PVF Roundtable solidifies vertical industry leadership position
BY MORRIS R. BESCHLOSS
PVF and economic analyst
The PVF Roundtable’s position as the vertical focal point of the fast-growing pipe, valve and fitting sector is reaching new levels of importance as industry members flock to its meetings in ever greater numbers. It’s the only industry organization that embraces the gamut from raw material suppliers to end users and specifiers.
Combining a lengthy networking session with outstanding after-dinner programs, this group of leading manufacturers, distributors, master distributors, sales representatives, end user personnel and specifiers, etc., have found these meetings at Houston’s Hess Club the location of choice for bringing together the core of specialists driving America’s PVF sector ever forward.
Originally founded in 1987 by co-owner Sid Westbrook of Westbrook Manufacturing, a producer of a wide range of PVF industry components, the Roundtable has grown from a limited meeting ground of interested industry activists to the “place to be” for the broad range of all aspects of the PVF production/marketing/application channel.
As the PVF sector looks forward to a major comeback year in 2011, the quarter-annual meetings have been organized to provide substance, as well as face-to-face communication, to the diverse elements comprising the PVF sector at the Houston meetings.
This year’s four sessions — scheduled for the third Tuesday of February, May, August and October— feature programs emphasizing the PVF sector’s growing importance.
The February meeting, featuring one of the nation’s outstanding energy experts, the University of Houston Economics Professor Michael J. Economides, was enthusiastically received by a large, attentive audience.
The May program will be devoted to the unveiling of the latest entrant into The Wholesaler’s celebrated PVF Hall of Fame. Originally introduced by The Wholesaler in 2002, this highly select group of manufacturers, distributors and relevant associations lauds the PVF sector’s pinnacle of accomplishments. The May gathering is also noteworthy in that the executive council of the Industrial Piping Division of ASA will be present. Its periodic meeting will be held the following morning in Houston.
The August session will again feature Bob Tippee, editor of the Oil and Gas Journal, one of the industry’s premier publications devoted to the oil and natural gas sub-sector.
Although the October meeting has as yet not been programmed, it will likely be devoted to the 2012 PVF sector outlook, since it will be the last scheduled meeting of the year.
As part of each session, I’m privileged to present a 15-minute wrap-up of the ongoing direction of all aspects of pipe-valve-fittings. Outgoing Roundtable president, Fluor’s international top executive, Ron Merrick, has thoughtfully dubbed this presentation “The Beschloss Moment.”
Heralding the forward-looking leadership of the Roundtable was the recent unanimous board of directors’ selection of Danny Westbrook as new president and Sheryl Ryan Michalak as secretary-treasurer, the organization’s chief operational
position.
Has the age of conglomerates come to an end?
The flurry of announcements relating to multi-billion-dollar conglomerates selling off disparate businesses under the publicly held corporate wing may signal the end of the era of super-conglomerates. Increasingly, the biggest of these corporate giants are among those announcing a return to their core businesses.
Born during the 1960s and 1970s, when privately held companies were selling out due to estate and family succession problems or just to enjoy the fruits of their success, conglomerates began to flourish. Initial steps in that direction became torrential at the time when the U.S. stock markets were creating the liquidity to make rapid, multi-industry acquisitions possible.
The premise behind the conglomerate rationale was that all companies were based on constituent factors of a strong financial foundation, good management and a judicious employment of corporate assets.
In the conglomerate approach, decreasing value was given to intimate involvement in or understanding of specific industry sectors. This was left, in many cases, to professional managers from totally unrelated specific business backgrounds. This approach, and the ease of money availability from financial institutions and a growing number of professional investment groups, further facilitated the rapidity with which these conglomerates grew during the latter part of the 20th century.
The recent announcement of ITT’s (originally International Telephone & Telegraph) split into three core-based businesses ended the decades-long reign of a super conglomerate headed from its early growth by one-time accountant Harold Geneen, considered by business historians as the "father of conglomerates."
In the early 1970s, Geneen took a mid-sized communications business generating a few hundred million dollars in annual revenues to an eventual $17 billion at the crest of its success in the 20th century’s final decade.
As business demands call for downsizing to preserve strong balance sheets, increased productivity and defense against increasing government-imposed costs, even giants such as General Electric, the world’s most prolific conglomerate, are aggressively divesting units, especially those not contributing satisfactorily to the bottom line.
The administration’s ignorance of the widening schism existing between large corporations and privately held businesses and of the latter’s superior employment capability is reflected by the choice of chief job development consultant, Jeff Immelt, chairman of GE, which employs most of its workers overseas.
With increasing knowledge of end-use business sectors reemerging as valued assets, it’s doubtful whether a return to the heyday of the conglomerate era will ever return.
Speculation, biofuels, global consumption create new food crisis
It’s the 2007–08 global food crisis all over again, with a new twist. At that time, the helter skelter jump into biofuels, emanating mainly from U.S. corn and Brazilian sugar cane engendered a worldwide food inflation at a time of an inflationary commodity boom. This was a traditional upward spiral exploding within an international surge of too much money chasing too few goods.
At that time, the move toward corn production to capitalize on the mania for subsidized biofuels precipitated a shortage of rice, the food staple for most of the world’s population, especially in Asia, where the mega populations of China and India were rapidly approaching the current consumption economy.
While ethanol has proven less than satisfactory as a biofuel converted from corn, it has been kept alive by the ongoing subsidy of 45 cents per gallon by the latest year-end Congress–administration political deal.
Even Brazil, which has moved up front in the world’s economic growth sweepstakes, has dedicated much of its sugar cane crop to keep its 1.5 million cars rolling. While emerging from a searing recession that has generally maintained a disinflationary economic climate around the globe, food prices are approaching the previous two-year peak (2007–08) at a time when the world at large is barely getting off its haunches.
The major factor that didn’t exist in the previous price spiral is the massive monetary surplus available to two of the world’s economic superpowers, China and India. They have seen literally hundreds of millions enter the consumption arena by virtue of rapidly expanding jobs paying multiple increased wages, allowing consumer participation levels not previously ever dreamed of.
This could prove even more inflationary and shortage-ridden than the previous peak of 2007–8. If the developed nations of the U.S., Japan and Europe regain their footing in 2011, the world could be faced with agricultural commodity shortages never before seen in modern history.
Latest statistics indicate that 40% of America’s world leading and bountiful corn crop is now dedicated to the controversial ethanol blend considered by experts to be damaging to automotive crankshafts. This was facilitated by the Obama administration’s arbitrarily raising the percentage of ethanol used in gasoline blends from 10 to 15%.
U.S. manufacturing comeback trumpeted by nation’s media
After an historical manufacturing December surge, of which I became aware by dozens of contacts with privately held U.S.-based businesses, the mainstream media is now trumpeting the manufacturing sector as the “shining light” in a lackluster economic recovery.
Although acknowledging that this comeback is for real, reversing manufacturing’s decade-long shrinking percentage of America's annual gross domestic product, a major front page story in the Wall Street Journal concentrated on the comeback of factory hiring, whose 2010 136,000 new jobs were minuscule at best.
Mark Zandi, chief Moody analysis economist, went so far as to predict that manufacturing “would be a main source of job growth over the next decade.” Although accounting for less than half of the manufacturing jobs available in 1950 (22 million) and a 2010 GDP percentage of 9% compared with 17% in 1990, Zandi cites an expected annual two percent growth in job creation through 2015 as a major future contributor to unemployment reversal.
Abetting the relatively jobless growth in the U.S. manufacturing sector going forward are the following factors:
• Heightened productivity exacerbated by severe employee cutback and accelerated technological improvements on the shop floor and back office. This was accompanied by a severe workforce reduction during the recent manufacturing recession.
• Increased overall business potential enabled by increased global recognition of America’s superior quality standards and inflation-induced import costs, both in labor, material and transportation. Fear induced by such major “product failures” as a rash of accidents within BP facilities has occasioned a growing switch to “buy American.”
• The need for “just in time” inventory levels, readily available from American manufacturers, has occasioned an expanded dependency on American-based inventory levels.
• New federal and state government tax write-offs approaching 100% in 2011, for most new equipment, have given manufacturers a shot in the arm to take advantage of these tax breaks to speed up their quest for maximizing efficiencies now.
• A spate of export orders and a backup of new projects in power generation, energy production and development and certain aspects of commercial and industrial construction are further assurance that America’s manufacturing sector could be on a potentially long term roll.
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Morris R. Beschoss, a 55-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst emeritus for The Wholesaler.