How Giants Are Dealing With the Downturn

WITH MORE MINUS signs in the percentage change column than weve seen in awhile, our 2003 Book of Giants graphically shows what many mechanical contractors already know: Last year was tougher than the year before. Another sign on our list are the asterisks, which mean that weve had to estimate a contractors revenue because the company would not divulge specific figures to us. In one case, when we followed

WITH MORE MINUS signs in the percentage change column than we’ve seen in awhile, our 2003 Book of Giants graphically shows what many mechanical contractors already know: Last year was tougher than the year before.

Another sign on our list are the asterisks, which mean that we’ve had to estimate a contractor’s revenue because the company would not divulge specific figures to us. In one case, when we followed up our faxed survey with a phone call, one CEO’s secretary told us: “We’d rather not participate. We haven’t had a good year.”

A final indication might be the number of contractors who declined to be interviewed by us for the story that accompanies our list. The number of contractors who took a pass this year seems to have increased.

Not all the news is doom and gloom, however, with a number of contractors showing nice gains in revenue and profitability over the previous year. Others are working on a good backlog and seeing signs of life from customers who have been dormant for too long.

Still, we can’t ignore some disturbing trends that may change the way that Giants and smaller contractors do business. Take, for example, the loss of 50,000 jobs at General Motors in the last decade in the Detroit area alone.

That migration of industrial jobs has forced Goyette Mechanical (No. 97 on our list) to consider becoming a smaller volume contractor. New Jersey-based Joule Industrial Contractors (No. 58) has seen its primary business of building and equipping manufacturing plants all but disappear. In its place, Joule is doing plant work related to the environment, safety and maintenance.

St. Louis-based Murphy Co. (No. 23) is finding less emphasis on bigger projects in all its markets. It is focusing on small and medium jobs instead.

The fact that several Giants told us that they were filling in the loss of industrial work with prisons, other government work and casinos is somehow less than reassuring. We’re not saying that these are not worthwhile jobs or good business, but we have to wonder what this shift says about the direction of the U.S. economy and the long-term effects on the mechanical contracting industry.

One of the characteristics of successful mechanical contractors, however, always has been adaptability. And such is the case with many of the Giants who have stayed on top of the changing needs of their customers and markets.

Schools, hospitals, and water and wastewater treatment plants are among the other types of work that are mentioned repeatedly by this year’s Giants. Those that are winning these jobs are staying close to their customers and paying attention to the basics of their business.

In both good and slow times, we’ve long advocated the practice of doing the basics of any good business operation. While we had the feeling that this wasn’t always being done in the 1990s when contractors had more work than they could handle, we’re glad to see that more contractors are paying attention the basics today.

During those years when we prepared our Book of Giants report, we invariably would hear from a contractor or two who thought that recession was just around the corner.

Now that the slowdown has dragged on for two-plus years, we’re hearing from contractors who are seeing a light at the end of the tunnel. Mechanicals such as Southland Industries (No. 19) see their backlog become work in progress. Others, such as Joule, hope the end of the Iraq war will allow their customers to get back to business.

We’re confident that the current downturn will not last as long as the good times that preceded it. We urge you to take this time to assess your customers and markets. Evaluate the strengths and weaknesses of your company, making sure that you’re paying attention to the basics of business. Like the successful Giants, you’ll be well on your way when the good times return.