Global outlook appears murky through 2012

BY MORRIS R. BESCHLOSS
PVF and economic analyst

The greatest satisfaction that anyone can receive at the apex of a lifelong career is the approbation of those with whom he has fulfilled his chosen career commitment. It’s a particular blessing when one has had the good fortune to fulfill his chosen life’s work with the overwhelming majority of plumbing-heating-cooling-piping distributors, manufacturers, contractors, end-users, specifiers, etc., who comprise one of the greatest slices of America’s world-leading economy.

When first entering the industry as assistant sales and advertising manager of Hammond Brass Works at the fall meeting of the annual Central Supply Association meeting on October 1, 1956, it would have seemed unthinkable that I would still be going strong after being enriched by involvement in just about any challenge that this great and multi-faceted industry has to offer.

This has included assuming the presidency of small, but fast-growing Hammond Valve at the age of 33. Even though I had been active in sales with the company for six years — during which time the company’s revenues had tripled — I didn’t have any particular expertise in production, accounting, personnel, labor relations, etal. But I was fortunate to assemble the best team of available associates, who became the major contributors to my eventual success.

I also learned quickly that my primary obligation was to contribute to the overall PHCP industry’s progress, which was evolving into product mechanization, automation and upgrading in my early years. In addition, our industry as a whole was becoming global, both in imports, exports and shared expertise. This was also the time when independent manufacturers were selling out in droves, and the traditional career-life commitments were being replaced by bottom-line devotees.
This gave me the impetus early on to become involved in the Valve Manufacturers Association, as its youngest-ever Board member, and eventually four-year chairman; seven-year chairman of the Plumbing-Heating-Cooling Information Bureau; founder of the Association of Industry Manufacturers; and its first-ever organization for the indispensable members of the industry's distribution channel, the manufacturers’ reps.

I’m proud to say that in the 25 years of my involvement, Hammond Valve revenues grew from $5 million annually at the time of my presidential appointment, to a $120-million empire made up of six acquisitions, but with 40% of the growth internally.

But I’m even prouder that while conscientiously involved in guarding the stewardship of my businesses, an equal amount of time was spent in commitment to the plumbing-heating-cooling-piping industry’s growth, and accommodation to the evolving challenges that arena faced.

Although my industry involvements did not shirk from the promotion of my company’s flow control products, I spent at least equal time in meeting a much broader spectrum of industry shakers and movers, by helping to promote the greatness and indispensability of the industry as a whole.

After my parent corporation was taken over in 1985 by another conglomerate, I chose to continue my industry involvement by using my major capabilities in economics and communication to work with the industry. It allowed me to commit my accumulated experience for the benefit of our great industry in totality.

In many ways, my past 25 years have proven the most satisfying, since I could spend all of my time in consulting with both industry associations, professional leaders and individual companies who felt my long-term expertise, both historical and experience-tested, could be of value to them.

And since 2001, I have thoroughly enjoyed serving as PVF, economic and industrial editor emeritus for TMB Publishing. Actually my outstanding impetus came from joining Tom Brown’s TMB Publishing Company and its flagship, The Wholesaler. In addition to founding The Wholesaler's PVF Hall of Fame nine years ago, Tom’s unequaled support has given me the opportunity to provide coverage of the PVF sector’s expansion and its dynamism.

Although having served in all segments of this wonderful $120-billion-per-annum industry today, I’m now intensely committed to the fast-growing PVF sector, the nexus of America’s incomparable industrial construction and energy arena.

As an architect of the 41-year-old Industrial Piping Division of ASA, I am committed to continuing to use whatever talents and influence are at my disposal to further the bright future this sub-sector is now confronting. An additional opportunity has been made available to me through the PVF Roundtable, a vertical Houston-based focus including all aspects of this sector. I'm proud to have been honored as its Director Emeritus, at the aegis of founder, Sid Westbrook of Westbrook Manufacturing.
I was extremely honored at the recent ASA Convention to be presented with the IPD’s “Award of Excellence” by the unanimous vote of the Executive Council of that prestigious organization. I will always cherish this honor.

As a self-appointed champion of American industry’s independent businesses, which define the overwhelming number of PVFs multi-generational distributors, I will spend all the years remaining to me to protect, nurture, and work with this fabulous IPD group, and its constituents, in perpetual partnership.

Global outlook murky

In sifting through various projections analyzing the world economy through 2012, what becomes apparent is the almost unanimous scaling back of forecasts posted at the beginning of 2011, regarding the growth of the world’s gross domestic product.
The glimmers of optimism that seemed to pervade most economic futurists earlier this year have since been tempered by the following factors:

• The impact of the earthquake/tsunami that devastated the Japanese economy in March. Although stoically rebounding from this catastrophe, the Japanese economy, which slipped to the world’s third highest annual gross domestic product last year, is on track for a drawback from last year’s results. However, a comeback is in the cards for next year. But China is solidly positioned as runner-up to the still-dominant U.S. gross domestic product.

• The heavy-duty global economic recovery (the purview of the U.S. over the years) is now dependent on the phenomenal growth experienced by China and India. Both are expected to equate this year’s results in 2012. China will continue to surge at a 9% growth rate, while India will see its growth stay at a 7.5% clip.

• The global economic drag will be occasioned by the Western developed world of Europe and the U.S. America is expected to keep its head above water with an anemic 2% this year, with only a slight improvement in the following 12 months.

• The Eurozone, caught in the warp of banking problems and weak economies, will be lucky to stay positive. Only Germany’s strong export economy will provide the strength needed to maintain that hapless area in the plus column.

• The United Kingdom shares the Eurozone’s weakness, but is doing better than expected this year and 2012. Next are Brazil, Russia, Mexico and South Korea, projecting a 4% improvement through the end of 2012.

• Canada — heavily dependent on exports to the U.S., especially in oil, natural gas and other natural resources — will see its growth stunted by America’s expected demand downturn. But our northern neighbor is still expected to reach growth in the 2.5% range.

The world as a whole will fall short of the 4% growth estimated earlier. However, internal expansion by emerging nations should create the impetus for some improvement in 2012.

Solyndra bankruptcy dramatizes exaggerated emphasis on renewables

The highly-publicized bankruptcy of solar-panel maker Solyndra LLC of Fremont, Calif., which received a $535-million Federal loan, and another $1 billion in venture capital proceeds, is the latest of a failing Administration energy policy placing its overall fuel independence bets on wind, solar and geothermal.

Along with its big bets on ethanol, and even the potential of natural gas for the fueling of the nation’s over 100 million cars and trucks, the White House has justified its multi-billion-dollar commitments on practically eliminating the need for oil and coal within the next two decades.

The Administration’s tentative OK to extend the Canadian oil pipeline from Cushing, Okla., to Texas-based refineries is being accepted begrudgingly by President Obama. This is happening ostensibly because a thumbs down on this project would cut back on refineries’ oil product input, as well as the thousands of jobs this additional Canadian oil availability will be generating.

Solar power has achieved mixed success in such sun-drenched areas as Southern California’s Coachella Valley, but is limited in its commercial and industrial applications. Increasing doubt on solar viability is being cast in various parts of the country. The same can be said for geothermal power capability, whose harnessing so far has been few and far between.

Despite the fact that coal is still providing half of the powering source for the nation’s power generating utilities, Lisa Jackson, head of the Environmental Protection Agency, and its Sierra Club allies are currently a major thorn in the side of America‘s coal potential, as well as the fracking breakthrough of natural gas and oil. At this time, EPA has issued an order to terminate coal usage in eight existing power-generating stations. If this order is carried out, it could lead to brownouts, blackouts or even permanent cutbacks in the areas impacted.

A world-leading and successfully published energy expert, Professor Michael J. Economides of Houston University, postulates that coal, oil and natural gas will still comprise 85% of world usage at the end of this century. Although America’s leadership may not believe in this thesis, China, India, Brazil, Russia and other emerging nations are putting heavy bets on Economides’ premise.

America still faces a bright economic future

Mark Steyn, the famed ex-Canadian columnist, author, lecturer and sometime substitute for controversial radio commentator Rush Limbaugh, is celebrating the New York Times bestseller status that his new book, After America is currently enjoying.

The book’s premise is postulating the U.S. demise as the world’s leading superpower, eventually being relegated to the pathetic status of a second-tier European survivalist economy living at the behest of the newly-empowered developing world. This new global power source is described as calling the world leadership shots, “literally” and figuratively in the future. But Steyn’s basic interpretation of America’s current economic and political woes indicates a certain misunderstanding as to what makes the heart of the U.S. tick.

The author tends to give a sense of permanence to this nation’s economic, political and social travail, by turning a blind eye to America’s amazing achievements in the arena of technology, entrepreneurial inventiveness, and a continuing sense of global philanthropy that transcends that of any nation in human history.

There is no question that the U.S. is experiencing a debilitating government leadership crisis that is impacting both global influence, as well as internal growth. Although most voices are dwelling on the negative, the U.S. economy still generates the world’s leading $14.5 trillion gross domestic product, four times the size of runnerup China, whose population exceeds the U.S. by 4.5 times.

America’s independent businesses fill two-thirds of a 153 million jobs potential and sit on over a trillion dollars of cash. Only the fear of indiscriminate and perceived anti- business hostility are preventing this outstanding source of U.S. dynamic growth to again exercise its expansionism of past eras. A bright American future still lies ahead.

Morris R. Beschloss, a 55-year veteran of the pipe, valve and fitting industry, is PVF and economic analyst emeritus for The Wholesaler.