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Each year, Pumps & Systems gathers critical industry insight at the Gabelli Pump, Valve & Motor Symposium in New York. Thanks to about 20 in of snow, this year I spent the entire conference at LaGuardia airport. However, Gabelli’s chief analyst for the pump industry, Jim Foung, was kind enough to share with me his candid observations and expert interpretations of the state of the pump industry for 2010.

“A combination of the weak global economy and lack of inventory stocking exasperated the downturn, which bottomed in late 2009,” Foung says. Without much re-stocking in 2009, Foung said the Gabelli Symposium speakers alluded that if nothing else happened in 2010 but re-stocking, we could see growth again soon. “But right now we are in a holding pattern.”

Simply put, “The economy has not gotten worse, but it has not gotten better,” Foung explains. “Distributors are not building inventories and this could be a new trend for a while. However, if history repeats itself, companies will have to restock at some point.”

Foung said many executives indicated growth in some areas, in particular the shorter cycle, book-to-ship markets in pumps and valves. “Major projects with normal lead time actually held up in 2009, but may be weakening a little now,” he says. “Major projects with longer cycles have caused more price competition, forcing some users to want to renegotiate contracts.”

Another trend for 2010 is a search for strategic acquisitions because of weak organic growth. “Quite a few companies indicated they have financial teams in place that can manage larger companies than they currently have.”

In retrospect, “Last year, cash was king,” Foung says. “The banks were not lending. There was a big concern about liquidity. Now, with some modest growth, metrics indicate that the market has picked up sequentially month over month.”

Foung says he is also hearing from companies beginning to see some benefits from the Stimulus Plan. “Two-thirds of the Stimulus spending has not impacted the economy yet,” he says. “It is a long process. A little bit of that is picking up the demand, which could help to make this a pretty good year.”

In general, “We should see modest growth in 2010 . . . maybe 1-2 percent,” Foung says. “The U.S. is consumer driven. If we have job growth and income growth, consumers will begin to spend again.”

Top level industry executives are returning to basic business fundamentals in order to survive in an economic climate that remains uncertain. Each January, Pumps & Systems publishes a report on the State of the Industry. As a sign of the times, this year we decided to take a new spin and focus specifically on “Succeeding in Today’s Economy.”

We once again asked a distinguished panel of industry executives to comment on business trends and strategies and more important, we asked them to forecast ideas for moving forward in 2010.

Based on their expert insight, the impact of the Stimulus Package continues to be a common topic of discussion. The industry is finally feeling some positive effects from the bill that has promised to provide a multi-billion dollar boost to the pump industry, particularly in the water and wastewater sectors.

Most executives are not waiting on (or counting on) government funds. They are focusing on business fundamentals and finding creative ways to produce more efficient products and services. Key strategies on the minds of industry executives include managing talent, streamlining processes, reducing operating costs, improving plant performance, managing and controlling inventory, becoming globally diverse and continuing to focus on improving technology.

According to Grundfos Pumps USA President Dennis Wierzbicki, managing supply chains will also be an important strategy for 2010. “As the U.S. begins to grow again, and it will, manufacturers’ approach to markets will be critical for supply chain partners to understand,” he says. “Confusing people in the supply chain will only make it difficult to sell your products and more important for end users to get access.

“Beyond this, the basic business axioms will be needed. Continue to improve processes to be more efficient for the customer and reduce costs. Continue to focus on inventory management, manufacturing excellence and relationship management with shareholders.”

One theme that seems to be a unanimous strategy for companies to succeed in today’s turbulent economy is a continued focus on the customer. “In the end, it is the customers’ perception that matters,” Wierzbicki says. “Interestingly enough, the customers’ needs are what always seem to provide the compass to develop plans.”

In a rare move, U.S. President Barack Obama went to Capitol Hill on Wednesday to personally pitch his stimulus plan to House Republicans. They were not impressed.

The plan passed with no problem (244-188). However, not one single Republican gave support to the President’s proposal, some of them stating for the record that they felt the now $819 billion plan contains too much spending and not enough tax cuts.

It is a vote that speaks volumes to the political challenges that await the new President regarding the economy and other issues.

Monday, the debate moves to the Senate and the tax relief provisions of the bill are likely to grow enough to pick up the Republican votes the President has been courting so aggressively.

White House speakers emphasize this is just step one, and indicate that the President is not discouraged. He says he knows it will take longer than a few days to effect change and the Speaker of the House said that “you can’t report the final score of the game when you’re only in the third inning.”

How this impacts the pump industry is still unknown. In the February issue of Pumps & Systems we reported speculation from industry experts and executive association leaders on how a huge portion of this package could dramatically impact infrastructure and the water and wastewater sectors of our industry.  Let us know what you think of these recent developments, and we will continue to give you timely reports.