Not All Is Serious in CEO Panel Discussion
Of course, members of the Air Conditioning Contractors of America (ACCA), who poured into the San Jose Conference Center Ballroom, roared with laughter at the rather personal inquiry. These contractors had come to the Industry Leadership Breakfast, sponsored by The NEWS, to find out what the heads of four leading industry manufacturers had to say about current issues.
This question, though, was a total curveball. But, the ever-clever Cook embraced the moment.
"I've been on the road a lot," began the president of all the brands for Carrier Corp. North American Residential, weighing his words ever so carefully. "In my suitcase this week is a complete collection of all the things you get at Christmas that you never wear unless you are at the bottom of the drawers."
The attentive ACCA members roared with laughter. But, Cook was not finished.
"I could light up here at any minute," he quipped.
Again, more laughter.
OK, not every minute of this year's CEO/Contractor Forum at ACCA's annual convention, had a serious tone to it. There were moments, per above, of levity. During this breakfast, ACCA members had the opportunity to submit questions to Cook, Dave Pannier, Trane and American Standard president, Dave LaGrand, Nordyne president/CEO, and Tom Huntington, president of York UPG, a Johnson Controls company. Murphy emceed the event.
Two other platinum sponsors of the national ACCA convention were not able to join the other panelists because of prior corporate commitments: Bob McDonough, president Lennox Industries Inc. and J.R. Jones, president of Rheem/Ruud Corp.
One of the highlights was the announcement by Pannier that Trane and American Standard would allow their dealers to use co-op money offered by the respective companies to be used to pay for ACCA membership dues. Upon hearing this, LaGrand quickly interjected, "We'll match that."
Cook said, "We are holding our big meetings in conjunction with the ACCA Conference, trying to bring new people in, making sure that all the people we consider to be our strongest dealer-contractors are also ACCA members," he said.
"We had conventions in Las Vegas with more than 10,000 Carrier and Bryant contractors. We made sure that ACCA had a booth there. Paul Stalknecht [ACCA president] was writing names down as fast as he could. There are a lot of things we can do together."
IAQ, TRAINING, AND BARBSAs would be expected in such a loose format, everything from indoor air quality to what the future holds was brought before the panel. When asked what each was doing to prepare dealers to understand the whole-house concept of selling and designing as a system, LaGrand responded that Nordyne was putting together "a tremendous amount of training materials."
"It's more than just the technical training," he said. "It goes to sales training as well, which is vitally needed so that you are prepared to ask the homeowner the right questions that will lead to a consultant-type of approach."
"In all fairness, the right way to think about the residential application is that the house is a system," chimed in Pannier. "You all know you can put the most-efficient system in a home, and yet if it is not properly installed, if the air distribution system isn't properly sized and sealed, you can even put in a 23 SEER system ..."
Taking that cue, a sly-smiling LaGrand abruptly interrupted by saying, "Thank you."
The compliment brought laughter and clapping from attendees, as many realized that Nordyne is touting the fact its brands have 23 SEER capabilities thanks to its iQ Driveâ„¢ technology.
"You wouldn't let me finish," Pannier smiled back, completing his train of thought, "...and it wouldn't deliver anywhere close to that."
His response brought laughter, too.
A few minutes later, Huntington tossed out his own barb.
"I think every manufacturer sitting up here on stage offers some form of training. We utilize [York's] Business Training University," he said, before taking a jab at Cook. "If we would have taken our collective budgets for training and add them all together, Halsey could probably buy that new house in Connecticut."
Again, such a comment produced laughter. Still, Huntington did turn to his serious side.
"The real opportunity is for us to get behind ACCA and have consistent best practice training. You are going to see York International joining hands with ACCA and be very aggressive getting the word out as this is the respected best practice training," he said.
This response drew applause.
VIEWS ON MAINTENANCE AND DISTRIBUTIONWhen asked if manufacturers should be promoting the importance of HVAC maintenance, LaGrand thought this was a good idea.
"I think that is a great question," he said. "I think at ARI [Air-Conditioning and Refrigeration Institute] and GAMA [Gas Appliance Manufacturers Association] associations, and perhaps at ACCA, there has been discussion in the past about all of us collectively pulling our funds for some form of consumer education.
"I think that is always a great idea, but a little difficult to pull off. If we could all get behind something and really drive it - educate consumers about a topic like that - it would benefit us all. As difficult as that might be to pull together, it might be more practical to think in terms of your relationship with your customer base. You want to hone that relationship."
Said Cook, "We need to keep pushing that [maintenance] because the best technology that we can put in the field isn't any good if it is not operating correctly and this is where this group comes in because you make it operate correctly."
In regard to distribution and the Heating, Airconditioning, and Refrigeration Distributors International (HARDI), each manufacturer head believed it was one of the strengths of the industry.
"There is always a lot of talk about trying to interrupt the channels of distribution and as you look at other industries - specifically, appliances - and going to more direct-type sales, people worry about that," said Cook. "We don't believe it is going to happen, because of the benefits it brings today to what is a very complicated sale still and we don't believe it is going to get simple. We can make it simpler about controls, in that regard, but distribution is going to be very important."
Added LaGrand, "Nordyne has dedicated itself to selling only through independently owned wholesale distribution to independent contractors, such as yourselves. We believe in it 100 percent. We believe it is very difficult to try to be good at manufacturing and distribution and contracting. So we focus on trying to be the best manufacturer that we can be."
Pannier termed distribution as "a barrier to entry" for foreign manufacturers. Meanwhile, Huntington said the future of distribution as "always being a combination of branches and independent distributors."
"The goal is not to have one or the other, but the goal is to have low-cost, but effective, distribution. In some cases, a branch fills that model. In other cases, only an independent can," he said.
BRAND PROLIFERATION AND THE FUTURESomeone from the crowd wanted to know if the proliferation of brands would continue and what effect, if any, this would have at the manufacturer, distributor, and contractor level. Again, Cook seized the moment.
"That must be for Dave," he quipped, referring to Nordyne's LaGrand.
"We have a few brands out there ...," confessed LaGrand cautiously, which drew laughter from the packed room. After it subsided, he quickly added, "They [Nordyne brands] supply a real strength to the consumer. They carry a lot of equity that can transfer to your company. Contractors are the most important link in the whole channel of distribution."
He did answer the question, too: "I don't think there will be too much more brand proliferation from where I sit."
"That's good to know," deadpanned Pannier.
When asked what each thought would be the greatest industry challenges over the next 10 years, Huntington cited talent and refrigerants.
"I would say recruiting young talent into this industry - on a number different levels - is going to be the greatest challenge for all of us, certainly at the manufacturing level, where sometimes other technologies, whether it be computers or whatever else is in vogue in the schools today, attract that young talent as an industry," said Huntington. "Sometimes we don't offer insight to the young talent what this industry can deliver as far as career opportunities.
"At the same time, on the technology side, after we pass 2010 and we are into the new refrigerants, there is going to be a whole evolution of new technologies that are going to affect us."
Cook pointed to energy prices, which, he described, "are continuing to go North."
"We're going to have legislation around efficiency, which is going to drive our industry," he predicted. "As manufacturers, we're going to have to look at new technologies in compression, heat transfer, and a lot of different areas in order to keep up with that," referring to higher energy costs.
Meanwhile, Pannier saw a future opportunity for the listening contractors.
"We, as an industry, have to become more retail-oriented," he said. "Our mindset needs to change really to thinking about doing business as retailers, if you will, as opposed to more to the technical element of the business. The fact of the matter is consumers are comfortable in doing business in a retail environment.
"The contractor will always be the critical link to reaching out and serving that consumer, but consumers are looking for more of a retail mindset relative to their home comfort system, as well other things that they buy on a day-in and day-out basis. That is a change and that is a challenge that we, as an industry, need to think long and hard and how we can step up and make that happen so that we can change our image in the mind of the consumer."
LaGrand saw foreign competition forging ahead.
"It is a global market," he said. "Actually the market for air conditioning products outside the U.S. is eight times larger, nine times larger than what the North American market is. As the world is becoming a smaller place, our supply chains become longer. So, managing those processes is certainly a challenge I think for all of us, but something we all do to remain competitive."
...AND YET MORE QUIPSAnother contractor wanted to know if manufacturers would push or require business management training for their dealers. Huntington thought it was not a good idea to force this onto contractors.
"That is a difficult task," he said. "Even though you may well be well intentioned, for every one â€˜attaboy,' you probably have three people in violent disagreement. So, rather than force a contractor to do the training, we would hope that if we could show them the opportunities that they would want to do it."
One inquisitive business owner wanted to know what Huntington thought of Johnson Controls acquiring York International. Before Huntington could sing of its praises, Cook blurted, "I think you should give ACCA more money for that question."
It was that kind of forum, laced with a little laughter.
Sidebar: Policies for WarrantiesTo no one's surprise, one serious question asked of the manufacturers panel at ACCA's Industry Leadership Breakfast involved the policing of matched systems. Each provided their respective slant regarding new condensing units matching properly with new evaporator coils for the validity of compressor and parts warranties.
Nordyne's Dave LaGrand: "Warranties are designed to provide consumers protection over factory defects, materials, and workmanship. And, installation instructions describe how the system should be matched and installed. So if the product isn't matched and installed in the way it is designed to, it could be that it would not be covered by warranty.
"I think the risk that we are seeing is that, with new, highly efficient outdoor sections, if the new indoor section is not changed out, there is a high potential of liquid getting back to the compressor and causing a condition that could cause the compressor to fail. In our opinion, that is not a factory defect."
Trane's Dave Pannier: "For those of you who were here last year, I was the one who blurted out the possibility of voiding warranties unless the systems are put in as a matched system. And we gave that some very hard thought. The fact of the matter is, when I blurted that out, I hadn't thought about it. And, I'll admit to that ...
"We talked about it, quite clearly within our business. You can simply create a policy that says we won't cover warranty obligations unless it's a matched system that has been installed at a consumer's home. But, unfortunately, what that does is that this makes the consumer take the brunt of that policy. And, they might not have had a choice where a less-than-scrupulous contractor decided he was only going to change out the outdoor system and not change out the indoor system. So, we said we could not penalize the consumer, but in the event of a failure, we can validate whether or not the failure occurred in a system that was properly matched or not properly matched. And if the failure occurred in a system that was not properly matched, then we would elect to take that up with the installing contractor and make it clearly understood what our requirements are.
"We have been very clear in terms of publishing the guidelines with regard to matched systems. And even before 13 SEER was a daily requirement, we've long been talking about the validity and benefits of matched systems. But from a liability perspective, it becomes even more critical to set up a policy that says the consumer is out of luck if they don't buy a matched system. But, we didn't feel this would be one [policy] we, in good conscious, could reinforce and simply lay at the feet of the consumer. We need to have you and all contractors, really, who work with us step up to the responsibility of installing matched systems."
Carrier's Halsey Cook: "It is an item that we devoted a lot of thought and a lot of money, too, to try and get right. We recommend that when a system goes in that you change out both the indoor and the outdoor unit. And, we think that is going to deliver the best performance, and that's what we continue to train people on and certainly put to our dealers to do as a default.
"Now, at the same time, we recognize that we have to be very pragmatic because that is not going to happen all of the time. Sometimes there are space requirements. Sometimes there are economic circumstances. Sometimes it's warranty and the timing when you have an indoor unit that is only a year or two old and there's nothing wrong with it. So we've done a lot of testing of old indoor units and new outdoor units, and published a lot of that data in white papers and also given listings and recommendations of how to handle the application of TXV valves and some other things you can do to go a long way to making sure that you do have a system that is going to be reliable.
"At the same time, we want to be transparent if it is going to deliver something less than 13 SEER. That needs to be stated and so we go ahead and get the rating of those combinations in ARI. The line that we draw is an important one to consider. We draw a line at 1992 and say if you are in systems that are before the last efficiency increase, you have to pull the indoor unit and get it out of there because I think you really cross the line in terms of what could be a reliable system moving forward."
York's Tom Huntington: "We did the same analysis that Dave [Pannier] indicated and our approach is only slightly different in that we require an ARI-matched system. We are not saying it has to be direct component on the indoor side, but rather, an ARI-matched system because, once again, you cannot penalize the homeowner that may not understand the difference between someone else's coil. What we elected to do was that we put our money into a computer system that allows us to give immediate feedback at the dealer level if a failure has occurred and if the match is not proper. We don't go out to necessarily reject the warranty, but we are going to go out and assist and provide training so the dealer understands the issue. And, of course, if we have a repeat offender, then we'll have to take it to the next step.
"One of the underlying opportunities as you tour the [Indoor Air Expo, held in conjunction with the ACCA Convention] show and see the miniaturization of units that occur, there is another subtle benefit in that most of the charges in 13 SEER systems grow dramatically - 40 to 50 percent - but if you miniaturize, you also reduce the charge. Then, you also increase reliability. So, we are monitoring it. We are optimistic that the industry will do the right thing with a little bit of coaching and assisting from the manufacturers."
Publication date: 05/08/2006