Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment

SIC 3585

Industry report:

This category includes establishments primarily engaged in the manufacture of commercial or industrial refrigeration equipment or domestic, commercial, or industrial air-conditioning units. Other equipment manufactured under this classification includes warm air furnaces, humidifiers and dehumidifiers, soda fountains, and beer dispensing machines. Similar equipment not covered by this category includes household refrigerators and freezers, and electric space heaters and portable humidifiers and dehumidifiers.

Industry Snapshot

A trip to the local supermarket provides graphic evidence of the importance of the heating, refrigeration, and air-conditioning industry (HVAC) to modern American society. Many of the products found in the air-conditioned aisles, like fresh fruits or live fish, could never have been transported or maintained without cooling technology. The Air Conditioning and Refrigeration Institute (ARI) estimates that more than three-fourths of all foods consumed by Americans have been produced, packaged, shipped, stored, or preserved by refrigeration. Temperature control systems also have become common in shopping malls, commercial office buildings, schools, and hospitals. The total value of HVAC industry shipments in 2009 was $32.8 billion, up from $30.9 billion in 2008, according to the U.S. Census Bureau.

The demand for air-conditioning systems and room air conditioners is often dependent on the state of the nation's economy and the vagaries of the weather. New building construction is the most important market sector for the HVAC industry, which in turn is based on such market factors as interest, vacancy, and employment rates. During the early and middle years of the first decade of the twenty-first century, the HVAC industry benefited from low interest rates and a healthy new housing market, but weak economic conditions led to the stagnation of the commercial and industrial sectors. The economic recession of the late years of the first decade of the 2000s and accompanying slowdown in construction negatively affected the industry, but not as much as many other manufacturing industries, because of the nature of the HVAC industry.

Background and Development

Until the industrial revolution, refrigeration depended on the natural mediums of ice, snow, and water. The early Chinese harvested winter ice and packed it in dried straw for use in the summer. The Egyptians used porous earthenware jugs placed on their rooftops at night to cool their liquid contents by the natural process of evaporation. Since changing a liquid to a gas requires a considerable amount of heat energy, the liquid remaining in the containers became much cooler by morning. During colonial times, the ice hut was a familiar part of the landscape. It used the Chinese concept of harvesting ice to preserve food during the summer. Well into the 1800s, Americans sold ice to foreign countries as a natural refrigerant. The periodic home deliveries of ice were a commonplace experience for most Americans during the early part of the twentieth century.

The first attempts to find an industrial method to duplicate and improve on nature came in 1748 from Dr. William Cullen of Scotland. In 1851, Dr. John Gorrie, director of the U.S. Marine Hospital at Apalachicola, Florida, built the first commercial machine, receiving U.S. Patent 8080 for it. By 1880, the fledgling industry had developed reciprocating compressors that made possible such things as commercial ice making, brewing, meat packing, and fish processing. In 1904, 70 of the industry pioneers formed the American Society of Refrigeration Engineers, officially creating a new profession.

In 1911, Willis H. Carrier presented the mathematical bases for the now-standard psychometric charts, which define the theoretical properties of heat transfer through air. His work earned Carrier the title of "the father of air-conditioning." In 1922 he invented the centrifugal refrigeration compressor. During World War II, Carrier contributed to the building of a 10-million-cubic-foot wind tunnel that could be cooled to -67 degrees Fahrenheit. The most notable use of the new air-conditioning technology was in the motion picture theaters of the 1920s. New York City theaters, including the Rivoli, Paramount, Roxy, and Lowe's in Times Square, were among the first to install the innovation. By the end of the decade, hundreds of theaters across the country offered a controlled climate along with their feature film.

The heating industry refined the early concept of the open fire by enclosing the fire with brick or stone structures equipped with chimneys. These dirty and inefficient first efforts generally heated only the room they occupied, but could also be used for cooking and provided a central focus for the household. During the nineteenth century, developments in metallurgy and forging promoted the use of remote water boilers attached to radiators by metal piping. These sturdy contrivances often used layers of asbestos to retain the heat in the water.

The warm-air furnace reduced the cost of heating, making the concept of central heating more available. Early systems were usually coal-fired, cast-iron machines that filled whole basements. They distributed the heat by means of "gravity" through large metal ducts attached to ornate grills in floors and walls. Like any other material when heated, air becomes lighter and tends to be pushed upward by the cooler air surrounding it. The gravity is actually "working" on the cooler air, pushing it down to displace the lighter warm air. Later, electric fans attached to the heaters created the first forced-air systems. Cast-iron heaters were replaced by compact sheet metal cabinets, which contained burner, blower, and filter.

Burning Alternatives.
A more integral change occurred in the fuel being burned. The early machines used coal, wood, or charcoal. These materials required large storage areas and considerable labor in feeding the furnace and cleaning out the burned residue of cinders and ash. The fire produced great amounts of air pollution in the form of sooty smoke and smog. London's famous pea-soup fogs of Victorian days disappeared when the British Parliament banned the burning of coal within the city limits.

The first technological revolution in modern heating fuel technology came with the use of fuel oil as a replacement for coal. The Gilbert and Barker company claims to have produced the first industrial oil burner in North America in 1889, but patents for several burners were not issued until 1892. These early machines were often called range burners because they were primarily used for the kitchen stove. New heat resistant metals made the use of fuel oil as a furnace fuel both practical and desirable by the late 1920s. That began a shift in consumer fuel preference that virtually eliminated coal as a domestic fuel by the late 1950s. A second fuel revolution came with the OPEC oil embargoes of the 1970s. Once cheap and plentiful, fuel oil quickly rose in price and scientists began predicting a world-wide oil shortage and depletion of reserves by the year 2000. To compensate, the industry shifted to domestically available natural gas and, to some extent, electricity. By 1992, with the cost of generating electricity escalating, natural gas became the clear preference of most U.S. consumers, reaching a market penetration of 65 percent, according to the Detroit Free Press.

Modern refrigeration and air-conditioning work on essentially the same principle. Both collect heat from one area and transfer it to another where it dissipates into some medium. The basic system consists of a compressor driven by an electric motor and two coils. In the first coil, called the condenser, the refrigerant gas is compressed into a liquid, discharging heat as it changes state. In the second coil, called the evaporator, the refrigerant becomes a gas again, absorbing heat from outside the coil. The essential ingredient is the refrigerant gas. Early refrigerant materials included air, water, butane, propane, ether, ammonia, sulfur dioxide, and methyl chloride. Some, like ammonia, continue to be used in large commercial applications like skating rinks and ice factories. Many of these materials were highly toxic, corrosive, and flammable.

In 1930 Thomas Midgely of the DuPont Company developed the first fluorocarbon refrigerant and demonstrated his faith in its safety at a company press conference by inhaling a stream of the gas and blowing out a candle with it. In 1956 the industry adopted DuPont's numbering system for all fluorocarbon refrigerants. The most common used in the 1990s were the chlorofluorocarbons R-12 for automotive and appliance applications and R-502 for commercial and industrial applications. A second generation of refrigerant compound displaced CFCs in many applications. The hydrochlorofluorocarbon (HCFC) R-22 dominated the domestic central air-conditioning market and was gaining popularity for some commercial applications.

Until 1953, water remained the most common cooling medium for air conditioning and refrigeration. Systems of that day used municipal water supplies or cooling towers, making the technology difficult for most domestic applications. The introduction of air-cooled systems in 1953 launched the concept of controlled cooling into national acceptance. It was followed by the split-system that continued to be used in the first decade of the 2000s. By 1973, 75 percent of industry sales were residential units. The development of electrically activated refrigerant reversing valves allowed cooling systems to be used for heating as well. The heat pump concept, which was pioneered in the 1960s, exchanged the functions of the two coils, as the evaporator became the condenser and the condenser acted as an evaporator. The systems scavenged usable heat out of the fall and winter air and pumped it into the building. Early models operated inefficiently in unsuitable climates, earning the technology a bad reputation with consumers. In 1960, only 28 percent of new homes were installed with central air-conditioning, but by 1992, the technology was included in 77 percent of new homes.

The technology sparked development of the commercial rooftop combination heating and cooling unit. Placing the heating and cooling equipment in a single box on the roof freed up valuable commercial space and simplified servicing and installation. In addition, improvements in compressor design, particularly the hermetic or sealed compressor, allowed the size and capacity of industrial refrigeration machines to increase and spurred the advancement of the chiller systems that dominated the large building and industrial markets.

The 1990s marked a decade of revolutionary change for the HVAC industry. The Centers for Disease Control and Prevention reported 1,604 cases of Legionnaires' disease in the United States for 1994, but epidemiologists believed the number of cases was between 10,000 and 100,000. Office building operators across the country reported cases of "sick-building syndrome," in which workers developed debilitating symptoms from a build-up of pollution levels in sealed, air-conditioned buildings. In 1993 Congress passed an energy bill that mandated higher efficiency standards for heating and air-conditioning appliances and promised to make the requirements stricter in 1998. However, the most devastating event for the HVAC industry was the discovery of a 7 million square kilometer hole in the ozone layer above the South Pole, and the scientific evidence linking that phenomenon to the release of chlorofluorocarbons (CFCs) into the atmosphere. That revelation threatened the basic component of the HVAC industry. Midgley's supposedly safe refrigerant, around which the industry was designed, had become an unacceptable pollutant.

Global Warming and Ozone Depletion.
The first rumblings of environmental damage were initiated by British scientist James Lovelock. In 1973, Lovelock wrote that carbon dioxide and CFCs in the atmosphere created a "greenhouse" effect by trapping heat in the lower atmosphere. Although few scientists argued the physics, the expected warming did not materialize as predicted. Other factors intervened, making it clear that the atmosphere and its energy transmission characteristics were too complicated to be fully understood. In 1995, the Nobel Prize in Chemistry was awarded to Paul Crutzen, who identified the chemical reactions that destroy the ozone layer, and F. Sherwood Rowland and Mario Molina, who determined that CFCs were responsible for triggering ozone depletion. The essential problem is the chlorine component of the CFC. The chlorine atom destroys ozone molecules in the high atmosphere through a complicated series of chemical reactions. Each chlorine atom destroys one ozone molecule every minute for about one year.

In 1973 the industrial world dumped almost one megaton of CFCs into the atmosphere every year. CFC production was a $2 billion a year business. Its leaders resisted the scientific theories, calling for extensive studies and time to develop replacement materials. Eventually Sweden, Norway, and Canada banned CFCs used in aerosol cans, but nothing further happened until the British Antarctic Survey discovered a hole in the ozone layer half the size of Antarctica. In 1987, 24 industrialized countries signed the Montreal Protocol, calling for a 50 percent reduction in CFC production by the year 2000.

The Clean Air Act of 1990, which introduced extensive air-quality standards as well as the incremental reduction and eventual banning of CFCs by 2000, challenged the industry to improve its technology. This challenge created uncertainty in the industry as new systems were developed, using chemicals that were not compatible with the old refrigerants. In the early 1990s, the fear of products becoming obsolete caused the industry to stagnate, while alternative refrigerants were researched.

In June 1990 the protocol timetable was amended. CFC production in developed nations was banned by the year 2000, but developing nations could continue to produce them until 2010. As a temporary replacement refrigerant, hydrochlorofluorocarbons (HCFC) were scheduled to be phased out in 2030. This answered a concern by developing nations that the ban would work to the advantage of European and U.S. firms who had the money to invest in alternative refrigerant technology. Manufacturers in those two regions produced two-thirds of the world's CFCs at that time.

Also in 1990, the refrigeration industry petitioned the Environmental Protection Agency to develop and issue uniform national recycling standards and requirements in anticipation of the large quantities of old refrigerant that would need to be removed from refurbished machinery. In 1992, the Air Conditioning and Refrigeration Institute (ARI) estimated the existing stock of refrigeration and air-conditioning equipment in the United States exceeded $135 billion. In February 1992, President George H.W. Bush reset the Montreal Protocol timetable, moving its requirements ahead four years and calling for other nations to follow suit. On January 1, 1996, the production of chlorofluorocarbons was banned in the United States and other developed countries. Hydrofluorocarbon blends were already being used as refrigerants since they were legal until 2010 and these could be used to service old HCFC equipment until 2020.

The problem for the industry centered around finding a suitable replacement refrigerant that could be produced quickly enough to meet the phase-out schedule. To make the ban effective, that technology would have to be shared with developing nations in order to persuade them not to continue building their own CFC industry. Refrigerant engineers looked for chemical combinations that were not flammable, corrosive, or toxic, and which would operate reasonably well in existing equipment. The lubricants in the old systems had to be compatible with the new gases, and in some cases new lubricants had to be found. In addition, the new designs had to meet the higher energy efficiency standards of 1993. Most of the new chemicals worked reasonably well, but not as efficiently as CFCs. Therefore, equipment redesigns were necessary to meet the efficiency ratings. The research and technology added to the cost of the machinery at a time when sales of refrigeration equipment were stagnant. Another round of higher energy requirements was slated to go into effect in 1998, but the industry could not build toward that higher target because the standard was still being developed.

The process of replacing CFCs required a shift to HCFC-22, which was the only proven substitute for CFC refrigerants in 1993. In 1996, AlliedSignal Inc. introduced Genetron AZ-20 (R-410a) as a new alternate refrigerant. This non-ozone depleting replacement for HCFC-22 was quickly adopted by Carrier Corp. for use in its air-conditioning units. Genetron AZ-20 is a patented azetropic blend of HFC-125 and HFC-32 and demonstrated a 7.5 percent higher energy efficiency rating (EER) over HCFC-22. At the same time, equipment manufacturers were redesigning compressors to match the characteristics of the new gases.

In the 1990s, modern HVAC systems were designed to isolate the indoor environment from an increasingly polluted urban world. With the rising cost of energy after the OPEC oil shocks, consumers tried to minimize consumption through energy conservation. The first and most obvious method was to tighten homes and buildings to prevent heat loss through the use of insulation and thermal window glass. In some cases, overzealous efforts had deadly consequences when the structures became too tight and the heating equipment burned up all the available oxygen. Instead of air, the occupants found they were breathing high concentrations of carbon dioxide or even more deadly carbon monoxide. In 1986 the Consumer Products Safety Commission reported that more than 200 Americans died each year from carbon monoxide poisoning in their homes. To combat this problem, the industry promoted sealed combustion appliances, high-efficiency, chimney-less furnaces and outside-air-intake devices called make-up-air units.

In large buildings, the problem surfaced as the "sick-building syndrome," first noted in the 1970s. Workers complained of fatigue, headaches, eye and respiratory-tract irritations, excessive colds, and dry, itchy skin. Investigators discovered air-borne asbestos particles, bacteria, chemicals, and carcinogenic tobacco residues in the forced air systems. The EPA reported the presence of asbestos in 733,000 public and commercial buildings in 1988. Legionnaires' disease developed from bacteria carried by aerosols in ventilation systems. As with the atmospheric environment, a building's micro-environment was a complicated system requiring careful scientific evaluation and monitoring to keep it safe for human occupation.

Unlike the steady market for room air conditioners in the 1990s, demand for unitary systems (factory assembled units) dropped after 1989, with shipments of 3.5 million units, but began rising in 1994 with shipments of nearly 3.9 million units. The years between 1995 and 1998 were good for this market sector with 4 million, 4.5 million, 4.3 million, and 4.9 million units shipped, respectively. Unitary systems are matched cooling components in factory fabricated assemblies, of which there are three basic types: single package systems, which are usually rooftop horizontal units applicable to single story buildings such as motels and bowling alleys; split systems, which consist of interconnected indoor and outdoor sections and are used in small retail and office buildings and restaurants; and packaged terminal air conditioners, which are designed for through-the-wall single room or zone applications and are often used in office buildings, condominiums, and metered multi-story buildings. The Air Conditioning and Refrigeration Institute released decade-long rising figures for installed non-residential air conditioning units in HPAC Heating/Piping/Air Conditioning in 1999. They reported 1995 sales of $19.9 million; 1996, $22.6 million; 1997, $23.3 million; 1998, an estimated $24.6 million; and 1999, an estimated $25.6 million. These figures included unitary as well as field engineered units.

The 1990s were never able to match industry shipments of more than 5 million room air conditioners in 1989. Through 1998, the highest number of unit shipments was recorded in 1996, with just over 4.8 million. The lowest number of unit shipments was in 1991, with just over 2.8 million. In 1998 there were just over 4.4 million room air conditioners shipped. According to an Appliance article on air quality, the HVAC industry shipped more than 6 million heat pumps and air conditioners in 1998, a 16 percent increase over 1997.

There was mixed demand for furnaces in the 1990s. For the popular warm air gas furnaces, the decade high (through 1998) was nearly 3 million units shipped in 1998. The decade low was 1990 when 1.9 million units were shipped. Figures generally remained high from 1993 through 1997, with shipments of 2.5 million, 2.7 million, 2.6 million, 2.8 million, and 2.7 million units, respectively.

HPAC estimated that 82 percent of the new homes built between January and May 1998 had central air-conditioning units. Homeowners also had enough discretionary income to either add air-conditioning to existing homes or buy new replacement units. Quoting figures generated by the American Refrigeration Institute, HPAC maintained that the strong 1998 U.S. economy and early summer heat waves were responsible for the shipment of 837,682 central air conditioners and air-source heat pumps in June. This figure easily eclipsed the previous record of 730,692 units shipped in June of 1996. According to HPAC, manufacturers shipped 3.4 million units during the first six months of 1998, up 11 percent over the same period for 1997. Shipments of central air-conditioning units have, except for a slight drop in 1997, risen consistently each year since 1992 when shipments stood at 3.7 million units. Some 5.7 million units were shipped in 1996, 5.4 million in 1997, and it is estimated that 6.2 million units were shipped in 1998.

The HVAC industry is a large consumer of various metal products and assembled pieces of machinery. Dollar values of material consumed by kind in 1997 (except for miscellaneous materials and supplies) were: steel sheet and strip, $724.6 million; copper and copper based alloy pipes and tubes, $535.1 million; refrigerator compressors, compressor units, condensing units, and other heat transfer equipment, $1.7 billion; steel bars, bar shapes, and plates, $288.9 million; automatic temperature controls, $362 million; and integral horse power electric motors and generators (more than 1 horse) at $792 million.

During the late 1990s, the industry was strong. Total shipment values were $22 billion in 1997, $25 billion in 1998, and 26.2 billion in 1999. Sales remained steady in 2000, with shipment values totaling $26.3 billion, before falling off to $24 billion in 2001. Central air-conditioners and heat pumps shipped in 2002 totaled more than 6.7 million, an increase of 7 percent from the previous year. Heat pump shipments totaled a record 1.5 million, a 4 percent increase from 2001. Total shipment values in 2002 were $24.2 billion. Strong sales were primarily the result of the new housing industry, which remained robust due to low interest rates.

In 2005 revenues from the shipment of heat transfer equipment totaled more than $7 billion. Unitary air conditioner shipments also were up, from $5.4 billion in 2003 to $6.2 billion in 2005. The majority of units sold were lower-end BTU units built for home installation. Higher-end BTU units were down across the board. Compressor shipments were down slightly, from $2.2 billion in 2002 to $2.1 billion in 2003; motor vehicle air-conditioning systems were up, from $2.8 billion in 2003 to $5.43 billion in 2007. Air source heat pumps increased from almost $1.1 billion in 2002 to more than $1.2 billion in 2003. Shipments of room air conditioners and dehumidifiers declined from $76.8 million in 2002 to $56.9 million in 2003, reflecting an ongoing trend for central heat and air.

Shipments of central air-conditioners and heat pumps were valued at $1.15 billion in 2005. However, most of these units were for single-dwelling housing as the industry and commercial sector continued to lag. Large unitary shipments, of factory assembled units, dropped about 14 percent in 2002. However, consistent annual shipments in excess of 6 million units during the first decade of the 2000s reflected an underlying stability in the industry, as compared to the early 1990s when unit shipments averaged 3.7 million annually.

The number of new housing starts was incredibly strong during 2003, reaching 1.8 billion (compared to 1.2 million in 2000) and remaining equally robust during 2004. Replacement sales, as customers upgraded to newer, more efficient systems, also spurred growth. The global economic recession, which began in 2008, however, resulted in the lowest level of new housing starts in decades and restrained demand for central air-conditioners and heat pumps. The industry faced other challenges in the early twenty-first century as well, including an increasing number of imports into the United States. In 1998 there was a trade surplus of $2.8 billion, whereas in 2003 the industry reported a $2.3 billion trade deficiency. By 2008, the U.S. was exporting just $403 million in HVAC products while importing $1.4 billion, resulting in a trade deficit of nearly $1 billion.

Although new housing is important, replacement business is also a strong market. There were between 60 and 70 million central air-conditioning systems in U.S. homes in the early twenty-first century. A significant number of these were older units that would need to be replaced within a few years. Because air-conditioning and heat are generally considered necessities, consumers will replace systems that are aged or in ill repair despite weak consumer confidence.

Current Conditions

By the second decade of the twenty-first century, the HVAC industry seemed to be recovering nicely, albeit slowly, from the economic recession of the late 2000s. Figures from the Air Conditioning, Heating and Refrigeration Institute showed that U.S. shipments of central air conditioners and air-source heat pumps, which totaled 554,027 in the month of July 2011, were up 9 percent that month as compared to a year earlier, and year-to-date estimates showed an 11 percent increase. Gas warm air and oil warm air furnaces, on the other hand, showed a year-to-date decrease of 8 percent and 12 percent, respectively, in the same time period. More than 1.3 million warm air furnaces were shipped in July 2011.

Other positive results came from the Heating, Airconditioning & Refrigeration Distributors International (HARDI), which showed an overall 8 percent increase in year-to-date shipments in October 2011 as compared to 2010. HARDI economist Andrew Duguay of the Institute for Trend Research commented that "The economy is in a definitive Phase C (slower growth) trend and so is the average HARDI member, but not without some positives. Looking at the latest data release, the ongoing improvement from 2010 sales numbers is encouraging to see despite its slowing rate."

IBISWorld also predicted positive growth for the industry. According to a July 2011 report by the research firm, "As the housing and non-residential construction markets recover, so too will demand for heating, ventilation and air-conditioning equipment." IBISWorld also noted that "The rebound in the foodservice and storage services industries will likewise boost demand for refrigeration equipment."

Central heat and air in indoor settings, as well as automobile air-conditioning, were once considered luxuries or nonessentials. However, by the 2000s, these features were part of the standard expectations of home and auto owners, as well as consumers and employees. Therefore, the HVAC industry should find significant room for development and growth into the foreseeable future.

Industry Leaders

At the end of World War II, the clear leader in the U.S. HVAC industry was the Carrier Corp. of Farmington, Connecticut. At that time Carrier controlled about 90 percent of the U.S. market. By the 1990s, Carrier was a subsidiary of the giant United Technologies Corp., but nonetheless lost its hold on a stable industry lead. In 1991, as a result of poor quality control, under-investment in research and development, inconsistent dealer relations, and poor marketing decisions, Carrier's market share had dropped to 37 percent. In 1992, however, the company began replacing its product line with high-tech innovations, spending tens of millions of dollars in research and development, and selling off business ventures unrelated to HVAC.

In 1996 Carrier had sales of $5.9 billion, which represented about 25 percent of United Technologies' total sales. In 1998 Carrier had sales of $7 billion, and 52 percent of Carrier's revenues came from U.S. exports and international operations. In early 1999 Carrier announced a restructuring that would eliminate 400 salaried workers or about 6 percent of its U.S. salaried workforce. It also acquired the refrigeration business of Electrolux for $145 million. The company reported revenues of $8.8 billion in 2002 and had 45,000 employees. Revenues increased to almost $9.3 billion in 2003, comprising approximately 30 percent of United Technologies' total sales. In 2010, company revenue was $11.4 billion with about 32,000 employees.

Trane Inc., formerly known as American Standard, of Piscataway, New Jersey, manufactured air-conditioning products and home comfort systems under a variety of names with American Standard and Trane being the most well known. In 2002 the company had sales revenue of $7.8 billion and employed 60,000. In 2006, sales increased to $11.2 billion with a workforce of 62,200. The company became a subsidiary of Ingersoll-Rand, and in 2010 Trane had revenues of $3.2 billion with 29,000 employees.

York International Ltd. of Oakville, Ontario, Canada was another large manufacturer of heating, ventilation, air-conditioning, and refrigeration equipment. York was the supplier of snowmaking equipment for the 2002 Winter Olympics, held in Salt Lake City, Utah. The company also supplied ice-making equipment and heating, ventilation, and cooling equipment for indoor venues. York manufactures heating and cooling equipment for a wide variety of commercial and industrial applications, as well as hermetic compressors and split-unit central air-conditioning and heating systems for residential applications. York's revenues grew to $4.5 billion in fiscal year 2004, generating $81.6 million in profits. Its workforce consisted of 22,300 employees. The company became a subsidiary of Johnson Controls of Milwaukee, Wisconsin, which generated more than $34 billion in revenue with some 137,000 employees in 2010.

To the person on the street, Lennox is perhaps one of the most recognizable names in the HVAC industry. The company traces its roots to 1895 and a riveted steel furnace built by Dave Lennox in Marshalltown, Iowa. In 1904 Lennox sold his company to a group of investors led by D. W. Norris, a Marshalltown businessman. In 1978 the company moved to Dallas. By the end of the 1990s, the company had three manufacturing sites in North America and was marketing its products through 6,000 independent dealers. Lennox has four operating companies: Lennox Industries Inc., Armstrong Air Conditioning Inc., Heatcraft Inc., and Lennox Global Ltd. Lennox was a privately held company until 1999 when it launched a $141.4 million initial public offering. The Norris family, however, retained ownership of 70 percent of the company's stock. In 2002 Lennox reported a net loss of $190.4 million on $3 billion in sales with about 18,000 employees. Its revenues and workforce remained steady at $3 billion and 18,000 employees in 2004, while 2006 saw revenue increase to $3.67 while employment decreased to 16,000. In 2008, the company's workforce was cut further to 13,500 with sales also dropping slightly to $3.48 billion. By 2010, sales were $3.0 billion and the Lennox workforce numbered 11,800.

Workforce

Traditionally, the heating, refrigeration and air-conditioning manufacturing industry has been highly labor intensive. In 2007 the industry employed 118,893 people who earned a total of more than $4.8 billion in pay. In 2009 employees numbered 126,063, of whom 85,709 were production workers earning a payroll of $2.9 billion.

Much of the assembly work was done by hand fitting many small parts and cutting metal shapes with the use of templates. By the mid-1980s, the industry was shifting toward more automated production with the use of numerical control machining tools and welding robots. Eventually, computerized control led to automated plants.

In general, employment for those involved in the maintenance and repair of heating and cooling units was expected to remain stable. Installers of new equipment, however, may experience cyclic employment as a result of ups and downs relating to the level of new construction. Future employment for these job classifications is expected to be affected by regulations prohibiting the discharge of CFC and HCFC refrigerants, as well as a market emphasis on better energy management, indoor air quality, and a rising demand for frozen or refrigerated convenience foods.

America and the World

Like the U.S. HVAC market, the global HVAC market is driven by new building construction and weather conditions. Mild weather generally contributes to a reduced demand for air conditioners and air-source heat pumps. Unseasonably mild weather in 1997, for instance, contributed to a global slowdown for unitary equipment, resulting in a fall in demand for the first time since 1994 and a 6 percent drop from 1996 when a record 5.7 million units were shipped. Canada, however, was a strong market, accounting for 29 percent of U.S. industry exports in 1997.

In 2008, HVAC exports were $5.7 billion while imports exceeded $6.5 billion. The highest proportion of the U.S. market share was the NAFTA market with Canada leading at $1.7 billion, followed by Mexico with $1.2 billion. Exports to China were $213 million. As with exports, imports were dominated by NAFTA, with 40 percent of imports coming from Canada and Mexico. Asia supplied another 40 percent of HVAC imports into the United States. China and Mexico accounted for one-third of all imports into the United States.

Demographic shifts in the U.S. population, however, had a positive effect on the HVAC industry. In 1991, 75 percent of new houses were built with central air-conditioning. By 2003 this figure increased to 83 percent of new homes. Much of this increase was attributable to population growth in the South, where 99 percent of new homes are built with central air-conditioning.

Research and Technology

There were many global issues facing the American HVAC industry as it entered the twenty-first century. Topping the list were energy efficiency, indoor air quality, and the concurrent issues of global warming and ozone depletion. Chillers, for instance, are mechanical devices used in commercial cooling applications and are major energy consumers. Newer chillers that use HFC-134a and HCFC-123 as alternative refrigerants are able to increase efficiency by more than 44 percent when compared to the CFC chillers that were used in the 1970s. Chillers that have been converted or replaced are conserving 7 billion kilowatt hours of electricity annually at a savings of $480 million.

The HVAC industry also was using advanced software in pursuit of energy efficiency. Sensors and actuators were integrated to monitor and control the formation of regional and even national "central stations." All of these innovations saved operator time while increasing system performance, reducing costs and eliminating system redundancies.

Indoor air quality was another issue demanding technological innovations by the HVAC industry. Due to shifting attitudes about indoor air quality, especially in the workplace, there were litigious claims in the 1990s from workers claiming that workplace air had made them "sick" and they were due compensation for their illness. Consequently, the industry continued to develop advances to ensure safety and lessen environmental impact.

The 1970s oil and energy crisis was a major factor in motivating the HVAC industry to produce more efficient products. The major industry issue of the 1990s was ozone depletion caused by the chlorofluorocarbon (CFC) refrigerants released into the atmosphere. Early air-conditioning systems relied exclusively on CFC refrigerants. This global problem resulted in the U.S. Clean Air Act amendments of 1990, numerous Environmental Protection Agency regulations, and the development of alternate refrigerants such as HFC-134a, HFC-410A, HCFC-123, and HCFC-22. With these new refrigerants available, the HVAC industry worked to set up compliance and training programs that necessitate sizable capital investments. Service technicians, for instance, must have the tools and know-how to recover CFC refrigerants that can no longer be vented into the atmosphere.

Concurrent with the concern over ozone depletion was concern over global warming, which has generally been attributed to carbon dioxide emissions as well as to emissions of certain refrigerants and methane. A U.S. global action plan was written in relation to Title XVI of the Energy Policy Act of 1992. The plan called for a switch from high carbon fuels, such as coal and oil, to low carbon fuels such as natural gas. The plans also called for more fuel-efficient and energy-efficient equipment. A global agreement called the Kyoto Protocol set a goal of reducing emissions 7 percent from 1990 levels between 2008 and 2012.

In turn, in 2001 the U.S. Department of Energy (DOE) introduced tougher standards for energy efficiency. Industry lobbyist groups went to court to contest the DOE's requirement that all new units meet stricter standards for the seasonal energy efficiency rating (SEER). Ultimately, in 2004, the industry accepted them and prepared to meet the 2006 deadline to improve the SEER rating by 30 percent, in spite of concerns that the upgraded units would be more expensive to produce, thus leading to price pressures and additional costs to both manufacturers and consumers.

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Manufacturing Close-Up; April 30, 2011; 644 words
...report "Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing...include: The Air-Conditioning and Warm Air Heating Equipment ...
Research and Markets Adds Report: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing Industry in the U.S. and Its International Trade [2012 Q3 Edition]
Entertainment Close-up; October 18, 2012; 656 words
...report "Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing...and 3585 - Air-Conditioning and Warm Air Heating Equipment ...
PTC Lab HVAC Equipment and Installation Services
Mena Report; June 10, 2014; 428 words
...238220 - Plumbing, Heating, and Air-Conditioning Contractors 333415 - Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing 423610 - Electrical Apparatus and Equipment, ...
Changes in some size standards are proposed.
Set-Aside Alert; September 14, 2007; 567 words
...Laboratory Freezer Manufacturing, to be reclassified in NAICS 333415, "Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing." SBA proposes a size standard of 750 employees. ...
Research and Markets Offers Report: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing Industry in the U.S. and its International Trade [2011 Edition]
Manufacturing Close-Up; April 30, 2011; 644 words
...Relations US, new report "Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing Industry...highlights include: The Air-Conditioning and Warm Air Heating ...
Research and Markets Adds Report: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing Industry in the U.S. and Its International Trade [2012 Q3 Edition]
Entertainment Close-up; October 18, 2012; 656 words
...LLC's new report "Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing...manufacturing air-conditioning (except motor vehicle...hierarchy of Ventilation, Heating, ...
Productivity in Making Air Conditioners, Refrigeration Equipment, and Furnaces
Monthly Labor Review; December 1, 1984; 700+ words
...the manfacture of air conditioning, refrigeration, and warm-air heating equipment rose at an average...s residential, commercial, and industrial products, and rapid...manufacture of air conditioning and refrigeration equipment and of...
PTC Lab HVAC Equipment and Installation Services
Mena Report; June 10, 2014; 428 words
...PTC Lab HVAC Equipment and Installation...Steam and Air-Conditioning Supply 238210...Plumbing, Heating, and Air-Conditioning Contractors...Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration ...

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