John Conover, president of Trane in the Americas, set the tone for this year’s Special Report: Commercial Insights, as he captured what is often referred to as the No. 1 challenge the HVACR industry faces.
This and a myriad of other important issues were topics for discussion as leaders of three commercial manufacturing companies met with John Conrad, publisher, and Mike Murphy, editor-in-chief ofThe NEWS. Following are excerpts from conversations with Conover; Kelly Romano, president, Building Systems and Services (BSS), Carrier Corp.; and Eric Roberts, executive vice president, McQuay International.
TRAININGNEWS: Are there programs at your company in place to assist in the training of technicians?
Roberts: We have an open training policy. We will train any contractor on any of our products. The more people trained on our products the better. We have a training facility in our Virginia facility that focuses primarily on chillers, but we have other classes nationally on a case-by-case basis ranging from controls through our DX product line.
It’s for this reason that Trane has invested heavily in training programs and career paths for contractors, engineers, and our own employees and leaders at all levels.
Some of Trane’s training takes place at headquarters and is fed through satellite to the local offices. “Breakfast with Trane” is an in-person training program that features our application engineering group and other Trane and industry experts talking about trends, technologies, and issues impacting the HVAC industry. For example: Our N.Y./N.J. team just held a series in New York City, Long Island, and New Jersey where energy experts discussed building energy analysis technology and what we can all do to help owners save money through energy efficiency in time for tax season. These types of sessions are held locally in many of Trane’s 80-plus Americas offices.
Another training program that Trane provides involves satellite broadcasts to talk about technical challenges of the day. There are about four to six of these sessions per year.
Most of the attendees are engineers and contractors. However, sometimes-sophisticated facility groups may come. For example, the University of Michigan facility management staff attends one of our classes every year. Trane has 35 Ph.D.s on the application engineering staff focused on industry solutions.
Trane also teaches an air conditioning clinic which we have been updating for 20 years. It is a 12-week period of training for consulting engineers and design-build contractors; this has been a basic training class.
Trane trains the people that train the industry. This includes an extensive talent development program to attract, retain, and develop leaders. Nearly 50 years ago, Trane began an intense six-month training program for its entire sales force. College graduate engineers attend classes eight hours a day for five and a half days each week.
Thirty to 40 people graduate from Trane University, as it is called, in LaCrosse, Wis., every six months. Then they go through another six month period of training on the job. We think of it as an advanced thermodynamics degree. Sixty kids a year for 50 years tells you that we have a history and tradition of training in this industry.
BUSINESS TRENDSNEWS: What are some of the key issues facing commercial HVAC contractors?
Romano: I would group the challenges into a couple of key areas: people and market forces. Finding, training, and keeping an engaged commercial technician workforce is critical to the success of commercial HVAC contractors. In addition, the changing environmental and industry regulations, accelerated project schedules, and the recent strong commodity headwind are all important issues facing commercial contractors.
Roberts:As technology changes we are seeing a fundamental change in the way products are designed and how the technologies are applied in these newer products. This requires contractors to be in a continual mode of learning about the new capabilities of equipment and systems. Understanding how the equipment and building function together as a system will become even more important; building system analysis is going to be a mandatory function for contractors to perform for owners.
ECONOMIC GROWTHNEWS:What are your projections for the commercial markets?
Roberts: Economists project around 2-3 percent growth; however, for the markets McQuay serves, we are currently expecting growth in the range of 5 percent. We are cautiously optimistic. There are a couple of current indicators that have people concerned, but overall we are looking forward to a good 2007 and 2008.
Conover: In the future, we see a long-term trend that is countercyclical between residential and commercial. We think that commercial is in for a pretty good run for the next two or three years.
Productivity is a big challenge for this industry. The construction industry is the only one in the United States in the past 20 years that has had declining productivity. A University of Michigan study cited a loss of 2 percent, while other major industries gained in productivity. One of the things that can lead to increased productivity is an adherence to safety practices.
TECHNOLOGY ADVANCESNEWS: What do you see as the next major advance in heating and cooling technology? When will it have an impact on the market?
Romano: We see continued evolution in the areas of heat exchanger technology. More system integration within the HVAC industry, but also more building-wide integration that combines lighting, HVAC, fire/security, and distributed power generation.
Roberts: I’ll try not to focus on a specific technology but on what the technology will do. We believe there is a shift from full-load to part-load efficiencies, which is the true operating mode of a building.
We’re going to see a focus throughout the industry on developing many technologies, allowing for better part-load performance. That can be achieved through variable-speed compression, variable-speed fans, and even new systems of controlling water flow for buildings. Our main focus is going to be on the part-load efficiency as opposed to the traditional full load.
This is coming about because of the emphasis of several things such as the government wanting to measure and regulate the efficiency ratings systems, ASHRAE looking at true building profiles, and owners who are doing life cycle costing analysis of their facilities. I think it will all focus on the true operating mode of a building, which will drive everyone toward a more dynamic load profile and not just a full load for the building.
I view the part load verses full load as a change in the commercial industry that is similar in importance to the recent 10 to 13 SEER change in the residential market.
Conover: We think that in the future, we will see hardwiring go away. One of the practical applications for wiring was in a school job that was on a fast track. The job was completed with thermostats already in place. The inspectors came through and noticed that the thermostats were too high for wheel chair employees. Within a few hours all the thermostats were easily lowered because they were wireless.
LABOR SHORTAGENEWS:We keep hearing about the shortage of qualified technicians. How is your company addressing this problem?
Roberts:We see it as much as anyone else; the average age of our qualified technicians continues to increase. At McQuay, we have begun focusing more on recruiting directly from technical schools to develop our own technicians.
Conover:If we think expansively, we believe that we’re quickly heading into an era where the opportunity far exceeds the capacity of the industry. The number of young people that are in the education system heading for our industry is only one for every five retirees. The challenge of attracting talent is going to be the No. 1 issue facing everyone at all levels of this business.
As an industry, we have to figure out processes to increase the volume we do per head - people may say about that comment, ‘Oh, you’re just trying to take jobs.’ No, that’s not it. We have a long way to go toward hiring, retaining, and training enough people so that this industry continues to grow. We are spending a lot of time on that; it’s one of the bigger focuses of our developmental plans in the background.
Instead of focusing on making individual product components, we’re focusing more effort on building systems that go together easier, that come up through the commissioning process faster, and the newest front is on wireless technologies.
Romano:Carrier offers a comprehensive suite of training for HVAC technicians. We’ve also participated in and been a strong supporter of NATE. In addition, we develop material for, and support, HVAC vocational schools around the country.
I think there are a number of areas where contractors can work to stabilize and develop the technician workforce: frequent communication with technicians in the field is paramount.
Training: Provide continuous and up-to-date training on the latest technology. This is critical and typically well appreciated by technicians.
Safety:Train for and provide a safe working environment at all times for your technicians. They deserve to be safe, and as an employer you owe it to them to do so.
Uniforms, trucks, and tools:Professional people deserve a professional look. Uniforms, up-to-date and clean service vans, and the tools technicians need to do their job effectively are all important elements to help keep qualified technicians with your company and in the HVAC industry.
CONTRACTOR FORTUNESNEWS: What does the future hold for design-build contractors?
Roberts: As the demand grows for energy efficiency and sustainable building design, there is clearly an opportunity for design-build contractors. Systems are potentially going to become much more complex. The integration of various systems and controls will cause the commercial delivery process to become even more critical. That presents an opportunity for the design-build contractor who often brings advantages to projects.
Conover:Trane has 53 design-build contractors in our Strategic Partners program. They have told us that what they really want is four things: help minimize risk, help them be more profitable, increase productivity, and provide excellent training that makes them smart on the jobsite.
Contracting is all about managing risk. It is more beneficial for contractors if we can help minimize risk than if we could bring them new business. Helping them to be more profitable can include an element of bringing them more business.
Romano: I believe the future is bright for commercial contracting and design-build contractors. The industry is growing - we are predicting North America will be up by 5-6 percent this year, and are seeing a number of projects coming off the drawing boards. Many owners like design-build - they want to deal with one firm to handle their needs from design through construction.
Quality building commissioning programs is another way that design-build contractors can guarantee their future - don’t let others fill that gap. Finally, the long-term future looks bright for contractors who stay abreast of rapidly changing technologies like LEED, sustainability, high-performance buildings.
NEWS: Contractors are concerned about competition from manufacturers. How should they view your company?
Roberts:Obviously there is a natural and ongoing tension between equipment manufacturers and contractors for service work on equipment. On a case-by-case basis, we try to support some end user McQuay customers while respecting the relationship we have with mechanical contractors who also service our equipment.
Romano:Contractors are very important customers for Carrier. We work very hard to provide them with marketing, training, and sales support material so that they can be successful.
The HVAC market is still quite fragmented with lots of opportunities to grow. The commercial HVAC equipment market in North America is almost $5 billion and provides many opportunities for contractors.
Conover:Trane has a long legacy of working closely with contractors, and they are a very important part of the construction process.
CORPORATE FORTUNESNEWS: How will the change in McQuay ownership affect the organization?
Roberts: The combined company [Daikin and McQuay] has revenue in excess of $9 billion, which is significantly larger than our prior position.
The relationship enables us to potentially grow the applied product brands tremendously throughout the world. The company has long been a major player in markets outside of North America and has a stated goal to become the largest global HVAC company. With that comes an objective to become a major player in North America.
We expect the future to hold an expansion of the McQuay line as well as a broadening down into light commercial unitary products.
NEWS: Several changes took place in the Carrier sales and marketing organization last year. What took place and why?
Romano: Carrier realigned its organization in early 2006, shifting from a historical geographic focus to market-focused businesses. The realignment allowed Carrier to become a more customer-focused organization through a clear alignment of our assets and resources to specific market segments. There are three main customer segments: Home Comfort, Building Systems and Services, and Food Safety.
Carrier Building Systems and Services (BSS) is responsible for Carrier sales and service in commercial and industrial buildings, this includes the equipment sales controls integration, total solutions, and services. Our global strength is unmatched in the industry.
NEWS: What will these changes mean to the commercial HVAC contractor that has traditionally purchased products from Carrier and Carrier distributors?
Romano: Our commercial customers did not see any changes. Local representation in this reorganization remained the same. Contractors continue to purchase and receive support from the same distribution companies as they have in the past.
REFRIGERANT CHANGESNEWS: How are you preparing for refrigerant changes?
Roberts:We first moved to R-410A and R-134a back in the early 1990s. Currently, we have HFC refrigerants in almost all of our products and will be switching the remainder over well in advance of 2010. Our parent, Daikin, and a sister company already have working natural refrigerant systems with ammonia and CO2, and plan to continue to develop those types of technologies.
Romano:The next big change is 2010 in the U.S. when HCFCs (e.g., R-22) will be prohibited in new equipment. For Building Systems and Services (BSS), this is not a big drama because we were early movers away from HCFCs, in most cases many years ahead of the Montreal Protocol deadline. So it really only impacts our rooftop products. We’ll be ready for this important transition.
Beyond 2010, we continually research and evaluate all refrigerant options to make sure we’re using the best refrigerant by application that minimizes any impact on the environment, is safe to use, is energy efficient, complies with all local codes and regulations, and is affordable to our end users. Essentially, it is a Rubik’s Cube puzzle for each application that achieves all these requirements.
INNOVATIONSNEWS: What product or innovation has your company developed recently to meet the changes in the market?
Roberts:McQuay was the first to introduce a commercial water-source heat pump with R-410A. We have also been focused on improving indoor environmental comfort and quality with quieter sound profiles; many of our new chiller products have the leading sound profiles in the industry.
The third important change at McQuay is actually a process rather than a product. We are providing highly configurable products from a base model manufacturing process so that we can offer custom solutions with highly competitive lead times.
Romano: Carrier continues to introduce best-in-class products from an energy-efficiency standpoint. Recent examples include:
1.Evergreen 23XRV variable-speed screw chiller, from 300 to 500 tons, the most efficient chiller in the industry with non-ozone depleting R-134a refrigerant.
2.AquaForce air-cooled screw chiller, from 80 to 460 tons, with industry-leading full- and part-load efficiencies, also using R-134A refrigerant. The Aqua Force also is the first commercial HVAC product to utilize microchannel heat exchanger technology, which significantly reduces unit weight, refrigerant charge and size, while providing increased efficiency and durability.
With the acquisition of Automated Logic Controls (ALC), Carrier has the leading technology to fully integrate HVAC and building automation systems to maximize energy consumption.
Conover:First, I think one of our major efforts has to do with the general education of the building owner. We have developed over the last four years a vertical marketing team that is trying to understand the issues for contractors, engineers, and building owners of education, health care, life science (pharmaceutical), and high tech (data centers, etc.).
We want to work with those sectors to educate them about how our industry can make a difference. In the health care sector, a new technology can have a major impact on IAQ, humidity, airborne contaminants, etc., in operating suites in hospitals.
These mission critical environments have been handled by our industry but always at a very high expense. Trane has come up with a new product and new marketing campaign for health care facilities to let them know how they can have a tremendous impact upon their operating costs and their productivity in the workspace, not only with high- efficiency equipment, but with preventative maintenance.