Brick and Structural Clay

SPECIAL SECTION/BRICK & CLAY RECORD: Ready for a Rebound

May 1, 2009
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The brick industry has had an exceptionally rough time over the last couple of years. According to the U.S. Department of Commerce, shipments of brick (building or common and facing) decreased more than 31% in 2008 from the previous year, while the value of those shipments was down by over 33%. The previous year fared little better, with 2007 shipments decreasing 20% compared to 2006 and value down nearly 18%. In contrast, 2006 shipments were only about 7% less than those of 2005, and the value of those shipments actually increased by a little over 2%.

First quarter 2009 figures were not available at press time, but a recent report from the U.S. Census Bureau and the Department of Housing and Urban Development reported that March 2009 privately owned housing starts alone were down 48% from the previous March, and by almost 11% sequentially. As a result of the continued housing depression, among other challenges, brick manufacturers around the world are being forced to reduce or eliminate capital expenditures, curtail production, idle or close plants, and lay off personnel.

A number of stimulus plans, both domestic and international, are focused specifically on resuscitating the worldwide housing market while encouraging banks to start lending again. Signs of hope for an economic recovery are thankfully beginning to emerge. According to the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single- family homes rose five points in April 2009 to the highest level since October 2008, its sharpest gain in five years.

“This is a very encouraging sign that we are at or near the bottom of the current housing depression,” said NAHB Chief Economist David Crowe. “With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates and the introduction of the $8000 first-time home buyer tax credit.”

Logic dictates that the global recession will not last forever. How can brick manufacturers ensure that they’re prepared to move forward when the economy recovers?

Personnel

The U.S. unemployment rate currently stands at 8.5%, and the recession was a good time for many companies to let their underperformers go. However, the vast majority of the people who are currently unemployed are surely good workers; many are undoubtedly exceptional. According to James E. Houseman, president of Harrop, Industries, Inc., a major challenge faced by all manufacturers, including brickmakers, is the “permanent loss of trained and experienced personnel.”

To avoid losing their remaining best-performers to poaching competitors, many manufacturers have begun providing additional employee training opportunities, such as workshops, short courses or webinars, to make personnel feel appreciated and valued. Additional training can also provide the added benefit of increased employee performance and effectiveness.

Some companies that have instituted necessary cost-saving policies regarding compensation (including reducing/eliminating bonuses, suspending 401(k) matching, or freezing or even reducing salaries) have offered additional paid vacation or personal time. Others have begun hosting regular potluck lunches or other social activities to help boost employee morale.

“It is essential to retain personnel with technical skills because they may not be available when business improves if they become a casualty of the current economic difficulties,” says Christophe Aubertot, president, Keyria, Inc. Chances are, employees understand the need for any cutbacks and are willing to do their part to help their companies through tough times. However, manufacturers must take steps to ensure that their valued employees continue to feel that their sacrifices are worthwhile.

Innovation

When the economy rebounds, those manufacturers that have continued to improve their products and processes will have a competitive edge. The industry needs “the ability to retain market share in housing cladding with depressed home prices and the projected slow rebound in home values,” says Houseman.

Suppliers to the brick industry are working hard to provide the means by which manufacturers can innovate and succeed. “New products are the primary thing keeping some plants running,” says Alan Petefish, vice president of Sales and Marketing for Prince Minerals, Inc. “We develop color libraries specific to the plants to facilitate product development and accelerate the process so that new base and accent colors can be developed without starting from scratch in the color development process.”

Aubertot agrees. “We have focused a good deal of our R&D efforts on reducing energy consumption through the development of new, more efficient kilns and burner systems, as well as investigating the availability and use of various fuels,” he says.

In addition, industry suppliers are taking their own steps to be ready for the recovery by targeting potential new cost-saving applications and focusing on R&D during the slowdown. “Our strategy is to retain sufficient resources to serve the industry effectively when the economy stabilizes,” says Houseman.

Brick's Future

It’s been suggested that in the “new normal” (our everyday lives after the economy recovers), consumers will have learned from the mistakes of their previous free-spending, disposable lifestyles. As a result, it’s possible that home buyers will be more willing to focus on high-quality products that they intend to keep for long periods of time. This “you get what you pay for” mentality can only benefit a high-quality, sustainable building material like brick.

For centuries, consumers, business owners and builders have appreciated the value that brick brings to homes and commercial facilities. Brick is clearly here to stay, and as more consumers begin to focus on “greening” their lifestyles, the industry is sure to benefit. According to Callum Grieve, director of External Affairs for The Climate Group, “People look to brands not only for value but for values. Consumers are more likely to buy from a brand that offers products and services that help reduce an individual’s carbon footprint.”

Without a doubt, the brick industry has suffered major losses as a result of the initial housing slump and the resultant economic recession. No one knows when the recovery will happen, but once it does, brick manufacturers that have focused on their key personnel and have continued to innovate their processes and product lines will be best-positioned to succeed.  

Editor’s note: Contact information for the suppliers included in this article can be found online at www.ceramicindustry.com/databook.

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