Internal homebuilder Hovnanian (HOV) layoff email to employees: "steepest declines in new home sales in our memory", "dramatic pricing concessions"

CEOs at companies around the country are getting ready to hit the SEND button on email just like this one. Get ready employees at Toll Brothers, Fannie Mae, Countrywide, Pulte, Centex, Century 21, the NAR, e-loan, etc. Your industry is the new dot-com industry, circa 2000. It has blown up, and blown up spectacularly.

Here's the highlights from the email over at papermoney:

MEMORANDUM TO: All Associates
FROM: Ara K. Hovnanian
DATE: October 3, 2006

Fellow Associates,

A few months ago I wrote to you about the changing market conditions in our industry and our concerns about how long the downturn in homebuilding may last. Since that time, the market has slowed further still, representing one of the steepest declines in new home sales in our memory.

Most of our markets have been affected, some severely. At this point, we are preparing for a long period of slower sales, at least through 2007 and perhaps beyond.

What does this mean for you and for our Company? These new market conditions have affected us in many ways and will continue to affect us in the months ahead. In the area of land acquisition we have been re-evaluating our current land positions and the contracts for new land in the light of these new conditions. Many of those contracts no longer make good financial sense when you factor in lower prices and a slower sales pace. In cases where we have been unable to renegotiate these contracts with more favorable terms, we are canceling them, at times forfeiting our deposit monies.

We continue to work on ways to reduce costs.We have also had to make adjustments to our pricing in order to make sales, either through added features, free options, waived premiums or outright base price reductions.

In a market where our competitors are making dramatic pricing concessions, we must make similar adjustments in order to remain competitive.

Obviously, this has a significant impact on our profits on those homes that we sell at a discount.

The most difficult adjustment we have had to make to the changing market is in the area of staffing. In many locations, including corporate headquarters, we have been forced to face the fact that we no longer have enough work for all of our Associates.

We were hoping that normal attrition and a reduction in new hires would prevent us from needing to take further action. Those steps helped, but did not solve the problem of having too little work for our entire team. As a result, we have had to make staff reductions.
We consider this action to be a last resort, but business realities demand action in order for our Company to remain healthy and to maximize our performance in a difficult market environment.