The housing industry will climb only part of the way back to a recovery next year, with housing starts reaching perhaps 1.3 million units, William R. Haselton, chairman of St. Regis Paper Co. predicts.
"I would think there is a 50-50 chance we would be at the 1.3 million unit level next year. It's not good traditionally. It's not going to solve the shelter needs of America. It is not going to solve the problems of the homebuilders, who are in dire straits. But at least it is a start," Haselton said in an interview this week.
For St. Regis, the nation's second largest manufacturer of two-by-four lumber, after Louisiana-Pacific Corp., the long depression in housing has been a heavy blow, and the company's economists are cautious in predicting the timing of a recovery, particularly after earlier rosy scenarios failed to come true.
"The problem with housing start estimates in the last three or four years is that they have been almost universally over-estimated, by everyone. So where we thought, a year and a half ago, we were going to have 1.3 million housing starts in 1982, it will be closer to 1 million.
"About last summer, it occurred to us that this situation could go on to the summer of 1983 and beyond, and we've postured ourselves for the long pull," he said.
St. Regis' strategic plan now says the recovery will probably not begin until the second quarter, and probably not before the third. "We expect very little is going to happen between now and Easter, and we can live with it," Haselton said.
The key remains the level of interest rates. He and others in the industry are still convinced that if mortgage rates decline to an average of 12 percent or 13 percent, a healthy surge in buying will begin. (The average rate on a 30-year conventional mortgage rose from 9 5/8 percent in 1978 to 17 percent last summer). The desire of young people to own their own homes has not been extinguished, he said.
"The question is, will things get back to normal?" Haselton says. He thinks not. "I get the feeling that the high riding days of the 1970s are not going to repeat themselves too rapidly."
Many businesses have been looking hopefully for "the light at the end of the tunnel -- they would come into the sunlight and everything would be the way it used to be. They're living in a dream world. The world is more competitive. It's going to get better; it may get quite a bit better, but it's not going to be like it was two or three years ago."
The only positive result from the recession for St. Regis has been the dose of cost-cutting, cash conservation and reorganization that the company was forced to administer to itself, Haselton said. "This recession has improved our productivity, improved our efficiency, cut our costs and made us do things we might not have done otherwise," he said.
St. Regis has reduced its salaried staff by ten percent since January 1982. It also cut its dividend in half last summer, saving $19 million in the second half of the year. It has put off high priority capital projects, such as conversion of its main mill boilers to run on coal and scrappage rather than oil and natural gas. (St. Regis manufactures a broad range of printing papers and paper containers in addition to lumber. It has also diversified into insurance.)
"We're going to come out of this stronger than we went in," he predicted.
But there has been a heavy cost in the steady battering of depressed sales and forced cost-cutting on morale -- Haselton calls it a "drip, drip, drip" form of "Chinese torture." The danger is that eventually, it will erode the resistance of management, or exhaust the patience of directors and investors.
"You can take it for awhile, but after long enough, everyone gets a little discouraged," he said. He would like to see the recovery arrive before discouragement takes hold at St. Regis, and he says he thinks that will happen.
"The only news you're going to get from here on is better news," he said. "America is the low cost producer of wood products and it will get better tomorrow than it is today. . . . If we don't go to some protectionist mentality in the world -- which I think would be a disaster for the economy -- we can compete worldwide in pulp, in paper, in liner board, especially from the Southern United States. The world economy is really the key to the lock."