First off, let me apologize to all you loyal blog responders to this site. I was on spring break last week and am still plowing through all your posts. Thanks so much for writing in! ... Now back to business:
|
AP
|
Iâm reporting a story on Lennar [LEN 41.11 -0.50 (-1.2%) ]
today. The sixth largest public homebuilder in the nation sent out an interesting letter to its contractors a few months ago offering them two choices:
(A) Reduce your unpaid invoices as of 1-26-07 by a minimum of X [many have reported up to 20%]â¦or
(B) Not reduce your unpaid invoices and be excluded from bidding future work for a minimum of 6 months. Those companies who choose to participate in this request and/or can exhibit the best price possible will continue to have every opportunity for future business with Lennar.
We spoke to several contractors, and many call it extortion. A trade group took the letter to the local DA but since Lennar is paying all its bills, thereâs really no crime. Lennar says itâs simply the cost of doing business in a down market. After about 3 weeks of calling them, Lennar did offer this statement:
Lennar Statement for CNBC:
When the housing market was strong, both homebuilders and our subcontractors benefited financially from favorable home prices and increased home sales. However, the current housing market has softened, and homebuilders and subcontractors must accept and respond to market conditions.
As the market forces lower home prices on the industry, homebuilders and everyone in the home building supply chain must reduce costs. We are working hard to find efficiencies and cost reductions in running our business and all of our trade partners need to do the same in their businesses.
The overwhelming majority of our subcontractors have agreed to reduce prices for future work. Many have even reduced prices for current or already completed work. We greatly appreciate their willingness to work with us as we face this challenging market, and we will continue to work with them in the future. Some subcontractors have declined to reduce prices on outstanding charges and for future work. They will be paid in full in accordance with their contracts for work already performed. However, our choosing to work with subcontractors who will do the same quality work for lower costs is not being heavy handed as this subcontractor is alleging, it is just the correct response to current market conditions.
Thanks to Lennar for the clarification. Look, sales are down, inventories are up, and how can a company expect to survive without a little help from its loyal employees. So Lennar overbuilt, like the other big builders, got heady with the spike in home prices, rode the market like the bull that it was. Who can fault them for that, right? I mean, itâs not like weâve seen any other crazy sector bubbles recently that Lennar could have learned from, right? So what if certain CNBC business reporters who cover real estate kept harping on the fact that real estate prices were unsustainable.
And isnât it just good citizenship to help out big public companies when theyâve got all those prickly shareholders breathing down their necks? I have to say that if GE were in trouble, if there were a sudden drop in light bulb demand, I would certainly offer up 20% from my paycheck to help out. I mean, isnât that how itâs all supposed to work? The government does it all the time; when Uncle Sam overspends, he just takes a chunk out of our paychecks. So there, itâs the American Way!
Iâm thinking some other companies should follow suit. The automobile industry is getting there: they dumped all those employee pensions onto the government and got rid of the workers. Same with the airlines. (At least they had that whole bankruptcy thing to fall back on). Circuit City just laid off a bunch of workers who they deemed to be overcompensated. If only Enron, instead of cooking the books and creating an energy crisis, simply asked their thousands of employees to, âgive us back 20% of your paychecks for the last year, so that our top level management can keep living in the style theyâre accustomed to,â then they could have avoided the collapse of the company, which would have kept all those employees in their jobsâ¦not to mention also avoiding all that nasty jail time.
This is a great idea. Iâm going to call the guy who added the bathroom in my house two years ago and tell him to give me 20% back. Iâm sure heâll oblige; after all, now that my homeâs value is depreciating, he owes it to me, right? And if my house isnât worth as much as it was last year, then my grass certainly isnât either. Iâm going to call that nice kid who cut my grass last week. Heâs going to need to give me 5 bucks back out of that $20, that is, if he ever wants to mow on my block again.
http://www.cnbc.com/id/18023112