A Texas two-step
July 1, 2009
FORT WORTH, Texas - Organizers of the Air Conditioning Contractors of America’s Feb. 24-26 conference were happily surprised.
With the downturn in the nation’s economy, they might have expected a lower turnout at the 41st annual national convention.
That wasn’t the case.
More than 2,300 came to this year’s event, held in Fort Worth, Texas. It was the first ACCA national meeting held in the Lone Star State since the association held its 2005 show in Austin.
“Even before the beginning of the event, we knew that pre-registrations were over the top,” said Kevin Holland, the association’s vice president. “It was a record year for attendance.”
In his convention-opening remarks, outgoing ACCA chairman Ray Isaac of Rochester, N.Y.-based Isaac Heating & Air Conditioning told the audience that group has “turned it up” this year, all year long.
“In a year when many associations saw their memberships decline, ACCA had its sixth straight year of membership growth, and we are already on track to grow even more in 2009,” he said.
Staying on trackIf the ACCA’s membership is growing, many members admitted it’s been harder time to make the same happen for their businesses in the tough national economy. Nevertheless, the general sense of attendees was optimism for the HVACR industry, said Larry Taylor of AirRite, based in the host city.
“We are putting more effort into our core business right now,” Taylor said. “We are making sure we take very good care of our primary customers.”
An event that many attendees look forward to at the conference each year is the Indoor Air Expo. The Feb. 24-25 trade show was co-sponsored by ACCA and the Indoor Air Quality Association, which also held its 12th annual meeting at the same time. It contained nearly 300 booths.
But one of the most popular events at the convention was the Feb. 25 CEO forum.
Mike Murphy, editor in chief of Snips’ sister publication the Air Conditioning, Heating and Refrigeration News, asked the top executives from Rheem, Carrier and Lennox questions that were submitted by ACCA members around the country.
The session drew a large crowd of attendees who were eager to hear what the company officials had to say about the recession, the refrigerant transition and how the recently passed federal economic stimulus package would affect the HVAC industry. Those participating in the forum were Bill Hanesworth, vice president and general manager of Rheem; Robert McDonough, president of residential and light-commercial systems with Carrier Corp.; and Doug Young, president and chief operating officer in charge of residential heating and cooling at Lennox.
It's the economyThe economy was on the minds of many conference attendees. The first question concerned the slowdown and how it will affect manufacturers.
Hanesworth noted that Rheem will be in a totally different environment for the next few years, and ongoing research and product development will be mandatory. McDonough added that some of Carrier’s markets have contracted 30 percent to 40 percent, so the company has had to make some difficult decisions.
“All of us recognize things will get better. In our company, we’ve invested $28 billion in research - we’re basically investing in the future,” McDonough said.
Young agreed that investing in research is crucial now, so Lennox will be ready when the market turns around.
“We see this as a point of balance,” he said. “How do we balance the near term and the long term? We’re going to invest more in R and D (research and development) this year than we did last year, so we will be able to excel when business comes back.”
Given the federal tax credits recently passed by Congress, the three CEOs were asked how those might help the HVAC industry.
Young said that while his company is still trying to digest the information surrounding the tax credits, “consumer confidence needs to rebound first. It’s early, and the tax credits will help, but we don’t know how much. It’s more about the economy and when it will come back.”
McDonough agreed, noting that the tax credits will have some effect. However, he is concerned that the high seasonal energy-efficiency ratings required to take advantage of the tax credit may be government overreaching a bit.
SEER here“There is a lot of 10-SEER equipment out there. We don’t want to set the bar so high that it’s out of reach economically,” he said. “I’m afraid the stimulus will appeal to a narrower band of people. We’re going to have to package incentives, such as utility and manufacturer rebates, along with tax credits. We need to work together if we’re going to help consumers.”
Financing these new systems was on the top of Hanesworth’s mind, and he said that the rebates are good, provided consumers can afford to buy the systems.
“Credit is still a problem,” Hanesworth said. “My concern is that customers aren’t qualifying for credit.
“Companies are reducing the amount of credit they’ll make available. We may need to find ways to supplement that. Financing companies don’t want to offer 12 months same-as-cash anymore. Until the economy levels out, it will be hard to do anything. Things need to stabilize first,” he said.
McDonough noted that credit rejections are higher, which is why Carrier has consolidated its financing suppliers.
“Every time dealers present an offer, we want them to present financing,” he said. “Things are choppy right now and it’s a hard issue to combat at this point.”
Where credit is dueLennox has also seen its credit rejections rise. Young said the company has reached out to financing companies to see if they could reduce the number of rejections.
“This world has turned upside down, but nothing will change until there is more credit available,” Young said.
When Mike Murphy followed up with a question on whether manufacturers would ever self-insure loans to consumers, Hanesworth said, “Right now, I don’t think we would. But we may have to re-think our strategy.”
The other CEOs did not add to Hanesworth’s comment.
Next to the economy, the most talked-about topic at the ACCA conference was the upcoming phase-out of R-22.
“This is going to be a very difficult transition,” Young said. “There is some clarity about regulations in that EPA (Environmental Protection Agency) said contractors can replace like-for-like equipment. However, on new construction, it has to be R-410A. On the service side, we have a long way to go. EPA says that today about 20 percent of R-22 should be reclaimed, but right now we’re at 6 to 7 percent as an industry. We have equipment being installed today that uses R-22, so that will be in place a long time and need service in the future.”
The down economy is also resulting in consumers repairing equipment rather than replacing it, which may exacerbate the need for dwindling supplies of R-22.
“We’ve shifted our sales to parts, and we expect more of the same this year,” Hanesworth said. “We saw that shift when we went from 10 to 13 SEER. A lot of people are just going to hang on to what they have and not replace it with R-410A equipment.”
Repair or replace?“There’s a lot of pressure to repair rather than replace due to the economy,” McDonough added. “However, the phase-out of R-22 could lead to a dialogue on replacing rather than repairing. But we’re talking about big-ticket items, and people are thinking twice before spending that kind of money.”
That repair versus replace conversation is going to be extremely difficult, said Young, and the R-410A issue is not going to help. “We’re getting into more treacherous water with the consumer, and R-410A may complicate things even more.”
The result is that consumers may look for cheaper options that do not include repairing or replacing their cooling systems, Hanesworth said.
“Window unit sales are up, and there seem to be a lot of people looking at that option instead,” he said.
Offering private-label equipment is one way in which many contractors like to differentiate themselves from the competition. The CEOs were not too thrilled with this idea when asked about it at the forum.
“It’s not something we’re excited about,” said McDonough. “We spend a lot on name recognition, and there’s a lot of equity in that brand name. While I don’t reject private labeling as being unacceptable, I don’t see how we can derive value from it.”
Young agreed. The purpose of a particular brand name is that it stands for something, he said, and a private label doesn’t have that same kind of status.
MaintainMaintenance is another issue that contractors are concerned about. The CEOs were asked if they would consider doing more to promote the importance of maintenance to their dealers and consumers.
“Everyone recognizes the importance of maintenance,” Young said. “We try to instill in the customer how important this is. The challenge is getting people to believe it. We will continue to push that.”
HVAC systems that “communicate” with homeowners will also help with maintenance, Hanesworth pointed out, and added almost all manufacturers are developing these types of systems.
“It helps when the thermostat reminds homeowners when maintenance is needed,” he said. “Hopefully we’re getting close to the point where people think about system maintenance as they think of getting the oil changed regularly in their cars.”
He added that service agreements are the best way to keep customers thinking about regular maintenance, and these also help contractors hold on to their customer base.
McDonough agreed, noting that contractors have the most direct link to customers, and they are the ones who need to have talks about maintenance.
“I think we do a good job, though. We do a lot of training, and we provide a lot of manuals,” he said.
State regulationsThe CEOs were asked about current regulations and proposals regarding HVAC equipment in trendsetting California.
“The state has some aggressive goals, including increasing efficiency 50 percent by 2020,” Young said. “However, very few jobs are permitted, and it takes a long time to get a permit. We’ve seen the effect of beating people into submission, so we need to turn it around and look for a different opportunity, such as NATE (North American Technician Excellence). NATE helps the state and the consumer, and if California can tie NATE into its utility programs and make the permitting process easier, people will get on board.”
California is addressing the crucial issues of proper installation and maintenance, but requirements in these areas can make it difficult for all consumers to benefit, McDonough said.
“California is developing a long-term HVAC vision for the state. However, sometimes the threshold is so high that it’s impossible to reach,” he said. “There are definitely real - and realistic - opportunities that can be found, though.”
As for the future, all the CEOs were eager to discuss the equipment they plan to offer over the next few years. McDonough noted that different technologies would take hold, as evidenced by the fact that sales of ductless and geothermal systems are growing.
“We’re working hard on designing more user-friendly controls, and we also have a long way to go with variable-speed technology,” McDonough said. “There’s a move to go to EER (energy-efficiency ratio) instead of SEER, though, and that concerns me, because it could affect how we use variable speed.”
Young said it was necessary for manufacturers to challenge conventional thinking about efficiency.
“One way to do that is the use of solar power to augment the unit,” he said. “We have to think about how we can change conditions in the home without relying on the grid. It’s true that ductless and geothermal will have their place; however, we have a ducted base, and that’s not going to change.”
Regardless of what may happen in the future, there are continuing issues surrounding the systems that are currently offered to consumers, McDonough said.
“We can design more efficient equipment, but there are poor installations and leaky ductwork - and that doesn’t help,” he said.
“I think we need to focus our attention a lot more on installation,” Hanesworth said. “We need to make sure sizing is right and installation is right.”
He added that Rheem is currently researching products that marry hot water with heating and cooling.
Feast fit for a chairmanLater that evening at the chairman’s banquet, Ray Isaac handed duties off to Stan Johnson, president of Stan’s Heating and Air Conditioning in Austin. Stan praised his predecessor for his extraordinary leadership, and then spoke to the challenges that contractors are facing in this very different world.
“My goal as chairman will be, that at the dawn of this new administration, we will position ACCA so that we are able to protect our members’ interests and help this industry thrive for the next four years,” he said. “It sounds simple, but it’s going to be hard. And I need your help. Each and every one of you.”
Johnson outlined an agenda of working to fight for contractor interests and maintain ACCA’s “seat at the table” in the halls of Washington.
“Over the next year, you’re going to be hearing even more from me and from ACCA,” he said. “We won’t just be telling you things; we’ll be asking you things. The wonder of technology means that we never have to guess what you think. You can tell us.”
The conference ended with what Johnson described as “the craziest keynote presentation we’ve ever had” - the Passing Zone, a chainsaw-wielding duo that drew applause for their demonstration of teamwork and how it can work in the real world.
The next ACCA conference will be held March 7-9, 2010, in Tampa, Fla.
Association announces winnersContractors from Cincinnati and Connecticut were among those who received honors from the Air Conditioning Contractors of America during its Feb. 24-26 convention in Fort Worth, Texas.
Deciding on the winners for the ACCA Awards for Excellence and the Spirit of Federation Award this year was especially hard, said Paul T. Stalknecht, the group’s president and CEO.
“We received an unusually large number of nominations this year from some exceptionally professional companies,” Stalknecht said. “Our judging panel of past ACCA chairmen told us that this was by far the most difficult time they’ve ever had in selecting finalists because the caliber of entries was so high. Making it this far is a very high honor for each of the eight finalists in two categories.”
The Excellence in Residential Contracting was given to Apollo Heating and Cooling of Cincinnati.
Harrington Engineering Inc. of Ole Saybrook, Conn., was given the Excellence in Commercial Contracting Award.
This year, an additional honor was handed out: The Spirit of Federation Award, which is given only occasionally to people who work to improve the association at the state, national and local levels.
The winner was Amanda Jones, executive director of the Greater Houston ACCA chapter.
“Based on everything she has done since the day she was hired, and her tireless dedication to supporting not only her chapter, but national and other chapters, we already knew that she was a bit of a miracle worker - and then we saw the miracles she performed after Hurricane Ike hit the Houston area,” Stalknecht said. “Amanda worked around the clock to get assistance to her members and information to contractors all over the country. Here’s the thing - a massive hurricane hit the chapter area, the entire country goes through a recession, and through all that this chapter continued to grow. In fact, today, it is the largest local chapter in the ACCA federation.”