Recessions have a way of separating winners from losers. And as the housing market inches closer to recovery, indications about which companies are likely to survive or fail become clearer.
Some companies are exploiting the economic downturn to strengthen their competitive positions. Others have used the recession to reinvent themselves. And a handful of new builders and suppliers have entered the market either to create new demand or to fill voids vacated by companies that have tripped or fallen. The following list of companies to watch this year includes builders and suppliers that are poised to take advantage of an economic upswing or, at the very least, stay ahead of the pack if the recession lingers. Our choices also include two builders whose very survival would be a rebuke to critics who had already written them off for dead.
1. Pulte Group, Bloomfield Hills, Mich.
Everyone has heard the arguments: Pulte bought Centex too soon. It paid too much money. The deal added too much debt to Pulte’s balance sheet. And why add market share when there’s no market in which to sell?
Each of these points may have some validity. But Pulte’s $1.4 billion merger with Centex, which closed last August, is still worth keeping an eye on now, if for no other reason than it’s virtually impossible to ignore a $6 billion home builder whose estimated unit closings in 2009 accounted for more than 3% of total new-home sales.
This “combination,” as Pulte’s CEO Richard Dugas calls the merger, extended Pulte’s reach to 69 markets in 29 states. Centex’s product for first-time buyers diversifies Pulte’s active-adult-heavy portfolio. Since the merger, Pulte Group has paid down nearly $2 billion in debt and made optimistic projections about synergistic operational savings.
But the litmus test could be whether Pulte can pull off its branding strategy in an industry sector that mostly has resisted name-brand marketing.
Pulte this year is assigning a brand to every piece of dirt it owns or controls: Centex for entry level lots, Pulte for first move-up, Del Webb for active adult, and “TBD” (apparently a brand still in formation) for luxury products. It’s worth noting that Pulte now controls the marketing, sales, construction, and design of its products corporately, leaving its areas and divisions to focus on land acquisition and customer service.