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issue: January 2003 APPLIANCE Magazine

2003 Association Forecasts
GAMA: 2003 Gas Appliance Manufacturers Association Forecast

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by Evan Gaddis, president

The past year has been a time of transition and adjustment for the Gas Appliance Manufacturers Association (GAMA), for our industries and for our country. Even in less than ideal times, however, GAMA finds opportunities to empower our industries and to embrace new technology.

Dealing with 2002's uncertain economy, finding our nation on a war footing against terrorism for the foreseeable future, responding to an increasing frequency of regulatory and legislative challenges in the states as well as in Washington - any one of these factors would be sufficient to occupy our time and effort for 2003. Facing all of them at once, however, means that we have to be smart, as an industry and as a nation. We have to turn a critical eye on old ways of thinking and come up with new techniques to accomplish more, faster and better, for less.

It appears that with continued low interest rates and depleted inventories, the outlook for manufacturers has improved. Good corporate governance based on old-fashioned values of honesty, accountability, and pride in what we do also has helped the HVAC industries weather the storm. Even so, there is a truckload of unfinished business for manufacturing industries that continues to kindle economic uncertainty, and it will have to be addressed in 2003.

The U.S. Congress failed to act decisively on a comprehensive energy bill last year, but the conditions which created the need for a new national energy policy haven't gone away. Indications are that near the top of the legislative initiatives in the new 108th Congress will be President Bush's ideas for promoting energy production and conservation, and we'll work to encourage them. However, the primary focus of GAMA's lobbying efforts was and will continue to be to ensure that there is no unnecessary or burdensome expansion of the federal regulation of residential and commercial HVAC equipment, as was proposed last year. Congress also failed to pass class action reform as part of a much-needed overhaul of our tort system. The President's Council of Economic Advisors reports that our tort liability system is the most expensive in the world, costing our economy the equivalent of nearly U.S. $650 for every person in the U.S. , or 1.8 percent of our gross domestic product. Another drag on our industries', and the U.S. economy in general, is the unrelenting spikes in the cost of employer-provided health care. One independent source estimates that the cost of employer-provided health care jumped 12.7 percent in 2001, the highest increase since 1990. Some smaller businesses have experienced increases of 30-40 percent annually for several years. The urgency of these issues is real.

On the state regulatory front, GAMA and several other appliance making trade associations have launched a vigorous legal challenge to new amended California appliance efficiency regulations. After several false starts due to California Energy Commission administrative foul-ups, the regulations were finally approved late in 2002. The regulations establish new information reporting and product labeling requirements for an extensive list of energy-consuming appliances and equipment. GAMA and the other associations argued before the Commission that the new requirements are pre-empted by federal law, but the rejection of our arguments now means that the issue will have to be decided in court.

The Department of Energy (DOE) rulemaking to update federal minimum efficiency standards for residential furnaces and boilers, which began in the summer of 2000, will continue into the new year. One particular focus of attention for GAMA in the ongoing rulemaking is the impact of design options on electricity use as well as AFUE. As always, our goal is to ensure that government regulation reflects sound science and not merely the wishes of special interests; consequently, the DOE rulemaking will remain a high priority for GAMA through 2003.

As I said early on, GAMA will respond to whatever challenges come our way in 2003 and look for their inherent opportunities - witness our formation of two new product divisions last year: the Power Generation Division encompassing fuel cells and micro turbines used to provide building services, and the Gas Detector Division, which is comprised of manufacturers of detectors of combustible gases and combustion products. Our Fuel Cell group is already pursuing funding to focus on fuel cell stationary application technology research in 2003, and with our well-established working relationships with DOE, gas utilities, and product testing agencies, we are well positioned to get it.

Based on projections provided by our member companies, GAMA foresees moderate but steady growth for most space and water heating products over the next four years. More than 2-percent growth in shipments of residential gas furnaces is expected for 2003, with lesser increases annually up to 2006 when we project an increase of more than 4.5 percent. Shipments of cast iron gas boilers are expected to grow more than 4 percent for 2003 and again in 2004, followed by a decline in shipment growth through 2006. Cast iron oil boiler shipment projections for 2003 are at a 1.5-percent increase, with increases of 1.4 percent for 2004, 1.9 percent for 2005, and 1 percent for 2006.

Steady growth is also projected for residential gas water heaters through 2006, with 2 percent increases in shipments annually. Smaller but nevertheless steady growth is also projected for shipments of residential electric water heaters, with increases of 1.5 percent in 2003, 1.4 percent in 2004, 1.9 percent in 2005, and 1 percent in 2006. Healthy increases for shipments of gas unit heaters are projected for the next 3 years, with estimates of an 8-percent increase in 2003, 5.2 percent in 2004, and 8.4 percent in 2005, with growth flattening out in 2006. Growth of around 1 percent annually through 2006 is expected for shipments of vented room heaters, while little or no growth in shipments for vented wall furnaces is projected for the same period.

Vent-free products are expected to show continued growth through 2006, with shipment increases for gas logs flat in 2003, but increasing by 3.8 percent in 2004, and 1.8 percent in 2005, and in 2006. Shipments for vent-free gas fireplaces are projected to remain flat for 2003, with a healthy increase in 2004 and then flattening out again through 2006. Projections for vent-free gas stoves are more optimistic, with shipment increases of 4.5 percent in 2003, 4.3 percent in 2004, 4.1 percent in 2005, and 4 percent in 2006. Increases in shipments of vent-free gas fireboxes are projected at a steady 4 percent annually through 2006.

No doubt 2003 is going to be a challenging, busy year, but I am confident of GAMA's ability to advance the interests of the industries we represent.


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