ACHRNEWS

Murphy's Law: Let's Start the HVAC Recovery Sooner

May 10, 2010
Mike Murphy

Good news: The recession is over. Even though Federal Reserve Chief Ben Bernanke is shy about going out on a limb just yet, The NEWS is not quite so reluctant.

Obviously, there are a lot of bad things still going on in the general economy. However, there have been enough good signs to point toward an end to the toughest recession that most of us have ever witnessed - The Great Recession. For example: commercial real estate has begun to move again as investors and banks have tiptoed back into the market, the residential housing market (though tenuous) is poking its head in and out of its shell, people are feeling better about keeping their jobs, and the auto industry is showing signs of life. AutoNation, the nation’s largest automobile dealership, posted first quarter growth over a year ago and attributes some of that to the fact that credit is loosening up.

However, the HVAC industry has a tendency to lag the general construction economy by anywhere from 12 to 18 months, and one of the top business problems cited by many readers of The NEWS continues to be a lack of consumer financing programs. Tight credit reins are still holding many contractors back. Jockey Calvin Borel didn’t win his record third Kentucky Derby in four years by holding back the horse in the last turn. This economic recovery is well out of the gate, though perhaps a little far from heading for the winner’s circle. Still, some help with consumer financing might boost this HVAC recovery somewhere midway through the race instead of waiting for the normally long lag effect.

Many equipment manufacturers provide customer financing options through third-party programs. Most contractors claim that the recent turn-down rates have been abnormally high. The financing is available, but not as many consumers have been able to qualify during the last couple of years. Recent discussions do not indicate that the HVAC financing programs have begun to loosen up as much as is currently needed to really jumpstart the coming summer months.

INVEST IN THE SUMMER

Inventory levels at distributorships have generally been reduced during the last 18 months, and are just now showing signs of getting healthy again. However, moving boxes from warehouses to contractors’ floors is going to require a little push. Contractors are just as gun shy of stocking too heavily at a time when consumers are still pinching pennies.

The worst thing that can happen in a cooling season is to start with a whimper, followed by blazing hot mid-summer days - then run short of product when it is needed most. It is a bit of a self-fulfilling prophesy: If business is slow to start the summer, manufacturers then ratchet down on production, distributor inventory levels fall. … Well, you know the rest of the story.

This industry needs a shot in the arm before those summer doldrums hit.

If equipment manufacturers, or distributors, are not able to pony up some investment capital to create some new financing options, there is a good chance the HVAC recovery is going to take awhile.

Barring any new programs for these two sources, perhaps it is time for contractors to get creative. The “90 Days Same As Cash” programs work quite well at the Midas dealerships, the Firestone dealerships, or the Mr. Goodwrench store. Much of that activity is directed toward service work, and if equipment sales are going to be tight this summer, then ramping up your service business with some creative financing might be the horse to ride. Most service jobs average less than $1,000. A set of tires on an SUV can cost that much, and three monthly payments with no interest sells a lot of tires.

It would be nice if a lot of equipment could be sold in a similar fashion this summer, but the consumer financing programs have not been able to turn up the volume yet. So, if there is not enough financing to support a big increase in equipment sales, maybe it is time to turn your attention to making it easy for your customer to say yes for some sorely-needed service work.

Murphy’s Law: Take what they give you.

Publication date: 05/10/2010