Indusry Outlook: Pedal to the Metal - With a Few Yield Signs

April 27, 2005
SMACNA President, Chapters Predict How The Sheet Metal Industry Will Fare In 2005 Good news is moving West to East as chapters of the Sheet Metal and

SMACNA President, Chapters Predict How The Sheet Metal Industry Will Fare In 2005

Good news is moving West to East as chapters of the Sheet Metal and Air-Conditioning Contractors’ National Association (SMACNA) predict how their members will fare in 2005. A recent survey of SMACNA chapters found a largely optimistic outlook —
although cautiously so in some markets.

In Los Angeles, man-hours have been trending up for the last two years with retrofit work having considerable impact. Western Washington state anticipates a 5% increase in hours for 2005, although noting that members are turning away from traditional HVAC work and depending on long-term service and maintenance contracts to pay the bills. Arizona is calling for an 8% growth in hours.

Expansion is the word in Las Vegas. From The Strip to high-rise condominiums to public works, the desert city just keeps growing.

Colorado, Chicago, Indianapolis, and Iowa all predict increased hours. While Detroit is striving to meet last year’s figures, Minnesota is calling for increases in the large metropolitan areas, while the central region is anticipating a 5% decrease.

Chicagoland will reap the benefits from some very large projects, such as Donald Trump’s high-rise condos and office building, a new hospital, and continued expansion of McCormick Center. Colorado anticipates increased activity thanks to the healthcare industry. Members in that state are also moving into the residential and architectural markets.

Indianapolis is proving another bright spot, as the chapter there predicts increased hours for the next three to four years. A new stadium and airport terminal, and construction in the school, healthcare, and pharmaceutical markets centers will keep Central Indiana contractors busy. In addition, the members say they’re expanding quite successfully into indoor air quality and commissioning.

While Iowa sees man-hours up slightly, concern was expressed that profit margins are still very tight and don’t reflect rising material costs.

In Georgia they’re keeping their fingers crossed and predicting that man-hours will be up 5%, attributing the phenomena to overall improvement of the state’s economy and several large construction projects coming to fruition.

The Florida chapter says that projects put on hold in 2001 will finally materialize. Central and South Florida predict growth, while Jacksonville will be holding steady.

Things aren’t as bright in the Northeast. Philadelphia predicts flat hours and a scramble to stay even, although they do report a growth in commissioning work and in the light commercial market. Southern New Jersey reports that a lack of work will result in a 10% decrease in hours; however, northern New Jersey expects a boost at the end of 2005 and a healthy 2006.

Long Island and New York City will benefit from several large projects in the pipeline — Javits Convention Center, a new football stadium in Manhattan, and a basketball stadium in Brooklyn. Contractors there, too, are looking closely at getting into light commercial work.

The most commonly heard contractor concerns from all the chapters include competition (as always), and two more vexing issues: getting paid in a timely manner, and rising healthcare costs.

Changes and Challenges

As we look to the future of the sheet metal industry, we can expect several major changes: globalization of the economy will change the way projects are procured, (i.e. reverse auctions, and global purchasing), the emphasis toward green building design will open many new opportunities for contractors, and the predicted acute shortage of skilled labor will affect every aspect of our industry.

Other factors that will affect the sheet metal industry include a declining industrial market due to global relocation of industries; continued centralization of the industry as technology requirements favor larger firms, with smaller firms unable to keep pace; and continuing modifications in project delivery systems, especially in how information flows vertically and horizontally within the project team.

‘Smart Card’ in the Works

SMACNA and the Sheet Metal Workers’ International Association (SMWIA) spend a huge amount of resources on safety training, OSHA compliance, and other areas of safety and health. That will continue to be the case, and I recommend that safety training be the highest priority at any sheet metal shop.

One advancement we’re looking into is an industry-recognized “smart card.” Presented at the jobsite, this card would tell how many hours and what areas of safety training a worker has. This would avoid the current costs and down time for additional, often duplicative, safety training.

Two Pieces of Advice

I have two major pieces of advice for sheet metal contractors.

First, embrace change, because it’s going to happen whether you like it or not — so you may as well like it. Look at the changes in our industry from just 10 years ago. Technology, skilled labor, and procurement have changed drastically in that short period.

My second piece of advice: Don't just sell low price. Sell your company, your abilities, your people, your quality, and your integrity. Unless volume and low margins are what you’re all about, raise your prices and gain as much or more profit from fewer customers while giving them better service.

Kevin Harpring, vice president and general manager of Harpring, Inc., Louisville, KY, is the 2005 president of SMACNA. To reach Kevin, call 703/803-2980.