Contractors avoid market risks
Shellshocked Wisconsin road builders are avoiding equipment purchases and work force expansions even with the promise of a packed bidding schedule in early 2010.
It’s a mistake, said Kevin McMullen, president of the Wisconsin Concrete Pavers Association, but contractors do not want to overcommit by expanding to chase more contracts this winter.
“They’re in kind of a conservative mode,” he said, “because they don’t want to have these expenditures or have to lay people off because this is just a spike in the market.”
So builders will play it safe, even with two Wisconsin Department of Transportation bid lettings per month in January, February, March and April.
The same applies to pavers across the country, according to an Associated General Contractors of America survey released Friday. Of the 543 contractors who responded to the survey, 336 reported they laid off workers this year. Only 36 contractors reported they expect their work backlogs to increase going into 2010.
Nationwide, heavy construction equipment purchases are down 40 percent to 60 percent, and Wisconsin is keeping pace with the rest of the nation, said Darrin Drollinger, vice president of statistics, technical and safety for the Association of Equipment Manufacturers, a nationwide business association based in Milwaukee. The association collects equipment sales data from its members, but cannot release detailed statistics because the information is proprietary.
Dean Word, president of Texas road builder Dean Word Construction, said his company’s work force dropped to just more than 200 employees from the 500 people employed when the contractor was at maximum production.
“I am seriously contemplating the likelihood of having to lay off more employees,” Word said. “We did get two stimulus jobs in April.”
Most survey respondents were asphalt paving companies, and the Wisconsin industry generally is following the national trends, said Scot Schwandt, president of the Wisconsin Asphalt Pavement Association. The number of asphalt paving projects in Wisconsin has dropped in each of the past three years, he said, and, without federal stimulus money, the amount of work in 2009 would be about 10 percent below normal, he said.
“Everyone is definitely sharpening their pencils and looking for ways to internally reduce costs,” Schwandt said, “and that probably involves some layoffs.”
Representatives from the AGC hammered on the need for a new highway reauthorization bill when the association rolled out its survey Friday. Ron DeFeo, chairman and CEO of Connecticut-based equipment manufacturer Terex Corp., said the country needs something on par with, for example, the historic U.S. public works efforts to build railroads, highways and the Erie Canal.
“In our generation,” he said,” we’re just filling in some potholes, in my view.”
Without the promise of work from a long-term highway spending reauthorization bill, builders are unsure if work will bottom out next summer after the stimulus projects are gone. If the U.S. Congress approves the reauthorization proposed by U.S. Rep. James Oberstar, D-Minn., instead of extending the current plan, builders would come out of their shells again and spend money, McMullen said.
“I think you would see a lot of companies just taking right off,” he said, “and the states would be able to send more work out the door.”