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PT&P History: The First Thirty-Five Years

Index | Acknowledgements | Milestones | Introduction | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Read More

Chapter 3: Thriving Through Diversification During Houston's Economic Downturn

"None of the operating companies were mounting new projects," said Terry McCormick. "Because, you know, the price of oil was going down and they were going through their massive layoffs. Every major company was cutting back." During the 1970s and early 1980s, business opportunities abounded in Houston and the entire city seemed awash in money. Rising oil prices fueled the boom which stimulated business in all sectors of the city's economy. Then suddenly, in 1982, it all began to sour. By 1985, the boom had turned to bust, causing many businesses to fail and many people to lose their jobs as those firms that relied upon energy related businesses  laid-off employees and closed their doors. The Bayou City suffered through five years of economic contraction with some areas feeling effects more traumatic than during the Great Depression of the 1930s. Although it may have seemed like it at the time, all of Houston did not fold during the economic downturn of 1982–87. Many companies survived the energy recession and some found themselves in better condition by the time the Houston economy began to turn around in 1988. One of those companies was Piping Technology & Products. The company was strong enough to weather the most severe downturn in the recent history of the oil, gas and petrochemical industries without the "downsizing" that many firms endured during those difficult days.

There are a number of reasons for the remarkable survival of Piping Technology during this difficult time. Unlike many Houston firms, PT&P had not mortgaged its future by borrowing heavily to finance expansion or capital improvements. Also, with the large contracts to provide pipe support products for the Texaco refinery in Convent, Louisiana and the giant Saudi Arabia Petrochemical Complex at Al-Jubail, PT&P had two long-term projects to carry the company for a while. Finally, Durga Agrawal, Randy Bailey and Terry McCormick had seen the downturn approaching as early as 1981 and began to search for alternative markets. They saw a need to diversify the company's customer base and to expand their product line.  Consequently, the company continued to book jobs and continued to grow throughout the period of the downturn. By the time that both the local and national economies began to recover somewhat in the late 1980s, PT&P had moved to a larger facility, acquired a new subsidiary, SWECO, and added new manufacturing capabilities while, during the same time, many of their competitors had been forced to close their doors.

Terry McCormick talked about the big economic crash years later. He recalled the drop in oil prices noting, "If you looked at August of 1982, West Texas Intermediates were trading for $39 a barrel. Four years later, in August 1986, they were trading for $9.50 a barrel, and 245,000 people had lost their jobs in Houston in that four year period." The falling oil prices meant a decline in revenues for the oil companies. Among other things, this delayed plans for new construction and upgrades of existing  refineries and other facilities. With little of this type of work being awarded, the big engineering and construction companies began reducing their workforces. McCormick recalled that "Fluor Corporation here went from like 3,900 people to 450 people. Bechtel was flat. Lummus was flat. Brown & Root was flat. Everybody in town was flat. The only thing that wasn't flat was Fluor [California] and that was by virtue of this big job in Saudi Arabia. The only thing that C.F. Braun was doing was their portion of the job in Saudi Arabia. So, no new jobs were being awarded and it was a very, very critical period of time."

PT&P continued to pursue work but in reality, there was not much work to pursue. McCormick utilized this slow period to bolster his contacts and keep in touch with the people and the companies that PT&P had done business with previously. He dropped in at the engineering companies to chat with the piping and stress engineers who still remained. The slowdown provided "a wonderful opportunity to call on those people…they were very receptive to meeting you." All of this generated good will and would pave the way for PT&P to be assured of receiving inquiries once the economy picked up and the engineering and construction companies began getting new projects.

One of PT&P's first sales agent training sessions.

In addition to shoring up PT&P's contacts with the engineering and construction companies, McCormick began putting together a network of sales agents to represent PT&P in other parts of the country. Usually these agents were independent businessmen, manufacturer's agents who represented three or more companies. Whenever McCormick traveled, he contacted the local agents and they would make calls together, visiting potential clients to make PT&P known to them. "So, that gave us an opportunity to call on the engineering companies, those that we were doing business with and those we hoped to do business with, and it gave us an opportunity as well to call on the major operating companies. Our [agents] have played an important part in our growth over the years." Eventually, PT&P established a worldwide network of manufacturer's agents to represent the firm.

During the early 1980s, PT&P had begun looking for ways to diversify and expand into the non-energy-dependent sector of the economy. Durga Agrawal briefly considered the idea of getting into the computer business as an after-market reseller. Although he did not aggressively pursue that option, diversification clearly was on his mind. As he recalled later.

"We started seeing the downturn coming a year before it happened,
or a year and a half before it happened. I knew that the petrochemical
business would be down the next two or three years. That's when we
started planning to diversify and get into other areas like building
expansion joints for the highways, doing anchor bolts, slide plates, all
kinds of miscellaneous steel fabrication, including getting into wastewater
treatment plants. So, we started focusing on those smaller, labor-intensive
jobs. And because of that, we kept everybody busy. We didn't have to lay off
anybody. We kept on expanding. We kept on hiring more and buying more 
equipment also.

PT&P was willing to try almost anything to keep the business going and to keep its employees working. As a result, the company not only survived, but also the expanding capabilities actually helped propel the firm into a new growth cycle. Randy Bailey described the period noting that, "Every year, we almost doubled in size, because we looked for diversification or options. In fact, that is when they passed the Clean Water Act and companies started doing a lot of wastewater treatment facilities. We branched out and we started working on sewer treatment plants. And so, we would go wherever they needed pipe, wherever they had pipe supports." The growing use of personal computers during the 1980s led to a corresponding demand for computer paper, which led to a boom in the pulp and paper industry. "They had a big push in the paper mills because they had so much [demand for] computer paper," said Bailey. "So, all the paper mills had to expand to keep up with the need and that's when we supplied all the hangers to the paper mills.

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