Carrier CEO talks unit volumes, the economy, and tariffs

Commentary: Wells Fargo this week gathered a slew of executives in Chicago for its annual Industrials & Materials Conference, including Carrier CEO Dave Gitlin, who chimed in during an on-stage Q&A on this year’s market, the macroeconomy, and recent tariff developments as they relate to the HVAC industry. 

A roundup of highlights from the conference transcript, lightly edited for brevity:

On the state of play:

“The [Americas] residential and light commercial businesses have both been performing better than we thought. The demand there has kind of exceeded our expectations, so that’s been encouraging. [It] feels like it’s hitting troughs and poised for a recovery.”

On whether interest rates are “the primary pressure point” on unit shipment volumes:

“Interest rates, of course, matter. We don’t love the 30-year [mortgage rate] north of 6 percent. But there are a lot of factors that go into it. You have true underlying demand [with] new home builds. There are 4 or 5 million too few homes in the United States. And when I talk to the CEOs at homebuilders, they’re like cage tigers ready to go. 

The existing home sales [are] at a couple of decade lows. People are anxious to move into those new homes, and they’ve been putting off some of those purchases not only because of mortgage rates, but also because of consumer sentiment, some general anxiety that’s among the consumer base.

So the underlying demand is there. Usually, you’re at 9 million units [shipped annually, on average]. We were a little above that from 2020 to 2024. And then last year, it probably ended around 7.5 million, maybe 7.6 million. This year, we had said it could be 6 million.”

On where things go from here:

“I don’t think you’ll see a rapid increase back to that 9 million, but you’re going to start to see, I believe, a trend back to that 9 million, because people have been putting off what’s fundamentally a replacement business. So, anyone who’s been limping along with a repair over replace, you’re going to see that demand come back. 

The countervailing force is high mortgage rates and some of that consumer sentiment. [The] shorter cycle stuff. Input cost increases on the consumer, like fuel. As those countervailing forces play out, I think you start to see some of that demand come back, and it could get accelerated. We’ll have to see as we get into 2027.”

On recent tariff developments:

“We were very pleased with the change [the Trump administration] made to Section 232, [which] takes [certain HVAC products] from 25 to 15 percent, with a path to 10 percent, depending on your percentage of U.S. steel purchases. We’re going to shoot for 10 percent, but some SKUs may end up staying at 15 percent. So we’ll be kind of a mix.

And then, we’ll have to see how the USMCA negotiations play out, because that may trump all of the Section 232 [changes], so we’ll have to continue to monitor all of that.”

Catch up quick

On whether there’s a path to hit that 10%, Section 232 rate:

“The issue for us is not our desire or ability to buy U.S. steel. We try to maximize U.S. steel content. The issue is with some of our suppliers; you may have certain engineered components that are specked in such a way that the steel is actually not available in the United States. 

So now you’re into a pretty significant redesign, and we’re just going SKU by SKU to figure out what to do about those. I think for the foreseeable future, we’ll have some mix of the 10 and 15 percent.”

On the impact on equipment pricing:

“On the residential side, when the tariffs came into place, we went to high single digits. I think it favors mid single digits going forward, and there’s a big range there.”

Related: Lennox, Carrier report double-digit drops in Q1 residential sales