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By Wade Vonasek and Karen M. Koenig
When Wood & Wood Products recently spoke to representatives of industry associations ranging from furniture, cabinet and component manufacturers to machinery suppliers and panel producers, there was one subject that was brought up by each and every one: the economy. 2009 was not a kind year to any sector of the woodworking industry.

“As everyone is painfully aware, 2009 was a difficult year for most businesses,” says Ken Hutton, executive vice president of the Wood Machinery Manufacturers of America (WMMA). “Those in the woodworking machinery, tooling and supply industry were no different. Because of product mix or marketing foresight, some survived the tumult of last year in reasonably good shape. Others struggled to keep their corporate heads above water by retrenching, cutting overhead and laying off employees.”

The depressed housing market contributed significantly to the dire business climate of 2009 for woodworking industry companies. According to the National Association of Home Builders (NAHB), year-end figures from the U.S. Commerce Department revealed that an estimated 374,000 new homes were sold in 2009, down nearly 23 percent from 2008, and the lowest number of new-home sales since the government began keeping track in 1963.

Housing starts also sharply declined 38.8 percent in 2009 to 554,000 units, according to Commerce Department figures. At the same time, The Associated General Contractors of America says that every state in the union, as well as the District of Columbia, lost construction jobs over the past year.

However, there is reason for cautious optimism. The NAHB says that housing permit issuance did rise in December 2009 by 10.9 percent, and that can be a sign of future housing activity. The Obama administration’s first-time home buyer tax credit, which was recently extended beyond its Nov. 30, 2009, deadline, has also sparked some movement.

Tom Julia, president of the Composite Panel Assn. (CPA), however stresses being realistic about the recovery. “The U.S. woodworking industries have been hurt badly by the extended national recession,” he says. “I believe all will recover, though some more quickly and better than others. What is important is that the industry not be painted with a single brush, and that one or two positive economic indicators not be immediately translated into an economic recovery such that we lose sight of the tough work still ahead.

“We must all continue to think lean, and at the same time be opportunistic,” Julia continues. “The downturn has been so severe that the recovery will take years, paralleling what many have seen happen to them personally insofar as home values, 401K accounts and consumer credit. The good news is that Americans are entrepreneurial by nature and can be counted on to find a way to make the recovery happen as quickly as possible.”

Cabinet Industry Cautiously Optimistic
The poor housing market, as well as the dismal economy in general, have hit the cabinet industry hard, with 2009 year-to-date cabinet sales showing an overall decrease of 29.2 percent compared to 2008.

“The biggest issue facing our industry today is the economy and jobs,” says Dick Titus, executive vice president of the Kitchen Cabinet Manufacturers Assn. (KCMA). “Our members have responded by belt-tightening, controlling costs, reducing worker hours, layoffs and plant closings. They are looking forward to better days and fighting to stay the course.”

Titus says that to succeed in 2010, KCMA members will need to continue to do what they currently are doing. “Competition is very keen,” he says. “That is not likely to change as companies compete for market share and business in a depressed economy. There could be additional shakeout as corporate resources are drained.”

Titus says he sees possible opportunity for the cabinet industry in revisiting ideas to increase exports. He adds that the KCMA is continuing to support efforts to resolve the current housing crisis and obtain tax credits for remodeling as an economic stimulus to help create jobs, though Titus says that legislation to accomplish this currently is stalled.

Home Furnishing Companies Adapting
With various reports indicating a year-to-year sales drop of 15 to 25 percent and higher, the home furnishing industry is looking to 2010 with a glimmer of hope.

“Industry analysts forecast a 2 to 3 percent increase in 2010,” says Andy Counts, CEO of the American Home Furnishings Alliance (AHFA). “As companies continue to wrestle with a challenging economic environment, they are also taking steps to position themselves for the recovery that is sure to come. Consumers will likely look to remain in their current homes longer and will look towards furnishings as a way to change and improve their environment.”

According to Counts, home furnishing companies have had to, and continue to, adapt to stay afloat. “The economy and its impact on our retail partners continues to remain a top concern. Furniture companies are now, more than ever, looking at every cost-saving measure and working to find every efficiency in order to remain competitive and viable.”

Counts also sees positive momentum from green initiatives within the industry. “AHFA developed an industry specific environmental management system over 10 years ago that is now gaining wide acceptance,” he says. “In addition to the environmental improvements achieved by utilizing the EFEC (Enhancing Furniture’s Environmental Culture) and SBD (Sustainable by Design) programs, substantial cost savings are also being realized.”

Second Half Rebound for Office Furniture
For the office furniture industry, orders and shipments started sliding during the fourth quarter of 2008, according to Tom Reardon, executive director of the Business and Institutional Furniture Manufacturers Assn. (BIFMA).

“While many companies had concerns and started taking action earlier in 2008, the actual downturn was abrupt and seemingly in direct response to the general financial meltdown. Many companies have reduced staff and/or working hours, and curtailed travel, meetings and other discretionary expenses. It’s a very tough environment right now.”

Reardon says that industry surveys indicate overall office furniture orders and shipments are both down about 30 percent for 2009 as compared to 2008, and that forecasts indicate that shipments could be down another 4 percent during 2010 before starting to see some recovery in late-2010.

“Corporate real estate development, corporate profitability and employment growth all have a significant impact on commercial furniture sales, and until those driving factors start turning around our industry will face some tough going,” he says.

Production is total shipments by U.S. office furniture manufacturers to all locations in the world. Consumption is the value of all office furniture sold in the U.S. from domestic and international sources.

But BIFMA remains optimistic and sees opportunity in these hard times. “These conditions force us to take a hard look at expenses,” says Reardon. “Where can we cut costs to be more efficient, invest in lean manufacturing principles or look at green technologies?”

The industry has continued to stay in the forefront of the environmental movement for more than 10 years. “Our industry has taken a proactive position and created a sustainability standard for furniture,” Reardon says. “We have used the ANSI consensus process to develop the standard and also created a certification program called ‘level,’ using independent third-party certification bodies, that supports conformance verification to the standard.”

Fixture Firms Looking for Second Half Revival
According to Klein Merriman, executive director of the Association for Retail Environments (A.R.E.), the decline in industry sales that began in the second half of 2008 produced a 3.5 percent decline for the year overall in the store fixture industry’s sales. On top of that, A.R.E.’s current estimate is that the industry declined an additional 22 percent in 2009.

“But all is not doom and gloom in the industry,” says Merriman. “The median projection from 73 companies in our industry, surveyed the second week of September 2009, was that sales would grow by 10 percent in 2010. If the holiday shopping season turns out better than forecasters are predicting, and if inventory-short retailers can avoid the profit-eroding discounting plaguing us the last two holiday seasons, there is hope our industry could experience a revival in the second half of 2010.”

On another positive note, Merriman says that relatively few companies in the retail environments industry have failed. “No one would have predicted our industry could experience a 25 percent drop in revenue over two years and see almost no supplier, manufacturer and retail design companies declare bankruptcy,” he says.

Tough Times Ahead for Architectural Woodworkers
Unlike others surveyed, the Architectural Woodwork Institute (AWI) is bracing for another tough year, says President Doug Carney. “If many economists’ predictions are on target, 2010 appears to be flat in comparison to 2009, and in some cases the custom architectural woodwork industry might even decline further from 2009 levels.”

Unofficial estimates show the custom architectural woodwork industry was down at least 30 percent on average in 2009 from 2008 levels. Slow housing construction, the evaporation of interior build outs and dwindling retail fixture markets created an influx of never before seen woodworking competitors that have migrated from other sectors, Carney says.

“Due to the lessened demand for custom architectural woodwork, our members will be forced to downsize their companies, cut overhead, delay capital investment and in general, pinch every penny. Savvy AWI member companies [will] identify new and different ways to leverage their value and production capabilities to meet new demands.”