INDUSTRY: Profiting from Misery

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As most of the U.S. sweltered last week under the hottest weather since the Dust Bowl days of the mid '30s, the makers and marketers of air conditioners were hoping that the baking temperatures would bake a bit longer. With thermometer readings edging up into triple figures in many parts of the nation, heat-weary Americans rushed in the largest numbers in years to buy air conditioners. In New York and Chicago, sales mounted to double the June rate. On one sizzling day in St. Louis, a Carrier dealer sold out an entire shipment of 300 units before noon.

The heat-wave sales promised to snap the nation's air-conditioning industry out of a three-year slump that had been caused by successive summers of exceptionally clement temperatures. The industry's last good year was the scorcher of '73, when perspiring consumers bought a grand total of 5.3 million room-size air-conditioning units and 2.8 million central cooling systems. Then sales plunged, reaching a low of 4.2 million conditioners of all types in 1975. The manufacturers, led by five big firms—Carrier, Trane, Fedders, Lennox and General Electric—have also seen their air-conditioner sales fall off as a result of the recession-induced decline in the construction of new homes and office buildings.

Impulse Purchase. Actually, business was starting to rebound even before July. In June sales were 16% above year-ago levels, and July's heat drove even more buyers into appliance stores. "It's an impulse item," explains Nicholas F. Tralongo, an appliance-industry analyst at Manhattan's Blyth Eastman Dillon & Co. "You have a bad week, and you rush out and get one."

Air-conditioner makers needed a few bad—or, rather, good—weeks to reduce the swollen inventories they built up during the three cool years. Since air conditioners, unlike autos and some appliances, do not undergo frequent model changes, many of the makers are simply taking old machines (a few of them made as long ago as 1969) and shipping them to dealers in new cartons.

A good year will provide at least a bit of breathing space for the manufacturers, who soon will be hit by costly new federal energy-saving regulations. A Federal Energy Administration study shows that air conditioners account for 7% of the electricity used in the U.S. The FEA estimates that air conditioning uses up the equivalent of 1 million bbl. per day of oil, or 2.5% of the U.S.'s daily energy consumption. More than 70% of all new homes built in the U.S. now have central air conditioning, and 53% of all older homes have at least one room unit. Air conditioners rank behind only space and water heaters among the home appliances as drains on the nation's energy resources.

As a result, the 1975 Energy Policy and Conservation Act empowered federal regulatory agencies to set targets for higher efficiency from home appliances. On July 15 the FEA announced voluntary efficiency goals for the industry: by 1980, new central air conditioners should be 25% more efficient than present models, while room air conditioners should be 30% more efficient.