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American Standard Building Systems - Residential prefab building

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2008-02-27

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stories: martinsvillebulletin.com

American Standard, which has been described as "One of the nation's oldest and largest manufacturers of framing components and new home building systems", has filed for Chapter 11 bankruptcy protection.

The Martinsville, VA-based company (founded in 1968), already mired in debt and rescued from bankruptcy once before in 1996, was done in this time by the squeeze of the all-encompassing home building bust:

American Standard closed Jan. 25, citing the nation’s housing slowdown and the company’s inability to borrow additional money. It employed 57 full-time employees and 23 temporary workers at the time.

Customers and employees may lose some or all money they are owed. CEO Jamie Lester stated:

Obviously, economic conditions were beyond my control; so was the bank’s decision. Perhaps I should have closed the business earlier, but jobs were at stake in my hometown and some customers had made deposits. I hoped conditions would change; obviously, they have not. Sadly, the market continues to deteriorate,” he wrote. “I am truly sorry for the losses by employees and customers.”

Perhaps Lester listened to too many upbeat forecasts by major builder CEOs and the NAR. We hope such people will think twice about putting out these kinds of lies in the future, even if they are palatable. It just causes more people to get hurt later.

We suspect the reliance on fiancing programmes contributed to American Standard's demise due to its own inability to borrow (linked from the same 2005 article as above):

Through relationships with the nation's leading construction lending institutions, Owner Builder Solutions offers 100% construction financing for every aspect of the home building project. In most situations, out of pocket expenses total only $800 to $1200. Additionally, homeowners may not have to make construction loan payments while their new home is being built. The Systems Building process is especially popular with financial institutions because its small margin of error significantly enhances the customer's chances of success.

That sales pitch is downright cringe-worthy in retrospect, after the mortgage lending collapse. And so yet another company learns that there is a downside to financing customers that otherwise could not buy the product being sold. It's really too bad, because the prefab "systems approach" to building looks like it brought lots of efficiency and cost savings. We wish the best of luck to everyone at or otherwise impacted by the closure of this company.

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Important: This company is on our list of builder operations that have "imploded" (see also ailing lenders). This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid declines in enterprise value; or abnormal "bail-out" by corporate parents or peers in order to continue to operate. The builders may be residential or commercial.