Constructive Comments By Dick Snow April 4, 2003
Longevity can be short-lived It was déjà vu all over again last week when we read that Guenther-Wagner-Johnson would be closing its doors voluntarily after more than 50 years of operations. We vividly remember the early days of A. Guenther & Sons, organized and headquartered in West Allis by Arnold Guenther primarily as a carpenter contractor. When he retired, he turned the business over to one of his sons, Gale, who proceeded to go general. After operating as A. Guenther & Sons for a number of years, Gale took on Harvey Wagner as a partner. Gale’s heir, Bruce, opted to go to Minneapolis first with another firm, then to the East where we lost track of him. The firm became Guenther-Wagner until, upon Gale’s retirement, Harvey took on his general superintendent, Rod Johnson, as a partner and became Guenther-Wagner-Johnson. Subsequently, Bill retired and Harvey’s son, Jeff, a graduate of Northwestern University’s Engineering School, joined him. Since the late 1980s, Guenther-Wagner-Johnson has been chugging along, primarily doing public construction work. Now, Harvey and Jeff, due to a soft economy, very tight margins of profit, tightened public construction budgets and rising costs of conducting business, unhappily have made the decision to finish current work and close down. Harvey, with a heart problem, has actually been trying to retire for a number of years now and has been in the process of being bought out by Jeff. Under normal circumstances, it would have worked, but industry conditions have not cooperated. Retiring, getting out in this business is not easy and usually doesn’t happen overnight. There is a current plethora of contractor executives coming into the office two or three days a week, checking the mail and reading The Daily Reporter, waiting out their buyouts. Most of them have a key account or two they continue to service. However, if we know Harvey, he is capable of reopening the business at any time, given more favorable circumstances. He’s been and will continue to be a tough competitor, and so is Jeff, for that matter. Under the circumstances, they probably have made a wise decision to melt down for now and not take chances on possible worsening of conditions — for them. Added credence More credence of tough times ahead for the construction is contained in an e-mail we received last week from one contractor. We have edited the e-mail to protect the identity of the writer but have maintained the essence of the message: "From time to time, we might consider ourselves a significant … operation, but in the business world we are a tiny Ma and Pa company of little consequence. "It boggles my mind then, that last year we spent over one and one-half million dollars on medical insurance (workers’ comp and health and welfare). I am in the process of receiving quotes on both right now. "I have received one so far on workers’ comp, and it is 82.5 percent more than we paid last year — and is not a guaranteed maximum, which last year’s policy was. The quote could actually be 165 percent more than last year if we had extraordinary losses. I have two more quotes coming in today and tomorrow. As you can imagine, I am praying hard. "Health and welfare is the same. We have already received a warning letter from our carrier … that our premiums will be increased approximately 24 percent. "I dug back into our records and have documented the fact that our small white-collar program has increased 212.3 percent in the past six years (an average of 21 percent per year). … "There are two kinds of contractors in this world … those that understand and plan for these outrageous prices and those that don’t. The former will be known as high bidders. They will look bad on bid day. The latter kind will be the low bidders. This will produce some sad, sad stories 18 to 24 months from now." This message is pretty clear and needs no comment, except to observe that only the very heartiest of contractors can be assured of some degree of survival in the immediate years ahead. Overall, it ain’t a pretty picture for the home teams. For the younger set in the industry, this note should be required reading. It’s a history lesson in real time. Nothing is forever in this business.
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On the bidding spike
- Bids are due April 23 for renovating the Lakefront Cafeteria at the University of Wisconsin Memorial Union in Madison. Hey guys, it’s okay to redo the cafeteria, but don’t touch the Rathskellar. That should be a designated, protected national historical site because so many of America’s finest have schlepped or slept there.
- UW River Falls is getting a new student union, bidding May 1. Or is it? The nearly $1 million building is called Child Care Center. How do they mean that?
- Bid numbers are getting closer together, probably reflecting market conditions. Examples: Dorner, Milwaukee, beat out Crane Engineering Scales, Kimberly, by $146, or 0.2 percent, to install new blowers for Sturgeon Bay’s Waste Treatment plant; the bids were $73,133 to $73,279, respectively. And Payne & Dolan was $2,766.25, or 0.5 percent, under Musson Brothers, Rhinelander, bid on sewer and street improvements in Greenfield; those bids were $523,981.25 and $526,747.50, respectively.
- Squeeze of the Week honors, though, go to Payne & Dolan, whose bid of $363,976.75 separated it from the $364,163.25 bid by Black Diamond, Oak Creek – a difference of $186.50 or 0.05 percent. The bid was for street rehabilitation and pedestrian access improvements in Greendale.
Everyone take a deep breath and stay tuned.Dick Snow, the ultimate insider, has been a leading figure in Wisconsin’s construction community for decades. We, and Mr. Snow, invite your response. Call us at 800-508-3800 ext. 125, or e-mail.