Facchina lays off 400, some local

Construction giant feels the pain of national slump

Friday, Dec. 19, 2008

Charles McPherson is hoping for the best for 2009, but he isn't counting on it.

During the last year, the chief operating officer said his firm, Facchina Group of Companies, which has development, local construction and Florida-based construction divisions, has felt the strain of tightening credit markets preventing customers from buying properties and slashing the budgets of local governments that award the company contracts to build highways.

And as the economic crisis has unfolded, the company has laid off about 400 of its 1,300 workers in the last six months — in management, laborer and skilled construction positions. The employees are mostly those who worked on condos in Florida but also on a mix of residential, commercial and highway projects in the Washington, D.C., metropolitan area.

The Facchina Group is one of many corporations in Maryland and around the country who've felt the sting of the new construction bust, brought on mostly by speculation during the housing boom. After foreclosures and bankruptcies began to skyrocket, many new spaces became vacant and credit became harder for even qualified buyers to obtain; the credit crunch stifled financing for new projects.

The La Plata-based company had to cut about 150 jobs in Miami beginning about six months ago due to the fallout from "excessive condo glut," according to McPherson.

The local impact on the company took 50 jobs in Baltimore and about 200 jobs lost in recent weeks in the metro area.

"There's several things that have contributed to that, basically the residential crash, the commercial slowdown — and that I think is going to be magnified over the next year because no one can get a loan — and the states are in trouble with heavy highway work because their funds aren't doing well," McPherson said. "Depending on what [President-elect Barack] Obama does could make a difference in a heavy highway side. Commercial will be slow for a while. Residential could level off in the next 12 months."

Last month, 82,000 construction jobs were lost nationwide, putting the construction industry unemployment rate at 12.7 percent – nearly double the country's overall unemployment rate, according to the U.S. Bureau of Labor Statistics.

"Hopefully it will start turning the other way in 2009. The lending standards are much tighter than they used to be," McPherson said, noting he's not sure whether the corporation will have to make more cuts in the near future. "I think we are doing everything we can to hang on to our good people. That's a priority."

About 774,000 construction jobs nationwide have been lost since the start of 2007.

"We've definitely seen a lot of job losses. It started mostly in the residential construction, and now we're seeing it in commercial and heavy and highway construction. What we've been calling for is an economic stimulus package to put people back to work," said Jacob Hay, spokesman for the Laborers International Union of North America. "It's definitely hard. Some people go to unemployment. Some people have to find lesser paying jobs in other industries. This is the highest unemployment rate for construction since 1992."

The construction industry makes up close to 10 percent of the country's gross domestic product in a stable year, Hay said, but in the last three months combined the unemployment total is the largest consecutive three-month total since 1975.

Jim Deale, a Huntingtown independent electrical contractor, has seen the implications of new construction turmoil over the last year or so and was later let go by a general contractor whose business significantly dropped.

"I started noticing contractors weren't paying subcontractors anymore. When they were, they were complaining, saying ‘we're not getting our construction loan money so we can't pay you 'til we do.' And then with the economy, taking the deep step backwards, that was just a nail in the coffin," Deale said. "As far as new construction homes go, my builder friends are all doing home improvements, just small stuff. People aren't even borrowing money for additions."

Deale has recently started his own company that specializes in solar energy installation.

LIUNA continues to call for economic stimulus similar to what President-elect Barack Obama has proposed that includes $100 billion for projects that would create more than 1 million jobs building America, Hay said, whereas the National Association of Home Builders is calling for an expansion of first-time home buyer credits and a reduction of mortgage rates.

The U.S. Federal Reserve's Open Market Committee established a "target range" of an interest rate between zero and 0.25 percent this week in an attempt to stimulate lending.

Builder confidence in the market for newly built single-family homes held at a record low in December as deepening economic turmoil, a deteriorating job market, and an ongoing flow of foreclosed homes onto the market continued to negatively impact sales conditions, according to the National Association of Home Builders/Wells Fargo Housing Market Index, which did not budge this month from November's all-time low reading.

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo index has gauged builder perceptions of current single-family home sales and sales expectations. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

November and December's scores were 9.

The index gauging traffic of prospective buyers held at a record low of 7 for the month.

Many larger builders in the region are probably sitting on a backlog of hundreds of new homes and empty lots, said Jonathan Benya, a real estate agent with Century 21 New Millennium in La Plata.

Doug Smith, sales manager for regional builder Quality Built Homes, said the company has sold the same number of homes this year as last year thanks to a buyer backlog of about nine months when the market began to fall. Now they must be more aggressive.

"We haven't had to lay anybody off. We've had reduced prices on different things. We have 350 lots ready to go. We hope to do another 140 [homes] this year. We didn't actually have inventory because we didn't have time to build [homes on speculation]. It's a struggle …" he said.

"We have seen no improvement over the past month in terms of sales conditions for new homes," said NAHB Chief Economist David Crowe, in a statement. "In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence."