Plumbing & Mechanical recently interviewed Dr. Michael Luz, president and CEO of Viessmann Mfg. Co. (U.S.), in his office in Warwick, R.I., about issues in the hydronic heating business. Before joining Viessmann in 2011, he was vice president of engineering and quality at Vericor Power Systems, a subsidiary of MTU Aero Engines and has more than 20 years’ experience in the gas turbine and aviation and aerospace industries. He holds a doctoral degree in aerospace engineering from the University of Stuttgart, Germany, and an MBA from Arizona State University.
PM: Where do you see the greatest business opportunities for plumbing and mechanical contractors in today’s construction market?
ML:I see them in the residential market and increasingly in the commercial market. New construction has really not recovered since 2008 in the Northeast where we have a lot of hydronic heating, although we’ve seen a little recovery in other parts of the country. Most of the opportunities we are hearing about are replacements, change-outs and retrofits. Many buildings still have very old equipment with very low efficiencies that can be replaced easily with modern, condensing-type boilers.
I have visited several boiler rooms that are very big and very empty because the old equipment is gone, and they have small condensing boilers in the corner. On top of the space saving, end-users benefit from the much higher efficiencies and much lower costs related to buying fuel. Those are where the greatest opportunities are for contractors.
PM: Do you sense any pent-up demand for commercial projects that is ready to break loose?
ML:I’d like to say that we do. We had a slow start to the year mostly related to the tough winter the entire Northeast and most of the Midwest went through. When that was gone, our business really jump-started. We’ve seen a tremendous increase in our commercial sales this year over last year, probably for two reasons.
First, we brought into the market some products that are attractive to our customers. At the same time, I have heard that many projects that were conceptualized three years ago and never realized finally came to fruition. All of a sudden, we’re seeing purchase orders and we’re digging out drawings we worked on a few years ago.
PM: On the commercial side, do you see activity in any particular market segments?
ML:Education is a segment where we are seeing activity across the entire country. Funding is still not necessarily available but in many instances we see energy-saving performance contracts coming into play that provide school districts with energy savings by installing modern heating equipment with much better efficiencies and lower fuel costs. They’re showing very attractive returns and offering school districts savings almost from day one.
PM: How will Viessmann help contractors take advantage of today’s business opportunities?
ML:The equipment in our industry changes quite quickly so it’s important for contractors to stay abreast of what is happening in the marketplace. Almost every year, manufacturers — including ourselves — bring out a new product or feature. So, we must keep contractors informed and train them on our products. We need to help them in setting up our products and support them if they encounter any problem they need to resolve. We need to have a close relationship with our contractors and cover their backs.
PM: What can contractors expect to see from Viessmann in the next 12 months?
ML:Next year is the 25th anniversary of Viessmann in the United States, which is a milestone for us. We’re excited about the new products in the pipeline for 2015. We will launch a new website this fall (uncompromise.us) that will provide contractors and engineers with some great access to all of Viessmann’s technical information where they can find solutions for their customers’ heating needs.
We will have a more robust sharing of information and technology with our new website, videos and social media. We will be more visible, literally, with the Vitomobile around the country.
PM: In what other ways is Viessmann connecting with contractors?
ML:We will introduce a new partner program because we want to get closer to our contractors. We want to offer support to our contractors to help them with their marketing to their customers. As members of this program, they will be able to distinguish themselves from other contractors by being able to offer things that are only available to the members in this program.
PM: What kind of formal training do you provide to contractors?
ML:The most important thing for a contractor who installs equipment for the first time is to understand the equipment itself and how to install it. We offer formal one-, two- and three-day classes that show contractors exactly how the equipment works, how it is installed, how to troubleshoot, how to start it up and commission it and so forth. We have a full curriculum as part of what we call the Viessmann Academy. Our training facility in Rhode Island is occupied on a daily basis with classes.
We also take our classes to contractors in all parts of the country. Our latest addition to those classes is a mobile unit we call the Vitomobile. It’s a truck with some of our equipment installed in it. We can take it to any wholesaler branch or contractor office and invite contractors over lunch to look at and test-drive our live-fire equipment. Or, we can conduct formal classes with them onsite to cover most of what we can show them in the classroom.
Anytime a contractor goes to training he doesn’t earn money because he can’t charge those hours to anybody. In consideration of that fact, we realize it is more important to go to them than bring them here, and we’ve done this more and more.
PM: How would you compare the technology of modern heating systems with rocket science?
ML:In my prior life as a gas turbine engineer in the aerospace industry, I actually had to do a lot with combustion, which is pretty much what we do with our boilers. So, I have found many parallels I really didn’t expect. When I look at some of the materials we use for gas turbines, I find similar high-quality materials in the boilers that Viessmann makes. If you look at our heat exchangers, you will find a stainless-steel material that is titanium-infused.
Our heat exchanger is unique in the boiler industry, and the material for it comes from the aerospace world. Other parallels come with controls, some of whose displays do not look that different from aerospace. They have similar functionality and capability to alert the user about what is happening with the system. The boiler industry is not low-tech. We have evolved into a pretty high-tech industry. The parallels with aerospace are there, absolutely.
PM: What technological innovation in heating products excites you the most?
ML:The heating industry has reached a little bit of a plateau at this point. The biggest development in recent years has been the introduction of condensing heat exchanger technology, which now is well understood. Most manufacturers have extracted all the efficiencies they can. We’ll have to see what will be the next-generation technology to be introduced.
In the meantime, what is happening now is about how the user interacts with the boiler. It’s about whether a contractor can dial into a boiler from wherever he is on the road to see what fault codes are shown and troubleshoot the problem remotely. We’re addressing some of the inefficiencies we still have in servicing the equipment through technology available today.
PM: Where do you see the future of renewable energy sources such as wood and solar thermal for building comfort systems?
ML:Renewables are new technologies and I am very excited about them. But they are not inexpensive, and as such they need help to get out of the gate. As long as that help is available, we see them catching on. As soon as that help disappears, using them becomes challenging.
I see a future for renewables, but I don’t know how close we are to that future. Today, their success is mostly related to incentives provided by either utilities or governments. We have incentives for renewables such as solar, which has a 30% federal tax credit that everyone has access to. The incentive does help but it really doesn’t drive sales as much as you would think. We have a similar incentive for geothermal. Both these incentives are set to expire in 2016. We will see what happens after that. I don’t expect the government to continue them.
PM: How important is energy efficiency in the choice of a heating system for a building in the United States?
ML:It is important for end users because they can, for example, go to National Grid’s website (www.nationalgridus.com) and National Grid will give them up to a $1,500 cash rebate if they purchase a high-efficiency boiler. Whether this will make a huge difference in actual fuel consumption is a totally different topic. We all wish it would but a boiler is just one component in a heating system.
Many times, the biggest inefficiencies are not happening in the boiler but somewhere in the radiators, ducting, pumps or other components in a heating system. Whatever you gain from the boiler you lose somewhere else. Or, maybe the heating system is not configured optimally and you don’t get the gains you want.
PM: When contractors think about Viessmann, what is their perception?
ML:People will tell you that Viessmann is the best boiler you can buy. I’ve heard this time and again, even from some people who don’t use our product. So, this doesn’t come from me or anyone else here. But I would put us in that category of making one of the best boiler products in the market.
Many times people then think that if you make the best boiler it’s not going to be the cheapest one, and it isn’t. We’ve had experiences where Viessmann was perceived as a high-priced product, and it isn’t really. In Europe, we are the single largest boiler manufacturer with an impressive market share, and there’s no reason why it should be any different in the United States. Many people here think they can’t afford a Viessmann boiler. What they really should be thinking is that they cannot afford not to have a Viessmann boiler.
PM: If you had only one piece of strategic business advice to give to contractors, what would it be?
ML:The most valuable thing you have as a business person is trust from your customer. If you can develop a reputation where people start recommending you, your phone will be ringing, and you won’t have to spend a lot of time on marketing and generating sales leads. A solid reputation in your particular marketplace is the most valuable thing you have. That’s true for any type of business and particularly if you are a contractor. That is what you need to pay attention to.