March 17 , 2010



## Interview with Tom Hansch
, VP of G. W. Berkheimer , an HVAC R equipment distributor

In support of the CACHP and F urnace rule making process, DOE representatives met with Tom Hansch of G.W. Berkheimer and Talbot Gee, vice president of the tra de group HARDI , on March 17, 2010

. T he DOE meeting representatives were Mohammed Khan and Wes Anderson. Rob Carmichael from Navigant Consulting also attended and Dave Winiarski of PNNL called in

. G.W. Berkheimer is a privately held, 76

- year old HVAC an d refrigeration distribution business with 26 branches across three states. The company primarily sells two equipment lines: Goodman and Armstrong (Lennox). The Armstrong product is a restricted line, meaning it can only be sold by authorized dealers. I t also comes with more dealer support, and thus, a higher price point. Notably, GWB does not use central distribution, but does use central purchasing , and transfers inventory among its branches as necessary.
Mr. Hansch provided the group with a brief hi story of the company, discussed the company’s lines of business, and described the company’s geographic reach. Other general items discussed included the following:
Mr. Hansch indicated that the party that pays for shipping (between the manufacturer

and t he distributor) usually depends on whether an order can fill a truck. If it does, the manufacturer typically pays; if not, the distributor pays. GWB usually fills the truck because the trucking company allows for up to three stops. However, distributors

u sually have liability for the equipment once it leaves the plant, meaning they incur any loss associated with damage during transit. Contractors vary in how much inventory they carry. It can be up to 30

- 60 days worth , but the long

- term trend has been re duced inventories maintained at the contractor level

. Mr. Hansch described the difficulty his contractor customers had during the 10 to 13 SEER switch due to space constraints in some applications, usually with respect to the coil and increase in condensin g unit sizes

. GWB’s customers do a significant number of hybrid heatpump/furnace installations which are most cost effective when pairing a high

- efficiency heat pump with a mid

efficiency furnace.
The group also discussed several issues surrounding enforce ment of regional standards:

Mr. Hansch and Mr. Gee did not know of a practical way to enforce regional standards, especially considering the variability of and commitment to building codes in states around the country.Mr. Hansch and Mr. Gee noted that it would not be possible for distributors to know where exactly the units sold were eventually installed. Contractors often do not even know where a given unit will be installed when they purchase the unit from the distributor. It would be nearly impossible and very burdensome to attempt to track down where units were installed after the fact. To illustrate the difficulty with enforcement, Mr. Hansch pointed to a situation that followed Hurricane Katrina in which they received several large orders following the hurricane, apparently from contractors ready to move the product down to New Orleans. Mr. Hansch said that his company does maintain transaction data including the name of the con tractor firm, for the purposes of product recalls and warranty data , but G.W. Berkheimer receives very little information on the end customer

. Mr. Hansch noted the internet sales are also an issue because they do not require any real registration. Mr. Gee emphasized the importance of having an enforcement infrastructure behind standards. He noted California’s difficulties with permit compliance, as there is no market incentive driving contractors to pull permits. Homeowners will request permits not be pulled because of the extra cost and time associated with it. Depending on h ow manufacturers deal with the EER issue in the southwest region, Mr. Gee noted that could bring additional complexities to compliance with regional standards. Mr. Gee noted that regional standards could reduce economies of scale for manufacturers, leading to higher prices. Mr. Hansch and Mr. Gee reiterated concerns regarding the split system nature of central a/c and heat pump systems as it pertains to enforcement since the performance of the outside condensing unit has more to do with what coil and fan bl ower it is paired with inside the house than on the stated SEER level of the condensing unit alone.