News & Views
The Recession Revisited - Tom Schliefer’s Latest Views on the Economy
Posted Mar 30, 2011
Some of you may have attended the event back in January of 2010 – SMACNA-KC hosted a visit from Tom Scheifer to speak on the economy and the future of the construction industry. Tom is a noted professional in construction management with more than 45 years of contracting and consulting experience.
At the recent SMACNA Annual Convention in Phoenix, AZ, Mr. Schleifer provided an update to this topic. He first reviewed his model of how the construction economy reacts to the US
economy by lagging behind by 12 to 18 months and restated that until we return to 2007 volumes, appetites will not be satisfied resulting in aggressive bidding.
He currently projects that we will return to base year (2007) spending in the construction industry by 2014. He qualifies this by adding that this has been the longest economic downturn in our history and recovery is hard to predict. He predicts that the upswing could be very steep with increases anywhere from 25 – 40% in less than a six month time frame causing serious issues with cash flow and man power.
The economic turn around will be very recognizable. Residential construction will come back first with industrial and commercial following. He describes how to determine if your economic
strategy will be successful. If your strategy causes losses, depletes capital or diminishes equity, you will not be able to finance the growth when the time comes. Your creditworthiness at the moment of recovery is an indication that you can sustain growth. You cannot afford to deteriorate your creditworthiness.
In closing Tom advises that your strategy should include downsizing to the point you aren’t
leaking equity out the door. It won’t matter when the economy recovers, you will be able to last and not damage your creditworthiness. Downsize rather than load up on cheap work!!