Mechanical Hub recently talked with John Hazen White, Jr., executive chairman of the board and president, Taco Comfort Solutions, about the short-term economy and the company. According to White, the outlook for all sectors is very positive. Consumer confidence is high; people are investing in their homes and businesses are investing in their organizations, be it new buildings or mechanical system energy-efficient upgrades. “With bi-partisan support for infrastructure, which includes significant long-overdue investments in our water and waste-water infrastructure, it could be another boom for our industry,” says White.
Specifically, in residential …
White says Custom home building and the second home market is back in many areas of the country. In these homes, consumers have become a lot more aware of their indoor comfort and the efficiency of both their HVAC system and their use of water. The home environment is also getting a lot smarter by just saying “Hey Alexa or OK Google.” Even the thermostat is now sexy and smart. For Taco, this means integrating our products via WiFi into the home system, like with our Leak Breaker Alert Plus shut-off valve that brings peace-of-mind protection to the consumer and full access via your smart phone.
Specifically, in commercial …
Technology companies, like Amazon and Google, are leading the way with new infrastructure spending. Fortunately, says White, the tech sector has benefited from implementing innovative hydronic-based cooling systems into their newest buildings and data centers. They have taken advantage of the ease of installation and faster commissioning of Taco’s SelfSensing pumps to get their project done on-time and under budget. Plus the real-time monitoring provided by the integrated, characterized drives gives the tech companies the precise data they expect to optimize their systems and track performance.
“We are also seeing an increase in the amount of LEED-certified buildings being designed and built. This again is an area where hydronics shines. Integrated into the designs has been a call for greater use of high-efficient pump solutions,” says White. Taco boasts the broadest range of ECM powered pumps, now up to 30HP. “We then go a step further and integrate the eLink connectivity platform and SelfSensing drives to provide greater installation and operation ease and savings,” says White.
White says Taco uses Dodge Analytics to track the type and size of commercial building projects being designed and, although construction starts have been a bit volatile of late, “we do see expansion continuing through 2018,” says White. “This is especially true in the North American market where we should see a bump in spending due to the impact of hurricanes Harvey and Irma. Also, the rising commercial property values are driving investors to switch from acquisition to more development, especially in the major cities.”
Everything looks positive going into 2018. Taco is very bullish on the economy and continued growth of our industry. High-efficiency and ECM are going to continue to be the buzzwords of 2018. New industry-wide pump energy rating labeling will be introduced by manufacturers and more utility program incentive dollars are being directed away from lighting toward mechanical equipment and systems. Embedded technology is increasing while connectivity is getting easier and more available. The internet of things (IoT), is being driven into more and more products, which will allow the HVAC system to be smarter and operate more efficiently. For Taco that means being able to supply more-and-more data and system feedback to make systems smarter, more responsive and energy efficient.
Although the forecast looks good, there is some concern. Commodity prices are on the rise and will certainly have an impact on equipment prices across the HVAC industry. “Already this year we have seen a double-digit increase in items like copper and steel and this trend looks like it will continue throughout 2018, especially if the world economy remains strong,” says White.
And, the still unresolved review of Section 232 steel investigation, after Trump’s April announcement that it would consider restricting imports on the basis of national defense, could bring major changes to the price and supply of steel.
Interest rates have moved up as expected or maybe even a little slower than expected through 2017 with the anticipation of further increases in 2018 while the Fed certainly tries to keep overall inflation in check. Indications are that the new Chairman will continue the current policy without any major changes, including allowing some of its portfolio to mature without reinvestment. A possible wild card affecting inflation will be if new trade restrictions are put in place (e.g. steel, as previously noted).
One also needs to keep their eye on the interwoven political climate around the world, be it Britain’s exit from the EU or the ongoing unrest on the Korean peninsula. China’s economic impact, possible currency fluctuations, environmental policy which is driving founderies to close, and their foreign policy towards North Korea all play a role in the world and US economy. Not to mention any reaction by the Trump administration directly against North Korea based on their ongoing provocations.
In general, though, Trump has been business-friendly, says White. “As a private, family-owned, American-based manufacturing business, the Trump administration, through words and early action, has certainly been focused on our success and the success of U.S. manufacturing businesses. In general, whether it’s directives to try and cut red tape or make the tax system more competitive, this administration has reached out to the manufacturing industry and has taken a keen interest in our future success.”
Based on its own optimistic outlook, Taco is making significant investments in new US-based manufacturing of high-efficiency pumps, accelerating research and development efforts, and expanding our highly-skilled workforce. We have also been able to recently add Taconova, a Swiss-based leader in innovative hydronic solutions for heating, plumbing, and solar energy applications in residential and commercial buildings, to the Taco family of companies.
In December of 2016, as a unified circulator manufacturing industry, Taco completed negotiations with the Department of Energy (DOE) on new circulator pump energy efficiency standards. The standard level established effectively shifts the circulator pump market from induction motor technology to more efficient electrically commuted motor (ECM) technology. Conservative estimates place the energy savings from this latest pump efficiency standard at 0.7 quads of energy over a 30 year period, or the annual energy use of four million homes.
“This was a significant, unilateral agreement that will have transformative implications for our industry, the economy and provide energy savings to all Americans who heat and cool with or recirculate hot water in their homes. What we need this year is the completion and publication of this standard by the DOE. Under the leadership of Rick Perry, the DOE has been slow to act on any new regulations but we hope the economic and energy-saving benefits of this standard will shine through and it will be published in 2018.”
Finally, tackling the issue of the skilled labor shortage, White says that he does not see a clear path to the issue getting better any time soon. This shortage is further complicated by the technical advances in the products being offered to the industry and the need for advanced skills in controls, programming and system integration.
“The broadening skills gap is due to several factors but the one we can and must address immediately is the negative perception of plumbing and HVAC jobs. We have a societal focus on four-year degree programs as opposed to technical education which has made it difficult for contractors to attract skilled talent. We work closely with our trade associations, including AHRI and Hydronics Institute, to fight this battle to attract new talent to our industry,” says White.
And once workers are engaged, Taco’s relentless focus on training helps contracting companies increase the skill of their employees. “It’s just part of our ongoing commitment to support their personal and business success,” says White.