When Sheryl Palmer accepted the job of chief executive officer of the home building company formed by last July's merger of Taylor Woodrow and Morrison Homes, she was walking into a situation other people probably would have avoided. Market conditions were terrible; she was becoming the newly formed company's third CEO in 12 months; and the merger itself, now called Taylor Morrison, presented daunting challenges.

But Palmer, a 20-year industry veteran who had been executive vice president of Morrison's western region, recalls being "excited" by the prospect. "I so believe in the opportunities of the two companies coming together and in the talent pool we have," she told BUILDER during an interview yesterday afternoon.

She is taking over a merged company that aggregately closed 7,247 homes in 2006 and generated $3.573 billion, which would have made it the 15th-largest builder in the country that year. Palmer says that Taylor Morrison's 280 communities in the U.S. would end 2007 with roughly the same number of closings, but that sales and profit would be off. "The big question, though, is what do we look like three or four years from now?"

She admits that the decisions she and her management team face are "almost unprecedented" because the housing downturn has been so severe. "We have to have the courage to make some difficult decisions, and have the strength to go beyond our comfort zone. What do you do when you have a master plan that has amenities open in a market that isn't selling? How do you approach that situation? There's no one answer, but you have to assess costs, and the impact on homeowners and your credibility."

During the downturn, Taylor Morrison has reduced its manpower by about 35 percent to 1,300 people and is executing what Palmer calls an "asset strategy" aimed at returning cash to the home building operations and the parent company, United Kingdom-based Taylor Wimpey. She notes that over the past 90 days, Taylor Morrison has whittled its unsold inventory by between 35 and 40 percent, to levels that she says "are in a healthy state." Taylor Morrison is also walking away from land that market conditions no longer justify holding onto.

The merger brought together one company, Taylor Woodrow, primarily a master-planned developer of mid- to upper-scale homes; with another, Morrison, a high production builder focusing on first-time and move-up buyers. Palmer tells BUILDER that Taylor Morrison would continue to offer the full breadth of products, with the exception of high rises, which it had been building in Florida but is getting out of. (Taylor Morrison's Monarch Homes division in Canada will continue to develop high-rise products.) Palmer also notes that a new branding and media strategy is in the works, although she would not reveal the details.

Operationally, Palmer prefers a decentralized structure. "Each of our [14 divisions] will operate as a business, with its own P/L and income statement," she says. Division presidents now report to five regional presidents who report directly to Palmer. (For the time, Taylor Morrison doesn't have a COO.)

Across the markets it operates in, Palmer sees some glimmers of light, despite cancellation rates that still hover above 30 percent. She says that Denver, for one, is "holding its own" because it hasn't gone through the levels of price discounting and incentives other markets have. Palmer also says that as Taylor Morrison moves forward, it has its eye on "investing" in the future, and "being opportunistic" at a time when there could be some major fallout in the industry. Any expansion, though, would be a longer-term proposition.