Profiting from Misery

As most of the U.S. sweltered last week under the hottest weather since the Dust Bowl days of the mid '30s, the makers and marketers of air conditioners were hoping that the baking temperatures would bake a bit longer. With thermometer readings edging up into triple figures in many parts of the nation, heat-weary Americans rushed in the largest numbers in years to buy air conditioners. In New York and Chicago, sales mounted to double the June rate. On one sizzling day in St. Louis, a Carrier dealer sold out an entire shipment of 300 units before noon.

The heat-wave sales promised to snap the nation's air-conditioning industry out of a three-year slump that had been caused by successive summers of exceptionally clement temperatures. The industry's last good year was the scorcher of '73, when perspiring consumers bought a grand total of 5.3 million room-size air-conditioning units and 2.8 million central cooling systems. Then sales plunged, reaching a low of 4.2 million conditioners of all types in 1975. The manufacturers, led by five big firms--Carrier, Trane, Fedders, Lennox and General Electric--have also seen their air-conditioner sales fall off as a result of the recession-induced decline in the construction of new homes and office buildings.

Impulse Purchase. Actually, business was starting to rebound even before July. In June sales were 16% above year-ago levels, and July's heat drove even more buyers into appliance stores. "It's an impulse item," explains Nicholas F. Tralongo, an appliance-industry analyst at Manhattan's Blyth Eastman Dillon & Co. "You have a bad week, and you rush out and get one."

Air-conditioner makers needed a few bad--or, rather, good--weeks to reduce the swollen inventories they built up during the three cool years. Since air conditioners, unlike autos and some appliances, do not undergo frequent model changes, many of the makers are simply taking old machines (a few of them made as long ago as 1969) and shipping them to dealers in new cartons.

A good year will provide at least a bit of breathing space for the manufacturers, who soon will be hit by costly new federal energy-saving regulations. A Federal Energy Administration study shows that air conditioners account for 7% of the electricity used in the U.S. The FEA estimates that air conditioning uses up the equivalent of 1 million bbl. per day of oil, or 2.5% of the U.S.'s daily energy consumption. More than 70% of all new homes built in the U.S. now have central air conditioning, and 53% of all older homes have at least one room unit. Air conditioners rank behind only space and water heaters among the home appliances as drains on the nation's energy resources.

As a result, the 1975 Energy Policy and Conservation Act empowered federal regulatory agencies to set targets for higher efficiency from home appliances. On July 15 the FEA announced voluntary efficiency goals for the industry: by 1980, new central air conditioners should be 25% more efficient than present models, while room air conditioners should be 30% more efficient.

Efficiency Ratings. Without waiting for Washington, California has set standards so tough that fully 80% of the air conditioners now sold there would be outlawed by 1979. In New York City, manufacturers already are required to furnish EYCO information --standing for Estimated Yearly Cost of Operation--to prospective buyers; there, the average small 5,000-B.T.U. machine, costing $200 to $225, has an EYCO of about $50.

The Association of Home Appliance Manufacturers has been rating U.S.-made air conditioners, using the Energy Efficiency Ratio (EER), since 1974. On a scale advancing from a poor five to an excellent eleven, the EER evaluates the air conditioner's ability to produce the largest amount of cooling with the smallest amount of electricity. The EER tests show that the industry is indeed capable of producing machines that would meet strict new federal requirements; one of the main features of a more efficient unit is a large set of condensers and evaporator coils. But these machines are relatively bulky and cost more to manufacture than the less energy-efficient ones. Unfortunately for the cause of energy conservation, buyers of air conditioners in the U.S. have so far demonstrated a marked preference for saving now on purchase price even if it means paying more later in higher utility bills.

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