The State of the Michigan Snowplow Industry??

Will the Michigan snow plow industry implode itself? Why are profit margins shrinking to dangerously low levels or disappearing entirely after the 2007/2008 season when we experienced 71.7 inches of snowfall, and our average is 42.4 inches? Didn’t we prove our worth as a valuable service?

As of mid-January 2009, we had already met the entire season average for snowfall; yet, our won bids came in lower than ever while costs continue to rise. In one and half months we have bought as much product and used as much labor as an entire average season. Couple this with salt vendors demanding cash up front for entire loads of salt, salt going from 100.00$ a ton to 170.00$ a ton in this short period, Michigan salt vendors running out of bulk salt, customers demanding black and wet pavement and seasonal contracts being split into five equal payments. Seasonal contracts that pay the same amount of money whether it snows thirteen times or thirty times.

How can this be happening? My husband has been plowing snow since 1981. His father, Don Porter, is often spoken of as the father of the snow plowing industry in Oakland County. He began pushing snow commercially on a large scale before anyone else. Snow plowing has always been worth it, but last winter began to change that.

From mid-November until mid-April snow plow contractors cannot go on vacation, they cannot plan outings, they may miss Holiday celebrations, they may not see their family for weeks at a time, they are on call 24/7, and when they work – it is hard, demanding, labor-intensive work. They are out in the worst of weather, driving on roads that the road commission hasn’t touched yet, often in the dead of night. It simply has to be worth it. It has to pay well and their work has to be valued.

But because of the economy, or so they say, bids this season had to be lowered in order to sell the job. We lost many bids and we sat right in the center of the bidding. We saw bids for so little money, we could not figure out what that contractor was thinking. Does that contractor not have liability insurance, not pay taxes, not buy any equipment, not have truck payments, what’s up? Why would that contractor not demand through the bid, value for their time and their employees’ efforts and sacrifices? Underbidding all the other contractors to such a degree will only hurt all the contractors, including the winning bid holder.

Eventually, customers will come to expect a very high level of service for a very low amount of money, and contractors will not be able to find employees willing to work under such conditions for such low amounts of money. Established contractors with years of experience and above the board businesses simply will not take on snow plowing contracts.

Part of this problem is the growth of snow plow contract brokers. These are large firms that have teams of salespeople who sell a seasonal contract at one price to the customer and then in order to make themselves money, hire a subcontractor at a significantly lower amount of money. Often these salespeople are presenting one image to the customer, such as black and wet pavement at all times, and another to the subcontractor, such as “Yes, we know there is a salt shortage and salt should be used conservatively.” These brokers often promise subcontractors work and then fail to deliver but not until the bid season is over. The subcontractor may have been working for the firm for several years, delivering a high level of service, and expanding their capital investment to meet the demands of the contracts. But when the firm loses the contracts, there is no real sense of loyalty to the subcontractors. This puts the subcontractor in a desperate position and nearly forced into accepting a contract, any contract, that is bid too low.

As the broker will point out, “You subcontractors are a dime a dozen and there are many willing to work for very little pay.”

And since it is the subcontractor who has purchased hundreds of tons of salt with cash, the snow blowers, the trucks, the liquid chloride applicators and storage tanks, the snow plows, the shovels, they must continue to service the contract, desperately needing that last payment in May while the broker pressures them with threats of the loss of the contract if the unreasonable expectations are not met.

What these brokers fail to understand is that the subcontractors, who are capable of delivering the service the customer demands, will no longer be willing to work for, what my Grandmother would call — peanuts.  Yes, right now because of the economy, we have a plethora of guys with trucks and a plow who will take any peanut you throw their way,  any bid to keep their business going through the rough times.

The economy will not stay down and what then? Is the snow plow industry counting on salt being cheaper, fuel staying at current prices, liability insurance suddenly dropping? Are we counting on a new group of illegal immigrants who will work for cash, under the table, plowing snow and shoveling sidewalks? Is that where we want to take our industry? Our American sons and daughters running hysterically when we offer them a career as a snow plow contractor?

Work our rears off, and never make enough money to support our families? Forget it! Break our backs and only hear complaints? Forget it!

It is up to the Michigan snow plow industry to determine its future as a viable option for Michiganders as a profitable business venture. It is up to each and every contractor to determine what contracts will pay next season and whether those contracts will prevent the industry from implosion. Why is your time and effort and sacrifice only worth a handful of peanuts?

 

Jennifer Porter