Goodman Holding Company

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Goodman Holding Company

1501 Seamist
Houston, Texas 77008
U.S.A.
Telephone: (713) 861-2500
Fax: (713) 861-2176
Web site: http://www.goodmanmfg.com

Private Company
Founded: 1975 as Goodman Manufacturing Company, L.P.
Employees: 7,750
Sales: $2.16 billion (2000 est.) 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; 335224 Household Laundry Equipment Manufacturing; 335221 Household Cooking Appliance Manufacturing; 421620 Other Major Household Appliance Manufacturing

Goodman Holding Company is the world’s largest privately held manufacturer in the heating, ventilation, and air conditioning (HVAC) industry and ranks second in HVAC market share. It makes a broad array of products, from small room air conditioners to central air and heating systems sold under the names Goodman, Janitrol, Caloric, GMC, and Modern Maid. Until the sale of its Amana appliance division to Maytag, scheduled for completion before the end of 2001, it was also making name brand home appliances, such as washers, dryers, refrigerators, dishwashers, ranges, and microwave ovens. As an industry leader, Goodman has received several honors from The Air-Conditioning and Refrigeration Institute and other organizations. It operates seven plants with a total of over four million square feet of space in Houston; Dayton, Tennessee; Amana, Iowa; Fayetteville, Tennessee; Florence, South Carolina; and Searcy, Arkansas. Independent distributors maintain over 800 stock locations in the United States and Canada as a way of getting Goodman products quickly to contractors. Forbes has listed Goodman as one of the top 100 privately held companies in the United States.

Origins and Early Years

Starting in 1954, Harold V. Goodman gained years of experience as a contractor who installed home air conditioners. He owned American Airco, once the “largest residential installer in the U.S. (15,000 systems a year in Houston) ,” according to writer Mark Skaer. That background led Goodman to start a company to make equipment for air conditioner contractors. “He was looking for two things: 1) better price and 2) not having to go back to work on what was just installed,” said Jim Plant, who worked with Goodman from the time he founded the company.

Harold V. Goodman in September 1975 began Goodman Manufacturing Company, L.P. Initially the company made flexible air ducts and plastic blade registers. By buying certain assets of Smith Jones, Inc. in 1982, Goodman acquired the Janitrol brand of air conditioning and heat pump devices. The company then moved Janitrol production machinery and inventory from Ohio to its Houston plant. That year Goodman began manufacturing split system air conditioners (external condenser and internal fixtures, allowing for central air), and in 1983 it started making split system heat pumps.

From its beginning, Goodman Manufacturing emphasized quality manufactured items available at the lowest possible price. Around 1982 Harold V. Goodman said, “We will revolutionize the heating and air conditioning industry with the highest quality equipment manufactured by the best producing work force in the business and sold at the lowest prices in the market.” That quote was used in the years ahead to guide the company.

In the mid-1980s Goodman Manufacturing began making gas furnaces and later started producing packaged units that the company designed.

Business in the 1990s and Beyond

In 1990 Goodman Manufacturing began offering a five-year warranty on its parts, which started a trend for competitors to also offer longer warranties. By the mid-1990s heating and air conditioning manufacturers offered a standard ten-year warranty, which was opposed by some wholesalers and contractors in that industry. According to the August 1996 Supply House Times, at a meeting of the North American Heating, Refrigeration and Air Conditioning Wholesalers Association, David Shaw of Shaw Curtis Company said he was “deeply opposed to the trend [started by Goodman] for longer and longer warranties in our industry. I believe it is harming the dealer and the distributor, and I can’t believe that something that harms both those parties can be good for the homeowner.”

Like any business, Goodman lost some contracts to its competitors. In 1992 it lost a bid for a contract with the Texas state government to Trane, a part of American Standard. Since Goodman’s bid appeared to be lower than Trane’s, President Harold V. Goodman lodged a protest in writing to the Texas Department of Commerce. Critics maintained that the bidding procedure was improper and that the state government may have broken the rules when it gave Trane $5 million to expand in Texas. In any case, Trane retained the state contract.

The company in August 1996 began replacing high-temperature plastic vent (HTPV) pipe used on about 8,000 Goodman gas furnaces. Defective vent pipes could release deadly carbon monoxide into the air. HTPV pipes were made by another company, but Goodman in cooperation with the U.S. Consumer Product Safety Commission set up a program where the vent pipes would be replaced free of charge. Consumers also could choose to buy a new furnace and new venting for just the company’s manufacturing price of the furnace, while not paying for any labor, associated materials, or dealer markup costs.

Since distributors sold Goodman products, the company kept close track of its franchise holders. When a Memphis distributor ended his business, that franchise to sell Goodman’s GMC products was taken over by Valley Supply Inc., a newly formed subsidiary of ACR Group Inc. Valley Supply’s franchise territory covered western Tennessee, eastern Arkansas, and northern Mississippi. Another ACR subsidiary called Total Supply distributed GMC items in the Atlanta area, while ACR subsidiary Heating and Cooling Supply distributed Goodman’s Janitrol line in the Las Vegas area. Goodman President Harold Goodman said in the May 11, 1994 Business Wire that the ACR subsidiaries “certainly impressed us with their ability to implement our marketing strategy and programs. We include them among our most valued distributors….”

The 1994 Manufacturing USA reference guide listed Goodman Manufacturing with annual sales of $400 million. According to Forbes magazine, Goodman Manufacturing in 1995 brought in $500 million in revenues and also $58 million in operating profits.

Goodman increased its sales in the 1990s and gained market share in its industry through both internal expansion and a major acquisition. In 1994 it opened a new plant in Dayton, Tennessee to produce room air conditioners. In 1995 the company opened its 11th Street plant in Houston to increase its production of gas furnaces and also electric and gas packaged units. The following year it again expanded in Houston with a new 350,000-square-foot plant designed to make insulation and flexible duct items.

In 1997 Goodman purchased the Amana line of commercial and household appliances from Raytheon Appliance Group, which sold Amana to concentrate on its military products. Maytag had considered but decided not to buy Amana. In this deal Goodman spent $550 million for a plant in Amana, Iowa, that made refrigerators and microwave ovens; a Fayetteville, Tennessee plant that manufactured heating and air-conditioning equipment; a cooking equipment plant in Florence, South Carolina; and a Searcy, Arkansas factory that made home dryers. About 5,500 individuals worked at those four plants.

George Foerstner of Amana, Iowa, had founded Amana Refrigeration in 1934. By the time Amana was purchased by Raytheon Company in 1965, it was making refrigerators, freezers, and air conditioners. In 1967 Amana began selling the “world’s first successful 115-volt countertop microwave oven for the home,” according to its web site at www.amana.com. It also sold a variety of stoves, dishwashers, and laundry machines.

Amana became in 1995 the first company to quit using chlorofluorocarbons (CFCs) in its refrigerators as a way to protect the atmosphere’s ozone layer. The CFC scientific and public policy controversy began in the 1970s when two scientists published their theory that CFCs could hurt the ozone layer that protects humans against ultraviolet light that can cause skin cancer. In 1987, 24 nations signed the Montreal Protocol as a promise to limit CFCs. The main villain was freon, a CFC commonly used in air conditioning and refrigeration equipment. In 1992 President George Bush set December 31, 1995 as the deadline for American manufacturers to cease producing almost all ozone-damaging chemicals. Although some prominent scientists disputed the ozone scare, the government’s move against CFCs caused a major change in the HVAC and refrigeration industries. This latest issue was hardly the first for the air-conditioning industry, for even in the early 20th century critics had attacked efforts to use technology to make indoor environments cooler and more comfortable.

When a heat wave hit Texas in the summer of 1998, both government and corporations stepped up to help. The federal government provided a $2.9 million subsidy to help the poor buy air conditioners and pay their electrical bills. In cooperation with a local contractor named John Moore Services and the Gallery Furniture Company, Goodman Manufacturing Corporation increased its number of donated window air conditioners to a total of 1,040 units, while its rival Carrier Corporation donated 200 units. Another time, Goodman helped Houston residents by donating 100 Janitrol central air conditioning and heating units to the city’s Habitat for Humanity program.

Company Perspectives:

“’We will revolutionize the Heating and Air Conditioning industry with the highest quality equipment manufactured by the best producing work force in the business and sold at the lowest prices in the market.”

—Harold Goodman, founder

In 2000 the Goodman Holding Company was reorganized into four divisions. Garland I. Winningham served as the president and chief executive of the Goodman Manufacturing Division and also as the interim head of the Amana Heating and Air Conditioning Division. The other two divisions were the Quietflex Division and the Amana Home Appliances Division.

The four divisions reported to John B. Goodman, the chairman, president, and CEO of Goodman Holding Company since 1999. Goodman was the son of the company’s deceased founder Harold V. Goodman.

Although the Goodman family retained ownership of the firm, outside investors also played a role. For example, as of January 31, 1997 international mutual fund company GT Global, Inc. owned 2.85 percent of Goodman Manufacturing’s net asset value through its GT Global Floating Rate Fund.

According to Goodman’s web site, in 1998 it had 13.7 percent of the market for core comfort conditioning, which included room air conditioners, unitary air conditioners/heat pumps, and gas furnaces. That ranked it second to Carrier with 15 percent of that industry’s market share. In 2000 Goodman continued as the second-ranked company in the core comfort conditioning market behind United Technologies, the market leader and owner of Carrier.

Forbes ranked Goodman Manufacturing as number 73 in its list of the largest private companies in the United States. That was based on its estimated revenues of $2.16 billion for 2000. Goodman Manufacturing’s brand names at the time included Amana, Caloric, Glenwood, Goodman, GMC, Janitrol, Sunray, RadarLine, Speed, Queen, Radarange, Menumaster, and Convection Express.

In 2000 Goodman acquired Miami-based Pioneer Metals, Inc. (PMI), a former independent distributor of Goodman products. PMI with its 380 employees continued to operate under its own name.

Frost & Sullivan, a consulting, marketing, and training company that served the heating and air-conditioning industry, in 2000 produced a report on industry developments and also honored the leaders in the residential HVAC industry. Goodman Manufacturing received the Sales Strategy Award for its 1999 accomplishments, while its competitors Lennox Industries Incorporated and Carrier Corporation also won awards. Frost & Sullivan reported that the U.S. residential HVAC industry was led by a few large corporations acquiring smaller firms and increasingly focusing on global strategies. Such consolidation occurred in many other industries as well.

In the summer of 2001 Goodman Holding Company announced it was selling Amana to Maytag Corporation for a total of $325 million in stock and cash. Maytag was buying the Amana line of home appliances but not its air conditioning and heating products. The deal, expected to close later in the year, would increase Maytag’s annual sales by $900 million and thus decrease Goodman’s sales by the same amount.

As the new millennium started, the residential HVAC industry in the United States was slowly growing, mainly due to new construction and replacing older models. Frost & Sullivan indicated that the industry’s expansion was limited by little new technology, high costs of HVAC equipment, and a saturated market. Two general trends impacting the industry were the increased use of the Internet to provide information for both consumers and contractors and also higher equipment and refrigerant costs due to replacing freon with more environmentally friendly substitutes. Goodman thus faced many challenges to its position near the top of the heating, ventilation, and air conditioning industry.

Principal Subsidiaries

Goodman Manufacturing Company, L.P.; Goodman Company, L.P.; Pioneer Metals, Inc.; NITEK.

Principal Competitors

Carrier Corporation; Fedders Corp.; Rheem/Paloma Industries; American Standard Companies Inc.; Frigidaire Home Products; Whirlpool Corporation; International Comfort Products; Lennox International Inc.; York International Corporation; Nortek, Inc.; Electrolux Group; LG Electronics Inc.; GE Appliances; Maytag Corporation.

Key Dates:

1975:: Harold V. Goodman starts the Goodman Manufacturing Company.
1982:: Goodman purchases the Janitrol brand of air conditioning and heat pump items.
1986:: Company’s first gas furnaces are introduced.
1987:: Firm begins making its Goodman-designed Packaged Units.
1990:: Company begins offering a five-year warranty on all parts.
1994:: New air conditioner plant in Dayton, Tennessee, is opened.
1995:: Goodman opens gas/electric packaged unit plant in Houston.
1996:: Company builds a new factory to make flexible duct items and insulation.
1997:: Goodman purchases the Amana home appliance line from Raytheon.
1999:: John B. Goodman becomes Goodman Holding Company’s chairman, president, and CEO.
2000:: Goodman acquires Pioneer Metals, Inc. a large air conditioner distributor based in Miami.
2001:: Goodman in the summer announces sale of Amana to Maytag.