SMACNA's HVAC Forum

November 26, 2007
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John Conover IV, president of Trane in the Americas region in Piscataway, N.J., spoke to SMACNA attendees about the HVAC industry.

LAS VEGAS - If you believe John Conover IV, this is an interesting time to be an HVAC contractor. Conover, the president of Trane in the Americas region in Piscataway, N.J., spoke to attendees at the Sheet Metal and Air Conditioning Contractors National Association (SMACNA) meeting. He told them, “There has never been anymore time than the present where there has been more opportunities and challenges in the HVAC industry.”

Conover spoke during the HVAC Contractors Forum where he highlighted some of the future challenges facing HVAC contractors based on past and present industry trends. He said there are “macro drivers” affecting the HVAC environment, including the economic cycle and energy costs.



THE ECONOMIC CYCLE

In the economic cycle, he noted that nonresidential construction is expanding globally, which has led to an increase in gross domestic product (GDP) and an increased HVAC demand. “Our growth in the U.S. has been about twice the global GDP in the last two years,” he said. But he noted that China has been making - and will continue to make - big strides in the commercial construction market.

“In the next few years, China will build five cities the size of Columbus, Ohio, from scratch,” Conover remarked.

In the United States, existing buildings are aging and will require replacement, he said. Industry estimates are that 15 million commercial buildings will be built between now and 2015. Conover noted some factors that will impact commercial buildings. “Buildings are becoming more customized as businesses are becoming more sophisticated,” he said. “More and more properties are in the hands of fewer people as consolidation grows.

“We think the tumble of the residential housing market will continue for a couple more years and this will have an effect on commercial building. But non-residential growth will remain healthy through 2009.”



THE ENERGY MACRO DRIVER

The energy macro driver shows that with the escalating prices of energy worldwide, there will be a greater focus on HVAC since it is typically the largest energy component in any building. Conover said that 38-48 percent of all United States energy consumption is in buildings.

“The real challenge is how to take care of buildings and not necessarily the fuel consumption by automobiles,” he added. “Buildings consume 79 percent of all energy in New York City. Soon all building owners will be required to have an energy audit to determine energy usage. In many cases, the owners will need to install new systems that will have a maximum payback of five years.”

Conover suggested HVAC contractors assume the role of trusted advisor to building owners in order to suggest energy solutions. He said that with the advent of sustainable and intelligent buildings, the HVAC trade is becoming more important.

But in order to meet this growing global, commercial HVAC market, there needs to be a growing work force, too. That is where the conflict lies - where to find qualified or trainable people to meet this demand.

“We have a talent shortage,” Conover said. “A recent study by the MSCA showed that for every three HVAC retirees, there is only one person on a career path to replace them.

“We have a great story to tell. Techs are not wrench turners, they are knowledge leaders. But we don’t do a good job of going out to schools and getting our story out. We need higher visibility.”

Conover suggested that one way to get more young people interested in the HVAC trade is to enroll them in co-op programs with mechanical contractors. “It’s a good way to introduce young people to our trade,” he said. “And if they like it, they will talk to others about it, too.”

The challenge for the entire HVAC industry will be maintaining growth - 25 percent bigger in 2012 - while the talent pool is shrinking.



CONOVER ANSWERS TOUGH QUESTIONS

Conover fielded some questions from SMACNA contractors, including one who questioned Trane’s position on selling directly to customers. “Eighty-seven percent of all products we sell go through the independent contractor,” he said. “That number has not changed much in the last 20 years. We prefer to sell through independent contractors.

“But we have to be a service provider too because the end user needs someone to fall back on.”

That brought up a question on whether Trane dealers have price advantages over independent contractors. “Prices depend on volume,” said Conover. “If an independent contractor buys more equipment, he will get a better discount than the local Trane dealer.”

And what about inventory shortages? Conover gave an example from 2007. “Trane planned an increase of 10-12 percent on rooftop air handlers,” he said. “The increase has been 80 percent. One of the things we have to look at is expanding our manufacturing capabilities.”

Publication Date: 11/26/2007

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