Wholesalers Hear Economic Forecasts

December 6, 2010
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HARDI’s Talbot Gee outlines issues affecting wholesalers during Johnstone Supply’s Annual Meeting in Chicago this past October.

CHICAGO - A hardly classic recovery. A deluge of economic issues related to health care, tax cuts, tax credits, and environmental challenges. And even the issue of dry shipping R-22 condensing units.

From broad based to very specific, these are some of the issues facing wholesalers - as well as others in the HVACR industry.

And they formed topics for back-to-back presentations at the Johnstone Supply 2010 Annual Meeting, which drew some 300 people representing the 125 independent owners of the 350 locations of Johnstone supply houses.

It was the first Annual Meeting for Johnstone’s new CEO DeWight Wallace who came to the position in January 2010 with 25 years of executive management and distribution industry experience.

The four-day event included strategic planning and best practices discussions, as well as the tandem keynote talks on the final full day of the event from Talbot Gee, vice president of the Heating, Air-Conditioning & Refrigeration Distributors International (HARDI), and Alan Beaulieu, president and principal of the Institute for Trend Research.

PROFIT AND GROWTH

Gee used his talk to announce what he called a “strategic partnership” between HARDI and Johnstone in which all Johnstone suppliers become members of HARDI.

The main thrust of his mid-October talk was, “Is HVACR recovering?” Statistically, he said there were mixed signs. In general, he said, “Every North American locale shows a little bit of confidence” but it is more evident in residential than in commercial, the latter of which “continues to struggle.”

“This is not a classic recovery,” he said, “because of policy uncertainty (in Washington),” the “demise” of HomeStar and Building Star efficiency incentive programs, and confusion over health care reform.

He said there could be legislative discussions in 2011 related to small businesses, extension of tax cut benefits, and health care based on wellness. He added that wide ranging environmental legislation is stalled and issues related to HFC regulations “did not go anywhere and will not go anywhere,” although the industry itself appears accepting of an eventual phase down in HFC production without a phaseout. “R-410A is not going away” he told attendees who supply contractor customers with that refrigerant in increasing quantities each year.

He touched upon a particularly hot issue at the time of the conference which was manufacturers’ dry-shipping R-22 condensing units. Environmental Protection Agency (EPA) regulations that went into effect on Jan. 1, 2010, banned the pre-charging of such units with refrigerant, but not its manufacture. The concern Gee raised was the possibility of a future ban on the manufacture leaving wholesalers with stranded inventory. “It is legal now, but will it be legal tomorrow?” he asked. He reviewed HARDI guidelines being offered to wholesalers to deal with such potentials.

He also encouraged wholesalers to be diligent in following regulatory policy and letting their voices be heard among elected officials. “We must be unified as distributors. We have a big footprint and reach. We have representation in every congressional district. You have more clout than mom-and-pop grocery stores and most contractors.”

FORECASTING

In terms of an overall forecast, Beaulieu said there “would be a substantial recovery for the next two years” but also noted it might be slow. “The world will get better by inches. You have to adjust to the fact that this is life.”

He also said attention should be paid more to increasing numbers of persons becoming employed rather than unemployment statistics.

For many in the audience, bank loans are important. But he noted, “Bankers want to lend money, but there are federal regulators looking over their shoulder and too much collateral is tied to real estate.” He did predict that “new lending regulations will be written.”

Another warning from Beaulieu was in regard to inflation. When it kicks in, it will “make it difficult for people working for us. They come into work stressed; they get scrappy at the counter.” He told the wholesalers to be prepared to give raises and to increase prices in early 2011 even if inflation had not kicked in by then. Concurrent with that is building inventory, he said.

JOHNSTONE'S TAKE

Johnstone CEO Wallace noted that the two speakers were brought in to inform store owners on the current state of the industry, but also to underpin the reasoning behind company plans announced at the Annual Meeting to invest aggressively on service and operational improvements despite economic uncertainties.

“Johnstone’s approach is to view the current challenges and changes happening in the industry as opportunities,” said Wallace. “I think that more than anything demonstrates our optimism about the industry’s long term future. Even if it turns out to be a slow recovery, Johnstone wants to make sure we are in the best position to help customers take advantage of it.”

Publication date: 12/06/2010

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