While some experts and non-experts alike have hinted at the idea that the United States is not only a recession but a depression, Lee McPheters, PhD, economist, Arizona State University, said this is simply not true. “We’re not in a great depression but in the worst down cycle since the great depression,” he said.

McPheters was one of the panelists on an Economic Discussion held during the recent meeting of the Window and Door Manufacturers Association (WDMA).

“This is not yet anything close to the Great Depression,” he added. He did say however that this downturn will probably be worse than what we saw in 1982.

“Even though everything you hear is gloom and doom there will be recovery at the end of this year,” he said. “A year from now we’ll be looking at 2 percent growth.” He said this is an area on which many economists agree.

Home prices have to fall to drive down inventory, however.

“When you have a housing decline that goes on for four and into five years, you’re going to have all that pent up demand that needs to be filled,” he added.

McPherson also addressed the stimulus package that was signed by President Obama on the day of the panel discussion.

“I don’t have high hopes that this stimulus package will have a miraculous impact immediately,” he said. “But it will have results where it is targeted. Nothing in this plan will make housing bottom out. On other hand we need it as people aren’t spending.”

Although McPherson was hopeful for the future he did have some bad news for the years ahead.

“Five years from now I think we’ll be seeing much higher taxes as a result of this stimulus plan.” (A sentiment that was echoed by another presenter later that day).

Another panelist participating in the discussion was Scott Shober, Ducker Worldwide, who said he was surprised that, according to a recent survey, dealers aren’t doing more to improve their businesses in these tough times such as improving their sales tools, etc.

“So if there is ever a need for you [manufacturers] to look at who you are doing business with the time would be now,” Shober said.

He also noted the opportunities that exist in the remodeling market.

“There is an opportunity with refitting of foreclosed homes,” he said. “Clearly there are some gems that some dealers are picking up on.”

Shober added that a key takeaway for those companies in survival mode is cash control.

The next two panelists, Mike Dillahunt, managing director, Piper Jaffray and Co., and Andrew Bohutinsky, managing director, Lincoln International, confirmed the fact that many door and window companies are indeed in survival mode. The two also gave attendees a look into the current state of mergers and acquisitions.

Dillahunt said there was a significant decline in mergers and acquisitions in 2008. He also pointed out that private equity firms are looking at their current portfolio-not expanding.

“There are still buyers out there but they are very selective,” said Bohutinsky. “The deals getting done are the high distress ones like Republic and Kensington.”

“For the least healthy companies in survival mode from month to month merging or selling may be best option for them.”

For companies at that next level, Dillahunt said they should be selective in adding new capabilities, or maybe perform some small acquisitions.

For those companies in transformation mode, he said they could grow market share in this downturn. “They key for them is to make their move before the market stabilizes.”

He did, say, however, that there are investors who will be looking at companies again. “They’re interested in those companies that will be leaders and survivors when the industry returns,” he said.

Dillahunt gave some great advice regarding dealing with creditors. If you see a problem coming be honest and up front about it,” he said. “But try not to go back to them a second time and don’t ask for a handout.”

The Future of the Mortgage and Credit Markets
Another session held during the WDMA meeting regarding the credit crisis tied into the economic discussion. Kevin Bingham and Scott Burgess from Deloitte Consulting said that as high as the amount of foreclosures are right now another wave will hit in 2011.

“The programs in place will only help 25 percent of homes in foreclosure,” said Burgess. He added that these programs won’t help those who have lost their jobs and can’t make house payments.

But in spite of the mortgage crisis they did have some good news for manufacturers.

They told attendees to seek out asset disposition firms–companies that will have to update foreclosed properties before selling them.

“Door and window manufacturers need to form relationships with these companies,” said Burgess. “A lot of these foreclosures need work.”


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