Tuesday, March 24, 2020

How Are Modular Housing Companies Reacting to COVID-19 Crisis

Yesterday I contacted some modular home factories and modular home builders trying to learn what they are doing about the COVID-19 restrictions put in place by Federal and State governments.

Here are a few of the first comments I received and are being published as “Anonymous” with some of the details redacted for privacy.

From an Anonymous Modular Home Factory:

We are not under a forced closure. Yet.

Most of our office staff is working remotely. We’ve closed the offices and shop to the public. We’ve posted signs on all of our doors asking delivery drivers to not enter.

We pushed orders out and cut our Production rate in half. We laid off 40% of the production floor. We will, however, continue to pay for their health insurance during their layoff.

We’ve cancelled all module shipping and sets for the next two weeks. We’ve cancelled all out of state (overnight) Service Work.

The shop was / is well stocked with lumber, sheetrock, insulation, etc. Last week we scrambled to order ahead on cabinets and windows. We’re dealing with vendor closures as they come up.

We are in a good cash position.

We’ll continue to trickle build, being mindful of cash flow and that deliveries will likely be delayed. We’re continuing to quote and develop new projects. But we’re not assigning them to our Production Schedule until we have more information.

From an Anonymous Modular Home Builder:

In New Jersey, the construction industry is exempt from the mandatory business closure by Gov. Murphy's most recent Executive Order. We are permitted to open and operate our office but we can not have face to face meetings with clients or prospects. We are getting creative with our sales presentations and we are making full use of various computer video conferencing platforms. Also, we can not have more than 10 people on one job site at any given time, which does not present a problem for us.

Today, we are taking delivery of the last modular home PBS built before the mandatory PA business closure. We will be setting the home tomorrow.

We have several modular homes on the ground that are at various stages of construction that will keep our field crews busy. We also stick build custom homes and we have one high end, site built custom home on the board. We also have several renovation and remodeling jobs as well.

So the temporary closing of the PA modular factories will not have a negative impact on our company in the short term. I am not sure what you consider an extended closure - two weeks, four weeks or more. The forced closing of any business or modular factory for more than two weeks will put a considerable financial strain on the industry.

A closure of four to six weeks could be a financial disaster for our industry.

Having been in the business for over 40 years, we have experienced - and survived - every recession since 1980. This COVID-19 event may be worse than the Great Depression and the Great Recession combined and literally destroy our entire economy. The best we can hope for would be a V shaped recovery which would be great. The only way we will experience a V shaped recovery is if all the businesses are permitted to open within the next two to maybe three weeks. A mass closure of more than four weeks would be our worst economic nightmare come true.

From an Anonymous Modular Home Factory:

Currently we have shut down almost all operations. I understand the situation, I don’t agree with the way it was handled. Most other states are allowing manufacturing to continue to operate, home building and construction is still allowed in several other states that had a mandated shut down.

It makes it very difficult for small businesses like us to carry on without having a steady cashflow. We are fortunate to be a strong cash position; we could ride this storm for a little while. However, the bills continue to come, for example, health care costs are ridiculous. That $90,000 bill per month comes regardless if we are working or not! Taxes, insurance, on and on. It will cost us roughly $100,000 per week with no incoming cash to operate the way we are. Enough ranting!!

We have the following departments working from home:
  • Sales
  • Engineering
  • Order processing
  • Costing
 In total about 22 people. We are trying to maintain order flow as much as possible so when this mandated shutdown is lifted we can move forward and not lose time on approvals and orders.
 I have the accounting department working on the QT to complete payroll, AP, insurances, taxes etc.  
We have applied to be exempt from the shutdown. I will keep our builders posted on the outcome of that application, I am aware of one company getting the exemption and some others getting denied.

1 comment:

Anonymous said...

Coach, I'm impressed by these companies. Very candid.

As a supplier to the construction industry we are facing the same issues. High fixed costs and very little business. We are blessed to have a cash reserve but many of the builders we supply don't which means we can't sell them product if they don't pay for what they have already purchased from us. We are not a bank but we will try to work with builders by converting their past invoices into demand notes as long as they continue to buy from us and stay current.

This too shall pass. Just not sure how long it will take.