As everyone in the electrical industry turns their attention to the new year and tries to anticipate what will happen over the coming 12 months, we checked in with a variety of leaders, insiders and visionaries to get their take on the major issues facing the industry as a way to help you broaden your perspective and check your assumptions.

Overall, our sources seem to have more questions than answers. If there's a consensus view among the people we talked to, it might be that the softening U.S. economy will play the major role in deciding the outcome: the severity of the downturn will determine who prospers and who struggles, who goes up for sale and who buys them.

Questions raised by Bill Goodwin, president of Griffith Electric, Trenton, N.J., highlight concerns shared by many in the industry. “Our biggest concerns are: a) What will the commercial construction market do in our area next year? And related to this, will the slowdown of the residential market contribute to a softening of this commercial market? b) If these markets continue to take a downward slide, how deep will this cut into margins? Certainly, they have to be affected, as we all fight over a ‘smaller piece of the pie.’ c) Are there going to be enough qualified people in our industry to support our growth?”

With the questions on the table, the challenge becomes figuring out how to respond in spite of the uncertainty and keep a company thriving and growing in a slow-growth environment.

“Certainly next year is going to be a difficult economy and we're going to have to make sure that we have strong, strong control of our activities during the year because we need to be able to take advantage of opportunities, but we must be well structured,” says Dick Waterman, executive vice president and CEO, International Electric Supply Corp. (IESC), Dallas, the U.S. holding company that oversees Rexel Inc. and Gexpro (formerly GE Supply).

The national economic landscape may be painted in somber colors, but there are local markets, customer groups and product areas that show admirable resiliance and some definite bright spots. It seems to depend on where you stand (or in which markets your company operates).

“The saving grace for 2008 will be selling up, new technology and gaining market share,” says Jerry Hagerman, senior sales operations manager/IC channel, for Sylvania, Danvers, Mass. “Florida, Vegas and Michigan will continue to struggle and perform poorly. The Southwest, especially Texas and Arizona, along with Utah, will continue to perform significantly better, especially the petrochemical centers. New York will continue to be strong. Segments that will continue to be strong will be healthcare and energy services (ESCO).”

In Sylvania's backyard, in fact, there's a lot of work going on in commercial and even high-end residential construction, says Greg Reynolds, president of Flynn & Reynolds Agency, an independent manufacturers' rep in Tewksbury, Mass., who covers all of New England.

“We're experiencing a lot of business in the high-end residential market,” Reynolds says. “Commercial is also strong, and we expect that to continue through about the middle of the year. The business we've written is about 15 percent above last year. The architects and engineers we work with tell us it should continue through the first six months of next year.” The commercial work is primarily build-out and fill-in construction in residential developments that went up during the housing bubble's long, happy inflation, where they're now building strip malls, schools and hospitals, Reynolds says.

Across the continent in California, Bob Wittig, director of IT for Independent Electric Supply, San Carlos, Calif., sees plenty of reason for optimism. “We expect things to be fairly good next year. We're up close to 20 percent in sales this year. We haven't really been affected by the housing downturn because we don't really sell to residential contractors; they're a small portion of our business. Commercial projects seem to be going at a good rate, especially here in Northern California.”

Independent Electric Supply has “doubled in size in the past three years and we plan to continue to grow as a regional distributor. I see things as pretty positive,” Wittig continues. “There are some pockets where we're not doing as well as we would like. Southern California is not doing as well as we would like. But overall, California is continuing to do reasonably well economically. The infrastructure improvements that are being made are directly benefiting companies like ours where we're doing commercial work.”

In the residential markets of Texas' major metropolitan areas, Bill Elliott, president of Elliott Electric Supply, Nacogdoches, Texas, sees some resilience due to strong oil prices and also sees lessons to be learned from how the nation got into this slump in the first place.

“The Houston market is buoyed by the oil market, but we are seeing slowing in both markets (Dallas and Houston),” he says. “A lot of this was brought on by aggressive financing. These lenders should not be protected by low rates and government bail outs. I don't think we will see ‘normal’ approach the building rate of the past, but by the end of next year we should see the worst of this behind us.”

Elliott even finds a reason to be grateful for the slowdown itself. “We welcome a correction in the economy and think it will favor strong organizations in the long run,” he says. He's not alone. Up in New England, Greg Reynolds has a similar sentiment. “It's strange, but I'm excited about the fact that business is slowing down slightly. We've been running at such a pace that we haven't taken the time to work on the business. This is a great opportunity to go out and grab market share and reinvent my business. There are negatives as far as the slowdown is concerned, but I think it's time to reinvest and get ready for the next boom market.”

As for the future of consolidation in the electrical distribution channel over the next 12 months, much depends on the economy. Many expect a slowdown in the rate of acquisitions after two years of watching the market's most active consolidators bite off some truly enormous chunks of business (see chart in “Top 10 News Stories of 2007,” pages 32-33). Some think they'll need to do a lot of chewing next year before eating any more. But there are exceptions.

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© 2007 Penton Media, Inc.