Outlook 2009: Resilience is key to weathering a tough economy
by Jonathan McGaha | 25 October 2010 12:00 am
My crystal ball is a little foggy right now. Every metal building system manufacturer, constructor and supplier faces challenges in 2009. This is not an easy time for any company, regardless of industry. It’s a fact of life that difficult economies come and go, and we all must learn to ride out rough storms.
The largest unknown factor I see is when the credit markets are going to free up capital to allow banks to return to normal lending levels. This step will help increase liquidity and begin reestablishing confi dence. In our B2B industry, there are many small contractors that depend on credit to operate their businesses. When the economy contracts, they still must continue borrowing money. Some can weather the storm for a while, but prolonged contraction of credit alternatives can easily lead to make-or-break decisions.
Here’s What’s Happening
Construction as a whole dropped in 2008 due to the credit crunch, the rise in energy costs and the price increases for all types of construction materials. Rising commodity prices, like $140 per barrel for oil, for example, impacted construction decisions; so did spiraling costs for rebar, concrete and steel. Many commercial and industrial building projects were shelved as their owners watched the quick and drastic impact these influences had on their building budgets.
All these factors contributed to a 20 percent decline in commercial and industrial building projects in 2008 and spawned forecasts that both markets would continue downward in 2009, potentially dropping by another 15 percent.
Staying Strong: Differentiation
Some metal building system manufacturers are looking to the institutional markets to take up the slack caused by the commercial and industrial decline. Some of these schools and government facilities will be complex, requiring more engineering, drafting and technical resources than we typically see, but fortunately, our industry can meet that challenge. Advances in building information modeling, for example, have given us new tools to help us become more agile in terms of design and manufacturing.
In comparison to other construction alternatives, we are fortunate that metal buildings offer the greatest value for the dollar. As owners and developers adjust their building budgets and plans, our job is to make sure they understand the attributes and efficiencies of metal building systems. We can, of course, point to their energy efficiency and sustainable attributes. Metal building systems provide energy savings through recycled and recyclable products, and that is a core message we must keep reinforcing. Owners also should understand that our building model often results in more favorable rates from banks because they know that a green building has a better resale value and that lower energy costs impact building tenant/owner cash flow.
We also must inform owners of the significant resources that reinforce the value of metal building systems. The Energy Design Guide for Metal Building Systems, for example, developed by the Cleveland-based Metal Building Manufacturers Association energy committee, is a synthesis of all the pertinent information about how to design, construct and maintain metal buildings to be energy efficient. Frame Design Using Web-Tapered Members was authored by Richard C. Kaehler, CSD; Donald W. White; and Yoon Duk Kim of the Georgia Institute of Technology, Atlanta. It was coordinated by MBMA’s technical committee; is being published by the American Institute of Steel Construction, Chicago; and offers an important interpretation of-and an extension to-the provisions of the 2005 AISC Specification for Structural Steel Buildings. Another resource is the Seismic Design Guide for Metal Building Systems, 2006 International Building Code Edition, a three-year project undertaken by the MBMA technical committee. It is being published by the International Code Council.
Each of these items is important at this time in our history because they all underscore the value that metal building systems offer in low-rise construction.
Bottom Line
Is there anything good to come out of this tough time? Sure, there is. We have gone through similar struggles before. Through those experiences, our industry learned to develop more agile and flexible processes. We run lean as an industry; but with sales and shipments down substantially, we have little choice but to wait for the economy to catch up. The problem for some companies is that the longer it takes for the credit crunch to end, the harder it will be to bounce back.
Metal building system manufacturers are a strong and resilient group, incorporating lean management techniques and rationalizing utilization to stay efficient and cost-effective. Collaborative and meaningful relationships among metal building systems companies and their suppliers have provided opportunities to share best practices that ultimately allow us all to be more efficient and to help us lift one another up through difficult economic cycles. When financial downturns have hit our industry in the past, we’ve always come out stronger, leaner and more cost-effective. Tough times force us to think through our business models and ultimately become better at what we do.
Keith E. Fischer is immediate past chairman of the Metal Building Manufacturers Association, Cleveland.
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