June 24, 2009
Stimulus comes too late for Vancouver Island general contractor
Stimulus dollars won’t help Parksville, B.C.-based Ballenas Engineering, which is set to close its doors permanently later this month.
The Vancouver Island general contractor is a casualty of the downturn in the construction and forest industries.
“Forestry has a very bleak future on the island and the slowdown in construction is directly related,” said owner Hans Heringa.
“The industry is going to be competitive enough in the next three to five years. I’ll leave what work there is for the others.”
The company has been in business since 1981 and its work is split between roadbuilding, sewer and water construction, and the trucking and forest industries.
The trucking component will go to another contractor and the construction end will close permanently, leaving about 30 of the company’s 40 employees out of work.
He said stimulus dollars don’t provide enough certainty to keep the company in business because anyone wanting to access them has to wait around.
He said Ballenas has been luckier than most in having contracts from last year carry it through to this spring, but he doesn’t see the likelihood of more steady work until sometime in 2010.
“Even then, there are no guarantees,” he said.
Rather than wait, Heringa is choosing to retire, as will many of his longtime employees.
“For us, the timing is good,” he said. “We’ve just decided to call it a day.”
Heringa’s company isn’t the only one feeling the pinch on Vancouver Island.
Economic trouble has also hit Chew Excavating and Ironside Contracting, both of which sold off equipment with Ballenas at an auction held by Ritchie Bros. Auctioneers June 15.
Ron Watson, vice-president of operations for Victoria’s Chew Excavating said the company’s involvement in the auction is just a routine shedding of surplus equipment and materials, but adds that the downturn has taken a toll.
The company does excavation for utilities, sewer and water construction, and rock work.
Only recently has there been work to bid on and the lag has saturated the market with contractors, who are just trying to cover their costs, said Watson.
“It lowers the value of the jobs. People have to do something so they are just looking for a little cash flow. It puts the whole industry in a bit of a limbo,” he said.
Whether stimulus funds will give the company a boost depends on whether they flow.
He cited Victoria’s Admiral Street Bridge project as an example of the uncertainty surrounding some projects.
Work was set to begin June 22. It is on the city of Saanich’s dime because of delays and the lack of certainty about its application for federal stimulus money.
“We’re a long-standing, solid company that’s been in business well over 50 years,” said Watson.
“We would expect we’d be able to continue on, but time will tell.”
Bail-out money for the forest industry isn’t reaching smaller contractors like Ironside Contracting, said part-owner Gord Thompson.
He surmised it could be because they don’t have the employment numbers.
The Campbell River-based stump-to-dump logging contractor that has been operating since 1995 has been slowing down for the past three to five years, but has cut its capacity and workforce in half since last fall.
Despite having some projects underway including a project on the north end of Vancouver Island, coming into fire season sets the company back as soon as it gets going.
“It’s very frustrating times,” said Thompson. “Everything has become hand to mouth.”
The company isn’t looking at a complete dispersal, but is selling off surplus equipment to make it through until the industry picks up.
“We are downsizing to be in a debt-free position and to weather the storm and hopefully come out on the other side,” he said.
Ritchie Bros. Auctioneers has held six auctions for an average of 125 consignors per event, since October.
During that time, the company has auctioned off equipment for four companies going out of business, and 20 to 30 looking to restructure or downsize in response to the economy.
Area manager Adam Pruss said the company sees 15 per cent growth year over year, regardless of the economy and that a link between auctions and the economic downturn isn’t realistic.
“In tough times we sell people out, but it’s the same in good times,” he said.
“Anybody who is smart is doing what (a lot of) long standing companies are doing. They’ve been through these cycles and they understand that when it’s busy they ramp up and when it isn’t they turn equipment into cash and wait it out.”
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