As sales sank and cancellations crested last year, production builders insisted they could stem margin erosion by exacting concessions from their trade partners. And through the early months of 2007, suppliers confirmed that builders were pressuring them for price breaks; although, with some notable exceptions, that arm-twisting had yet to become as severe as anticipated. The flip side of this volatile housing market, however, is that it's presenting trade partners with opportunities to improve their positions with builders, according to several leading manufacturers exhibiting at the International Builders' Show (IBS) in Orlando, Fla., in February.

Exhibitors were buoyed by builders' cautious optimism about when buyer demand might rebound, the consensus being mid-2007. “They're whining, but not complaining,” is how the national accounts manager for one supplier of foundation materials describes builders' attitudes about current market conditions. And it's not like business has fallen off a cliff: Jeld-Wen, the Klamath Falls, Ore.–based millwork supplier, is set to put three new door plants on line.

But suppliers and contractors also report that some builders are taking a harder negotiating line, as typified by Lennar, which in January asked contractors to lower prices by between 5 percent and 20 percent. Those who refuse face being banned from bidding on that builder's work for at least six months. This threat—first reported in Southern California's Orange County Register—and others like it have forced trade partners to devise persuasive counterarguments to deflect builders away from price and towards “value.”

“The builders are smart enough to know that they need to create value, and they can't do that solely through price,” says Jeff Wagner, executive vice president of OSB for Nashville, Tenn.–based LP Building Products, the giant panel producer that in October reacted to the housing downturn by curtailing production at five plants and closing another. So when builders and contractors demand givebacks, LP directs them to products such as its Tech Shield radiant barrier and the tax credits builders can earn by installing it, says Wagner.

“We're going back to that four-letter word: S-E-L-L,” says Stephen McNally, vice president of marketing for Joplin, Mo.–based Tamko, echoing comments from other suppliers that are placing greater emphasis on training and supporting their outside sales teams.

The trick to winning builders' business in this latest down market, say suppliers, has been to offer alternatives that don't undermine the existing value of suppliers' products or services. For example, Bayport, Minn.–based Andersen Windows—which cut 440 jobs in December, in reaction to the slowdown in new-home construction—recently picked up business for the first time from Richmond American Homes in the Denver market, a gain that Andersen's vice president of sales Steve Mog attributes to his company's acquisition last summer of Silver Line Building Products, which put Andersen into the vinyl market. Andersen also added 54 sizes to its 200 Series of wood windows, which Mog says gives cost-conscious builders more choices.

What started out last year as a conversation solely about price reductions between Pulte Homes and Therma-Tru, the Maumee, Ohio-based millwork manufacturer, evolved in November into an exclusive three-year deal where Therma-Tru is supplying fiberglass entry doors to all of Pulte's communities nationwide. Carl Hedlund, Therma-Tru's president and CEO, is convinced that what separates winners from losers, especially when the business is slumping, is creativity. During IBS, his company had its biggest new-product launch to date, the centerpiece of which was “Tru-Defense,” a door system that can withstand 150 mile-per-hour winds, 8 inches of rainfall, and impacts up to 35 miles per hour. “This industry is looking for leadership,” Hedlund says, “and you can either cut your expenses to the bone, or you can make something happen.”

Learn more about markets featured in this article: Orlando, FL, Los Angeles, CA.