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Millwork and fixture manufacturers weather turbulent 1992.

Architectural woodworkers and store fixture manufacturers are looking forward to a stronger 1993 after suffering through a year in which costs were rising and profit margins were falling.

The architectural woodworking and store fixture manufacturing industries continued to weather an economic storm in 1992. While a small minority of manufacturers said they were not impacted by the economy, many woodworkers, buffeted by a slumbering U.S. economy, increased competition leading to low-ball bidding, and higher prices for lumber, were forced to lay off workers and in some cases, take losses on jobs just to keep busy.

According to a majority of manufacturers surveyed in WOOD & WOOD PRODUCTS 6th Annual Top 25 Architectural Woodworking/Store Fixture Manufacturing survey, jobs are fewer and farther between. When jobs do become available, the number of bidders, and the bid list requirements, have increased dramatically.

"The work we are pursuing has an extensive list of bidders which has radically cut (profit) margins," said Robert E. Ziegelmeier, president of Haggerty Millwork of Mt. Kisco, N.Y.

Some companies are taking on jobs at a loss, in order to cut losses. "We are taking work at lower and lower margins, cutting into overhead, (and) resulting in year-end losses," said John T. Mielach Sr., president of Mielach Woodwork of Edison, N.J. "Essentially we are taking work at losses to lose less than if we were to take no work at all."

Mielach and other manufacturers said they think many of the companies bidding on fewer available projects do not have the expertise to perform those jobs once they are awarded the bid. "There is a lot of competition right now, especially from unstable and/or inexperienced woodworkers who, in the end, produce an inferior product," said Mark Bernhard, vice president of Bernhard Woodworking Ltd., Northbrook, Ill.

David Schemery, president of Famous Fixtures of Sun Prairie, Wis., said one of the woodworking industry's biggest threats is "suicidal price cutting by marginal companies trying to stay in business when they should be leaving it."

Some in the industry are fed up with the current system of bidding on jobs. Famous Fixtures wants to form a trade association which would rate fixture manufacturers as to their size, capabilities, financial condition, and customer evaluations.

Others in the industry are calling on the design community to take a greater role in weeding out companies that produce inferior products. "There is a need for the design community to pre-qualify woodworking companies and then enforce compliance," said Yves DesMarais, CEO of Hollywood Woodwork of Hollywood, Fla.

"The problem is," said Mielach, "that because of the economy, contractors, construction managers, architects, designers and users have thrown out the old norms of pre-qualifying and pre-selecting like bidders for similar work and are reaching wherever they can to get lower bids."

Raw materials cost on the rise

And, while manufacturers are pitching lower bids in an attempt to get jobs, woodworkers are being squeezed by rising raw material costs.

"We are paying through the nose for lumber," said Bill Knight, purchasing and finishing foreman for Darby & Mitchell of Pompano Beach, Fla.

This sentiment is echoed by many of those surveyed. Heinz Zaiser, president of K&Z Cabinet Co. Inc. of Ontario, Calif., said that his company's lumber prices have increased 40 percent. Other manufacturers reported increases of up to 10 to 15 percent while mill lead times have increased from 3 or 4 weeks to 7 or 8 weeks.

One of the causes for the escalation of prices for temperate hardwoods has been the land set asides required for protecting the northern spotted owl. "Pine and fir products have had price increases due to the shut down of the timberlands in Oregon to save the spotted owl," said Mike Raburn, vice president of Oklahoma Fixture Co., Tulsa, Okla.

Prices for domestic lumber are also on the rise because of a trend away from rain forest wood species, said Jack Heydorff, vice president for Architectural Woodworking Co. of Monterey Park, Calif. "Designers are seldom specifying rain forest wood species any longer," he said. "The trend toward domestic species is starting to drive up prices for high-quality material."

This impact of this trend is being felt by large and small companies throughout the industry. Keith W. Skipper Sr., vice president of Columbia Showcase & Cabinet Co. Inc., a $26 million company based in of Sun Valley, Calif., said, "Nearly every project we have involves some discussion of alternate woods to avoid rain forest woods."

Douglas Rieder, president of Glenn Rieder Inc., a $6 million company, said his clients have changed wood specifications from mahogany to cherry.

The environmental challenge

Companies are also being challenged by environmental restrictions which add costs to the bottom line even as profit margins are sliced. "Restrictions by the EPA are continuing to challenge our ability to provide what our customers want at competitive prices," said Clarence Kamba, executive vice president of Woodwork Corp. of America of Chicago.

Schemery said that larger companies, such as Famous Fixtures, a $11 million company, are unequitably being punished by the EPA. He said smaller companies are not examined as closely as larger companies, because larger companies have the resources to pay for compliance and pay the fines leveled by the EPA. "We are spending over $100,000 in finishing, and over $300,000 in dust collection to meet requirements," he said, "while a small competitor of mine spray paints outside the rear of his 10,000-square-foot plant...Everyone should be inspected and regulated equally, or no one should."

Gene Barsanti, president of the $6 million company, Barsanti Woodwork Corp., Chicago, said that compliance with current and future government regulations are the industries "main problem." "We just hope that they (regulations) don't become so stringent that they put woodworkers of our size out of business," Barsanti said.
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Author:Adams, Larry
Publication:Wood & Wood Products
Date:Mar 1, 1993
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