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issue: January 2005 APPLIANCE Magazine

Appliance Industry Association Forecasts - Gas Appliance Manufacturers Association
Taking Action for a Healthy 2005

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by Evan R. Gaddis, president, Gas Appliance Manufacturers Association (GAMA)

It is always a challenge to forecast how our industries will fare in the coming year. Like Dr. Niels Bohr of nuclear physics fame, I firmly believe that “prediction is very difficult, especially about the future.” With apologies to Dr. Bohr, I will nevertheless hazard a few projections.

Evan R. Gaddis

There are some concrete reasons to be optimistic about our industries’ future. I note that the Wall Street Journal reports that U.S. manufacturing output has returned to pre-recession levels, due in large part to a rising demand for U.S. exports. Manufacturers are again producing at the levels of the 1990’s boom.

In GAMA’s industries, our members are enjoying the steady upturn in the U.S. economy and are enthusiastically gearing up for current and projected increased demand for heating products. Figures for gas venting and chimney liners—always good market indicators for our industries—show recent sales increases of 5 to 7 percent. The numbers for commercial gas water heaters indicate strong increased demand, while residential water heater sales appear level with the previous year. Gas- and oil-fired, warm-air furnace sales reflect the economic upturn, with the general heating industry expecting a positive 3- to 5-percent growth. Residential product sales, in general, are moving much faster than sluggish—but still improving—commercial product numbers.

My optimism toward steadily improving sales is tempered, however, by economic factors such as the skyrocketing costs of steel and heating fuels that introduce market uncertainties, as well as by specific issues where GAMA sees potential for industry growth in 2005 if we take decisive action. So the question is: What are we going to do about them?

One of those issues is China. GAMA has had an explosion of interest from our members about doing business in China, and it is clear that GAMA’s unique position representing our industries qualifies it to play a role in helping our members take advantage of the market opportunities China offers. To assist our members who are already in the China market, those who are considering their options, and those who are ready to take the plunge, GAMA has opened an office in Beijing. Our role will center on promoting the harmonization of U.S. and Chinese standards for our appliances and controls, but we will also analyze market data and trends, and liaise with the Chinese government on matters important to our members.

At a time when our members are intrigued by global opportunities, they are confronted with increasing global risks to their intellectual property rights (IPR). In 1982, global trade in counterfeit products was estimated to cost U.S. manufacturers around $5.5 billion in lost sales; that figure skyrocketed to somewhere between $450 billion and $500 billion for 2003, so forecasting an increase for 2005 doesn’t require much prescience.

GAMA is working with other manufacturing associations to identify the best approaches to attack this scourge, and we intend to enlist the IPR Caucus formed last year in the U.S. Congress to lead the attack from Capitol Hill. The “STOP” (Strategy Targeting Organized Piracy) Initiative launched in late 2004 by the U.S. Departments of Commerce and Justice and the United States Trade Representative is another reason for optimism. GAMA will work with these offices in 2005 to see that STOP’s new anti-piracy measures are implemented and that they get results. With the counterfeiting problem so acute in China, GAMA will make this issue an additional focus for our office in Beijing this year.

I also hear frequently from GAMA’s members of the urgent need for legal reform. Our civil justice system has gone lawsuit-crazy, with state class-action lawsuit filings increasing more than 1,000 percent since 1994 and costing U.S. businesses an estimated $200 billion per year. Concurrently, our tort system, which currently handles claims related to asbestos exposure, is not working in a timely manner—for defendants or plaintiffs. At a time when global competition requires virtually every company to trim expenses, the rising costs of defending themselves against sometimes frivolous litigation is not only driving up companies’ costs of doing business, but is also driving some companies out of business entirely.

Another issue sapping the financial vitality of American businesses is the skyrocketing costs of employer-provided healthcare. Double-digit, yearly cost increases in providing healthcare to employees are now the norm, with some companies facing yearly increases of more than 30 percent. Association health plans (AHPs) have been proposed as a legislative remedy, allowing companies to band together through trade associations such as GAMA to negotiate better health care premiums and to continue this important benefit to their employees.

Although class-action reform legislation, an asbestos litigation trust fund proposal, and AHP bills received substantial consideration in the 108th U.S. Congress (2003-2004), none were enacted. GAMA’s priorities in the new Congress will be to see that another Congress doesn’t come and go without taking decisive action on these critical issues.

I may be cautious about predicting the future when it comes to statistics and sales figures, but I am confident that in creating a healthy environment for U.S. companies to do business, the future will be what we make it.


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