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How Private Equity Is Ruining HVAC · The Matt Walsh Show

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0:53
Speaker 1: Whether you've noticed it or not, and you probably have
0:55
Speaker 1: noticed it, it's virtually guaranteed that your home repair bills,
0:58
Speaker 1: especially involving HVAC and plumbing, have increased dramatically in the
1:02
Speaker 1: past few years. And when I say dramatically, I'm talking
1:05
Speaker 1: about a rate that exceeds inflation by more than 25%,
1:08
Speaker 1: probably more like 40%. By one estimate, average repair revenue
1:13
Speaker 1: per job in the HVAC industry jumped more than $ 818
1:15
Speaker 1: in 2021 to more than $ 1, 200 in.
1:16
Speaker 2: 2025, even as the average.
1:22
Speaker 1: Repair costs for HVAC contractors fell by around 26% in
1:26
Speaker 1: the fourth quarter of 2025 compared to late 2023. Average
1:29
Speaker 1: ticket prices, the amount customers have to pay, continue to increase.
1:34
Speaker 1: And you can't shop around to beat these prices. Odds are,
1:38
Speaker 1: when you try to find a better deal, you're finding
1:40
Speaker 1: that everyone is charging the same rate. It's yet another ongoing,
1:45
Speaker 1: ever-increasing maintenance cost that's destroying the finances of homeowners. And
1:49
Speaker 1: for millions of young people, it's yet another reason to
1:51
Speaker 1: avoid buying a place, a home in the first place. Now,
1:55
Speaker 1: to understand what's going on here, I need to begin
1:57
Speaker 1: with this footage shot by Inside Edition. A couple of
1:59
Speaker 1: years ago in New Jersey, they exposed an HVAC company
2:02
Speaker 1: called Gold Metal Service, which sent a technician to their
2:06
Speaker 1: decoy house and tried to charge more than $ 1, 000 for
2:09
Speaker 1: a non-existent leak in their air conditioner. So this is
2:13
Speaker 1: basically to catch a predator HVAC edition. And here's how
2:16
Speaker 1: that went.
2:17
Speaker 3: Watch.
2:18
Speaker 4: Next, we had them create a simple problem where none
2:22
Speaker 4: previously existed.
2:23
Speaker 2: So all I did was I just disconnected the low
2:25
Speaker 2: voltage circuit.
2:26
Speaker 5: So when the thermostat calls for air conditioning now, the
2:29
Speaker 5: outside unit won't come on.
2:30
Speaker 3: To fix it, they say all you have to do
2:33
Speaker 3: is simply reattach these contact wires and the unit will
2:37
Speaker 3: power right back on.
2:39
Speaker 2: A technician should recognize this within five minutes. Very, very,
2:42
Speaker 2: very simple fix.
2:43
Speaker 5: Even a novice HVAC technician can figure that out within
2:46
Speaker 5: five minutes.
2:47
Speaker 4: There was one in the bunch who spoiled a perfect record.
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Speaker 4: This technician from a company called Gold Medal Service examined
2:55
Speaker 4: the unit, and when he returned, he had some bad news.
2:59
Speaker 2: It's not cooling efficiently, and you're losing it, okay?
3:03
Speaker 5: So there's a leak in the system.
3:04
Speaker 3: Okay, so there's a leak in the refrigerant.
3:07
Speaker 5: Yes, it's a microscopic leak.
3:08
Speaker 6: He's trying to tell there's a microscopic leak somewhere.
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Speaker 7: Is that true?
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Speaker 2: No, it's not. It's not true.
3:13
Speaker 3: His price to fix that non-existent leak? We're looking at
3:21
Speaker 3: about $ 1, 736.
3:22
Speaker 7: $ 1, 736?
3:22
Speaker 2: That's really expensive.
3:24
Speaker 3: Time to reveal who I really am. So, Thor, I'm
3:28
Speaker 3: not really the homeowner. I'm Lisa Guerrero with Inside Edition.
3:32
Speaker 3: And we know that that air conditioning unit does not
3:36
Speaker 3: need all the repairs that you just told.
3:38
Speaker 7: Me it needed.
3:39
Speaker 3: All you needed to do was to connect two wires
3:42
Speaker 3: that weren't connected. Were you trying to upsell me? He
3:46
Speaker 3: packed up his gear and drove off. He took off
3:49
Speaker 3: in such a hurry, he left this tool bag behind.
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Speaker 2: I'm happy to say that three of the four companies
3:55
Speaker 2: nailed it. They found it right away. We only had
3:57
Speaker 2: one bad apple of the bunch.
3:59
Speaker 5: We reached out to Gold Medal Services several times for comment,
4:02
Speaker 5: but did not hear back.
4:05
Speaker 1: So Gold Medal Service couldn't even bring themselves to respond
4:08
Speaker 1: to this report. Apparently, after this report aired, they put
4:10
Speaker 1: out a post suggesting it was misleading in some way,
4:13
Speaker 1: although it doesn't seem to have been.
4:16
Speaker 2: Their technician just runs out of the home and flees in.
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Speaker 1: His van, leaving his tools behind. Really, the only thing
4:22
Speaker 1: about this segment that could have been improved is having
4:25
Speaker 1: the police wait outside to arrest the guy. That was
4:29
Speaker 1: a feature of To Catch a Predator, and they should
4:31
Speaker 1: have brought it back for stings like this. But the
4:32
Speaker 1: really amazing thing about this report is Not that an
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Speaker 1: HVAC technician was caught trying to rip off a customer.
4:39
Speaker 1: That comes with the territory often. The really extraordinary thing
4:43
Speaker 1: is that gold medal service was not actually impacted by
4:47
Speaker 1: this report in any significant way. Believe it or not,
4:50
Speaker 1: they're still in business and they have some very strong
4:53
Speaker 1: financial backing from a private equity backed portfolio company called
4:57
Speaker 1: Strike Point Group Holdings. On their website, this private equity-backed
5:02
Speaker 1: company boasts that gold medal service was founded in 1994
5:06
Speaker 1: and that, quote, gold medal technicians are known for getting
5:09
Speaker 1: the job done right every time and are the most
5:11
Speaker 1: trusted when it comes to heating, cooling, plumbing, and electrical services.
5:16
Speaker 1: The slogan says they've been trusted for generations. Doesn't seem
5:21
Speaker 1: like it could possibly be real, but it is. This
5:23
Speaker 1: company was exposed in front of an audience of millions
5:25
Speaker 1: of people. They tried to scam a reporter who caught
5:28
Speaker 1: them dead to rights on camera. And despite that, they're
5:33
Speaker 1: still in business and still enjoying the backing of a
5:36
Speaker 1: large private equity firm. And not only that, they're pretending
5:40
Speaker 1: as if they have a sterling reputation for getting the
5:44
Speaker 1: job done right every time. So the private equity firm
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Speaker 1: is trading on this firm's reputation from 1994, before it
5:52
Speaker 1: was owned by private equity and before they scammed the
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Speaker 1: news reporter, even though today this company is obviously complete trash.
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Speaker 1: So brazen does not even begin to describe what's going
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Speaker 1: on here. But the important lesson to draw is that
6:07
Speaker 1: Inside Edition did not simply expose one bad HVAC company.
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Speaker 1: They actually exposed a much larger scam, which is almost
6:14
Speaker 1: certainly affecting you because it's spread all over the country
6:17
Speaker 1: across the vast majority of suburbs and virtually every city.
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Speaker 1: So understand what's going on here and how to find
6:23
Speaker 1: a way to reverse the trend. We need to Begin
6:26
Speaker 1: with a demonstration. So imagine you're living in the Detroit,
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Speaker 1: Ann Arbor area. Your air conditioning just went out. You
6:32
Speaker 1: want to go with a locally owned and operated, reliable
6:35
Speaker 1: HVAC company with a good reputation. So online, you find
6:38
Speaker 1: a company called Flame and you set up a service
6:41
Speaker 1: appointment and the van shows up outside your house. And
6:45
Speaker 1: as you can see, it's a nice bright red van
6:48
Speaker 1: and looks like a professionally maintained sort of thing. plaster
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Speaker 1: on every side of the truck, you'll see the words
6:54
Speaker 1: since 1949, letting you know that these people have been
6:58
Speaker 1: on the job for a very long time.
7:00
Speaker 2: And so they must be reliable.
7:02
Speaker 1: And indeed, that was a big part of the reason
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Speaker 1: you selected these people in the first place. All over
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Speaker 1: their website, they advertise that they've been in business since
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Speaker 1: the 1940s. They say, quote, since 1949, flame, heating, cooling, plumbing,
7:15
Speaker 1: and electrical offers residential and commercial services throughout the Detroit
7:18
Speaker 1: metro area, including Maycomb, Oakland, St. Clair, Lane, and Washtenaw counties.
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Speaker 1: Above all, we believe in delivering excellent and reliable service
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Speaker 1: to our customers. We have more than 135 employees and
7:30
Speaker 1: 95 vehicles on the road to adequately meet the needs
7:34
Speaker 1: of our community. So that sounds like a good option.
7:37
Speaker 1: It's a big fleet, lots of employees, and they have
7:40
Speaker 1: tons of experience. Pretty much since the end of the
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Speaker 1: Second World War, they've been repairing air conditioning units in
7:46
Speaker 1: your neighborhood. And of course, no one stays in business
7:49
Speaker 1: that long unless they do a pretty good job at
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Speaker 1: what they do, plus they have a reputation to protect.
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Speaker 1: So it stands to reason that you can trust them.
7:57
Speaker 1: That's a rational conclusion to draw. And on top of that,
8:00
Speaker 1: on your TV, you've noticed that Flame even puts on,
8:03
Speaker 1: puts out really, really quirky ads highlighting their individuality and
8:06
Speaker 1: their irreverent.
8:07
Speaker 2: Sense of humor. Nothing corporate about these guys.
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Speaker 6: Watch.
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Speaker 7: Sounds like a pterodactyl.
8:23
Speaker 5: Sounds like that.
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Speaker 2: Hello, flame. So it's great stuff.
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Speaker 1: And as the technician gets to work on your air conditioning,
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Speaker 1: you feel confident that you've selected a quality local company
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Speaker 1: to fix your AC. And then you notice another van
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Speaker 1: pull up to your neighbor's house across the street. And
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Speaker 1: it looks like this one. It belongs to a company
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Speaker 1: called Randazzo Heating, cooling and electrical. Emblazoned on their van,
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Speaker 1: you'll find the slogan, go with the name you know.
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Speaker 1: And you start to wonder if Maybe you shouldn't have
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Speaker 1: gone with Randazzo since apparently it's the people you know.
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Speaker 1: You pull out your iPhone, you go to Randazzo's website,
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Speaker 1: and this is what you see on their About Us page.
9:04
Speaker 1: And here's what it says when you look at it. Quote,
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Speaker 1: Randazzo Heating, Cooling, and Electrical is a Michigan-based company keeping
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Speaker 1: Michigan residents comfortable since 1988. Our team believes in setting
9:13
Speaker 1: the highest heating and cooling industry standards, leading with innovation, integrity,
9:17
Speaker 1: and breaking all barriers. Our team is a large family. Together,
9:20
Speaker 1: through Christ... All things are possible. This is obviously kind
9:25
Speaker 1: of a different message from the one you saw on
9:26
Speaker 1: Flame's website. At Flame, they're bragging about how they've been
9:29
Speaker 1: around since the 1940s. They've got a ton of vehicles
9:32
Speaker 1: and employees. Randazzo, though, is not talking about that. They've
9:36
Speaker 1: only been around since the 80s. But they care about
9:39
Speaker 1: their Christian faith and how, with God's help, they can
9:44
Speaker 1: innovate and meet high standards. And through the power of Christ,
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Speaker 1: they might even fix your air conditioning unit. So Let's
9:51
Speaker 1: say you're a Christian. This message might appeal to you
9:53
Speaker 1: for obvious reasons. It would appeal to me in a
9:56
Speaker 1: lot of ways. And then right as you're having these thoughts,
9:59
Speaker 1: because of everyone's AC just broke, yet another van pulls
10:03
Speaker 1: up to a neighbor's house. And you could see it
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Speaker 1: right there. This van belongs to the Robin Air Service Company.
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Speaker 1: They do the same kind of work, HVAC, plumbing, electrical,
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Speaker 1: and so on. Their van's a little more plain than
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Speaker 1: the others. There's no slogan or anything, but on some level,
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Speaker 1: You know, you can kind of appreciate that. After reading
10:21
Speaker 1: all this marketing language, you're in the mood for an
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Speaker 1: HVAC company that doesn't stand on ceremony. You know, so
10:26
Speaker 1: you go on their website and you come across this.
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Speaker 1: It's a nice big Robin Ayer team photo with everyone
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Speaker 1: looking like they're in good spirits. The website goes on
10:35
Speaker 1: to talk about all the community services that Robin Ayer does. Quote,
10:39
Speaker 1: it has always been a priority to give back and
10:41
Speaker 1: help others in need, which is why we participate in
10:43
Speaker 1: various community activities. We are a proud partner of Lennox's
10:46
Speaker 1: Feel the Love program. which brings heating and cooling equipment
10:49
Speaker 1: to deserving families who need a helping hand. So that's
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Speaker 1: a unique perk of going with Robinair. Unlike the other companies,
10:56
Speaker 1: they give back to the community.
10:57
Speaker 2: You have so many choices. They all seem like great options.
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Speaker 1: And right then your technician from flame emerges from your
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Speaker 1: backyard with a grim expression on his face. He says,
11:08
Speaker 1: you know, I'm sorry, but you're looking at a major
11:11
Speaker 1: repair here, at least $ 2, 000. You might be interested in a,
11:16
Speaker 1: buying a new unit altogether to save on future costs.
11:19
Speaker 1: And you're crushed to hear that. You don't have the money.
11:21
Speaker 1: And frankly, you don't necessarily trust the guy. After all,
11:23
Speaker 1: he's every incentive to upsell you on an expensive repair
11:27
Speaker 1: or replacement that you don't need. So you tell the
11:30
Speaker 1: repairman to come back another day. Then you set up
11:33
Speaker 1: two more appointments, one with Randazzo and one with Robinair.
11:36
Speaker 1: It seems like a smart way to scope out the market.
11:39
Speaker 1: Maybe the Christian warriors at Randazzo Heating, Cooling, and Electrical
11:43
Speaker 1: could find a way to do the repair for cheaper.
11:45
Speaker 1: Maybe the public servants at Robinair could come through for you.
11:49
Speaker 1: But as these technicians from the other two companies show
11:51
Speaker 1: up in this hypothetical scenario, they all tell you the
11:55
Speaker 1: same thing. You're looking at a $ 2, 000 bill minimum. So
11:59
Speaker 1: then at that point, reluctantly, you agree to it. You
12:01
Speaker 1: really don't see any other option. You've compared all your options,
12:05
Speaker 1: three different companies, and they all say the same thing.
12:08
Speaker 1: So the market has spoken. You have no other choice.
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Speaker 1: Except in this hypothetical case, The market did not, in fact,
12:16
Speaker 1: say anything. And that's because all three of these companies,
12:19
Speaker 1: which are real companies that all work in the same
12:21
Speaker 1: area in Michigan, are owned by the same gigantic private
12:25
Speaker 1: equity-backed institution called Heartland Home Services. Heartland is specifically backed
12:30
Speaker 1: by a private equity firm called the Jordan Company, which.
12:33
Speaker 2: Manages tens of billions of dollars in assets.
12:36
Speaker 1: And to be clear, the private equity firm acquired all
12:38
Speaker 1: of these HVAC companies recently, within the last decade. They
12:42
Speaker 1: acquired Flame and Robinair in 2021, Randazzo in 2017. So
12:46
Speaker 1: in other words, a large private equity company swooped in
12:50
Speaker 1: and acquired all of these HVAC companies in the same
12:53
Speaker 1: area and dozens of others, which serve the exact same region.
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Speaker 1: But the private equity company did not unify the branding
13:00
Speaker 1: of these companies or do anything to indicate that they
13:03
Speaker 1: were fundamentally the same company. Instead, the whole point of
13:07
Speaker 1: the deal was to purchase the reputation of these individual
13:10
Speaker 1: companies while also eliminating competition in the market, all while
13:15
Speaker 1: giving customers the illusion of choice. And to do that,
13:20
Speaker 1: they try to make each company look distinct on their vans,
13:23
Speaker 1: on their websites, et cetera. Each company kind of hits
13:26
Speaker 1: a different note. This is all very coordinated, but in reality,
13:31
Speaker 1: they all have the same owner. So if hypothetically you
13:36
Speaker 1: shopped around at all three of these companies, you're really
13:39
Speaker 1: talking ultimately to the same people. We've reached the point
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16:00
Speaker 1: slash Walsh. Almost no other industry works like this. I
16:05
Speaker 1: guess it's common in the glasses industry where Luxottica basically
16:10
Speaker 1: owns all of these smaller brands that pose as independent
16:14
Speaker 1: entities like Ray-Ban, Oakley, and so on.
16:17
Speaker 2: And it's common with funeral homes also, believe it or not.
16:21
Speaker 1: But for the most part, this is not how it works.
16:25
Speaker 1: When Apple buys a smaller company, like they did with Siri,
16:28
Speaker 1: for example, everyone understood that Apple had taken over the brand.
16:34
Speaker 1: When Amazon bought Whole Foods, they didn't really try to
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Speaker 1: hide it. They actually started including Amazon return stations in
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Speaker 1: every store. When Sirius bought XM Radio, they kept their
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Speaker 1: name Sirius and on and on. Generally, when one company
16:48
Speaker 1: acquires another, they don't go out of their way to
16:50
Speaker 1: hide their connection to the company they purchased. They might
16:54
Speaker 1: keep the existing brand ashore that happens all the time,
16:57
Speaker 1: like Disney with Lucasfilm, for example, but private equity is
17:00
Speaker 1: doing something very different with these HVAC companies. They're keeping
17:05
Speaker 1: these smaller companies around and pretending that they're still independent. Now,
17:11
Speaker 1: Heartland is just one example of a private equity-backed firm
17:14
Speaker 1: doing this, but it should be mentioned that they're a
17:17
Speaker 1: massive operation. They own 24 brands across seven states, including Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio,
17:24
Speaker 1: and Wisconsin, according to their website. And again, this is
17:27
Speaker 1: just one private equity-backed firm The same exact scenario is
17:31
Speaker 1: playing out thousands of times all over the country every year,
17:36
Speaker 1: and it's accelerating. According to the outlet PitchBook, private equity
17:39
Speaker 1: investors have, quote, purchased nearly 800 HVAC plumbing and electrical
17:42
Speaker 1: companies since 2022. Adam Hanover, who serves as chairman of
17:48
Speaker 1: a private equity-backed company called Redwood Services, told the Wall
17:51
Speaker 1: Street Journal that, quote, everybody and their uncle owns an
17:54
Speaker 1: HVAC business in the private equity space today.
17:58
Speaker 2: Okay, now, to be clear, I'm not against capitalism.
18:02
Speaker 1: I don't oppose the idea in principle of bigger companies
18:06
Speaker 1: buying smaller ones. I don't even think private equity is
18:10
Speaker 1: always a bad thing in every context. Often it can be,
18:14
Speaker 1: but they saved Arby's, which is the best fast food
18:16
Speaker 1: restaurant in the world.
18:17
Speaker 2: Never let anyone tell you otherwise.
18:19
Speaker 1: And yes, there are some benefits to having one big,
18:22
Speaker 1: well-funded company take over and manage a You know, when
18:26
Speaker 1: private equity takes over the HVAC companies, they tend to
18:29
Speaker 1: get better scheduling systems, better technology. Technicians tend to get
18:33
Speaker 1: a better deal on their health insurance. And along the
18:36
Speaker 1: same lines, back-end costs tend to get cheaper due to
18:39
Speaker 1: economies of scale, as it's called. It's expensive for a
18:43
Speaker 1: small mom-and-pop operation to have an accounting department, for example.
18:46
Speaker 1: But if Heartland adds one more HVAC business to their portfolio,
18:50
Speaker 1: it doesn't really increase their middle management costs at all.
18:53
Speaker 1: Their existing accounting department can take care of it. And
18:57
Speaker 1: in theory, those savings could be passed on to the customers,
19:02
Speaker 1: in theory. The problem is that in reality, savings are
19:06
Speaker 1: not being passed on to the customers, quite the opposite.
19:09
Speaker 1: As private equity has moved in and taken over the
19:12
Speaker 1: HVAC industry, competition has disappeared and costs have spiraled out
19:17
Speaker 1: of control.
19:18
Speaker 2: One of the main ways.
19:19
Speaker 1: That private equity companies have increased their margins of these
19:23
Speaker 1: HVAC companies is by pressuring customers into paying for more
19:26
Speaker 1: expensive installations or repairs than they need. They want you
19:30
Speaker 1: to pay to replace your entire unit rather than get
19:33
Speaker 1: a repair because it'll dramatically improve their margins. They also
19:38
Speaker 1: push customers to sign up for regular service plans and
19:41
Speaker 1: warranty visits because for investors, one of the single most
19:44
Speaker 1: important metrics is recurring revenue. If they can convince you
19:48
Speaker 1: to pay them for basically doing nothing, just coming out
19:51
Speaker 1: and taking a look at your equipment when it's running
19:53
Speaker 1: fine already, then they'll do it. Because many of their
19:57
Speaker 1: customers are old and generally try to be agreeable people,
20:00
Speaker 1: these sales pitches are very often successful. And given the
20:04
Speaker 1: quality of these installations that these private equity-backed companies are performing,
20:08
Speaker 1: the warranty is actually a smart investment. According to some
20:11
Speaker 1: HVAC engineers, private equity companies will encourage their employees to
20:14
Speaker 1: complete as many installs as possible, even if they're so
20:18
Speaker 1: shoddy that they'll require follow-up service appointments. This is reporting
20:22
Speaker 1: from the American Prospect. It's about Jeff Howard, who works
20:25
Speaker 1: as an HVAC engineer in Indiana. It says, quote, Howard
20:29
Speaker 1: was optimistic when he moved to Williams Comfort Air, a
20:31
Speaker 1: regional firm he had long admired, but it was soon
20:34
Speaker 1: acquired by the Wrench Group, a private equity-owned roll-up of
20:38
Speaker 1: home service companies. You saw this big shift in focus
20:41
Speaker 1: to just replace more boxes and not care about the clients,
20:44
Speaker 1: not care about the employees. Howard told the prospect after
20:47
Speaker 1: leaving earlier this year, there was a mass exodus of
20:49
Speaker 1: talent and technicians. When Wrench took over, it was, hey,
20:52
Speaker 1: we now have all these companies, all these problems from
20:55
Speaker 1: installs we're just throwing in. He said he estimated that
20:58
Speaker 1: warranty calls doubled. He ended up in a spat with leadership,
21:01
Speaker 1: he said, after going on several warranty calls for equipment
21:04
Speaker 1: that had been badly installed. They upsized the equipment, oversold it,
21:08
Speaker 1: said it was going to take care of all their problems.
21:10
Speaker 1: I ended up going in, ripping it all out. He
21:12
Speaker 1: said they didn't like that at all. So that's when
21:15
Speaker 1: they started trying to demote me. Ultimately, he left, he said,
21:18
Speaker 1: with multiple other employees fed up with their management. Of
21:21
Speaker 1: the private equity management, he said they abused the people
21:25
Speaker 1: that actually know how to do things and fix things.
21:28
Speaker 1: I saw a similar experience on the HVAC subreddit, which read, quote,
21:33
Speaker 1: month before Apex, a private equity backed company, Took over,
21:37
Speaker 1: we had full systems going for 6K to 13K. Right
21:40
Speaker 1: after they took over, the price book changed. Full systems
21:43
Speaker 1: were going for 16K to 23K. Dual caps went from
21:47
Speaker 1: $ 220 to 384. Plus it's all about financing a next
21:51
Speaker 1: day install. Got to put the pressure on and don't
21:54
Speaker 1: let them figure out the whole price. So they go
21:57
Speaker 1: out of their way to close a sale, whether or
21:59
Speaker 1: not the customer actually needs the install, which costs a
22:03
Speaker 1: lot more money than it ever did before. And as
22:05
Speaker 1: we covered earlier, if you want to fire these people
22:08
Speaker 1: and find another company, well, good luck. Odds are the
22:12
Speaker 1: next company you find.
22:14
Speaker 2: Will be the same company. They'll be owned by the
22:16
Speaker 2: same private equity firm.
22:18
Speaker 1: Now, to be fair, there are some other factors at
22:20
Speaker 1: play here, especially when it comes to the cost of
22:23
Speaker 1: HVAC repairs. For one thing, HVAC equipment prices have jumped
22:26
Speaker 1: by more than 60% over the past six years, compared
22:30
Speaker 1: to 31% for general consumer prices. And while you might
22:34
Speaker 1: hear a regulatory explanation for this, an EPA rule restricted
22:39
Speaker 1: the use of high global warming potential refrigerants, which raise costs,
22:44
Speaker 1: for example. The truth is that rule only took effect
22:48
Speaker 1: after the biggest price increases in HVAC equipment were already recorded.
22:53
Speaker 1: Other contributing factors included the expiration of a tax credit
22:57
Speaker 1: for heat pumps, as well as rising wages for contractors
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26:00
Speaker 2: The other point.
26:02
Speaker 1: That needs to be made, of course, is even before
26:04
Speaker 1: private equity swooped in to dominate the HVAC industry, there
26:08
Speaker 1: were plenty of repairmen who were already con artists in
26:12
Speaker 1: the first place. I'm not saying that private equity invented
26:15
Speaker 1: the concept of a corrupt repairman. What you should probably
26:19
Speaker 1: do if you're getting any kind of expensive repair done,
26:21
Speaker 1: no matter who's doing it, is make sure you have
26:24
Speaker 1: cameras documenting everything that happens. As CBS Los Angeles found,
26:28
Speaker 1: you might catch your repairman just walking past your AC unit,
26:33
Speaker 1: staring at it occasionally, and then claiming that it's broken.
26:36
Speaker 2: Watch.
26:37
Speaker 6: But before we called in the technicians, we called in
26:41
Speaker 6: an expert.
26:42
Speaker 2: Pressure's worked great.
26:44
Speaker 6: Gabriel Chiaffi teaches air conditioning repair at LA Trade Technical College.
26:49
Speaker 6: He checked out our unit.
26:51
Speaker 7: It's working properly?
26:51
Speaker 2: It's working properly.
26:53
Speaker 6: It was working properly until we had him disconnect these
26:57
Speaker 6: two wires, cutting the power to the fan. He says
27:01
Speaker 6: it should be no more than a $ 200 repair job.
27:05
Speaker 6: Should a qualified technician catch what you did there with
27:08
Speaker 6: those two wires? Absolutely.
27:10
Speaker 2: It should be very easy to diagnose.
27:12
Speaker 6: Let's see.
27:13
Speaker 3: Hi.
27:14
Speaker 6: First up were Ron and Zip with XL Heating, Ventilation,
27:17
Speaker 6: and Air Conditioning. Their website claims they're reliable professionals.
27:22
Speaker 2: No, it's just hot.
27:24
Speaker 4: Or warm air.
27:25
Speaker 5: Just warm air.
27:27
Speaker 6: Ron left with his tools, saying he was going to
27:30
Speaker 6: check the unit outside. But our hidden camera shows him
27:33
Speaker 6: just walking by it several times, never inspecting to see
27:38
Speaker 6: what was wrong.
27:39
Speaker 3: Okay.
27:39
Speaker 7: So he's almost there.
27:41
Speaker 6: Even so, they pretended to diagnose the problem.
27:44
Speaker 4: What Ron thinks right now that it's a part of
27:46
Speaker 4: the wiring and the controller.
27:49
Speaker 6: And gave us a price.
27:51
Speaker 7: It's a simple fix?
27:52
Speaker 4: The simple fix is we're talking about $ 500, and he's
27:56
Speaker 4: going to rewire it.
27:58
Speaker 7: And make sure it's working.
28:00
Speaker 2: Hey, Ron.
28:01
Speaker 7: David Goldstein with CBS 2 News. How are you?
28:03
Speaker 6: Ron couldn't explain why he didn't find the two disconnected wires.
28:08
Speaker 7: Why is it $ 500 and have to rewire.
28:10
Speaker 2: From inside to outside? The price is not me, my friend.
28:14
Speaker 2: This is not my company.
28:16
Speaker 1: Now, that particular outfit, as best I can tell, has
28:19
Speaker 1: no connection to private equity.
28:21
Speaker 2: Neither does this guy, although.
28:23
Speaker 1: He's easily the single most shameless HVAC scammer ever recorded
28:26
Speaker 1: on camera. This is a next level performance that you're
28:29
Speaker 1: about to witness.
28:30
Speaker 4: Watch.
28:31
Speaker 6: Thank you. Next was Vlad, who responded after we called
28:35
Speaker 6: American West Appliance Repair. Their website touts experienced technicians with
28:40
Speaker 6: factory training. He actually went outside and checked our unit,
28:45
Speaker 6: doing some work that we couldn't see. Then he came
28:48
Speaker 6: back with his findings of what was broken. Electrical contactor.
28:52
Speaker 5: Electrical contactor.
28:53
Speaker 6: And the price? Not cheap.
28:56
Speaker 4: Not cheap?
29:03
Speaker 7: Everything's working fine. You're just trying to rip us off
29:06
Speaker 7: and you're trying to jack up the price, right?
29:10
Speaker 2: Maybe, yeah.
29:10
Speaker 7: Maybe you are. So you admit you are. That's very
29:14
Speaker 7: noble of you to be honest. And I appreciate that.
29:17
Speaker 2: You're welcome.
29:18
Speaker 6: But when Vlad left, we connected the wires to test
29:21
Speaker 6: the unit.
29:22
Speaker 2: It didn't work. Hold on here.
29:25
Speaker 6: Shiafi found this piece of something. He took this photo
29:28
Speaker 6: showing it was wedged in between the two metal contactors,
29:32
Speaker 6: which prevented the unit from starting. You ever seen something
29:35
Speaker 6: like this?
29:36
Speaker 7: No, I've never seen that one before.
29:38
Speaker 6: That's a first.
29:39
Speaker 2: Well, at least he's honest.
29:40
Speaker 1: And to give him some credit, he at least put
29:43
Speaker 1: in the work to go down there and break the
29:45
Speaker 1: AC unit completely. The other guys couldn't even be bothered
29:48
Speaker 1: to do that. They just glanced at it from a
29:50
Speaker 1: safe distance. But this particular HVAC scammer apparently sabotaged the
29:55
Speaker 1: equipment going above and beyond the call of duty. And
29:59
Speaker 1: he fully admitted that that's what he was doing on camera.
30:03
Speaker 1: The only thing that's questionable here is that he went
30:05
Speaker 1: through all this trouble for, what, $ 320? That's only about
30:11
Speaker 1: $ 120 more than the amount he should have charged, according
30:13
Speaker 1: to this news station. And that doesn't really make any sense, frankly.
30:16
Speaker 1: I mean, if you're going to go through the trouble
30:18
Speaker 1: of sabotaging an AC unit, committing a crime, you might
30:21
Speaker 1: as well say they need to do a total replacement
30:24
Speaker 1: for $ 2, 000 or something. Why would you commit a felony
30:28
Speaker 1: for $ 120? Kind of an amateur mistake, if we're being honest.
30:32
Speaker 1: It's precisely the kind of mistake that private equity can fix.
30:35
Speaker 1: Private equity-backed HVAC companies would not miss this opportunity.
30:39
Speaker 2: There's just no way.
30:41
Speaker 1: They would milk that fake broken AC for all it
30:44
Speaker 1: was worth and much more than that. Now, at this point,
30:48
Speaker 1: I do have to acknowledge that judging by the comment
30:50
Speaker 1: section from our earlier show on air conditioning in Europe,
30:53
Speaker 1: I do have a lot of listeners who work in
30:55
Speaker 1: the HVAC industry. And I am a big fan of
30:58
Speaker 1: HVAC units in general. in particular air conditioning, as I've
31:02
Speaker 1: made it very clear. I'm broadly supportive of the industry
31:06
Speaker 1: as a whole. And you can see some of the
31:07
Speaker 1: comments there on that show we did last week. Never
31:13
Speaker 1: been prouder to be an HVAC guy, one person wrote
31:15
Speaker 1: in response to the show. And all the replies are glowing.
31:20
Speaker 1: HVAC guys are my heroes, someone responds. I love my
31:23
Speaker 1: HVAC guys, says another. So I feel a little bit
31:26
Speaker 1: like I'm doing a show bashing Santa Claus right after
31:28
Speaker 1: my entire audience just told me how Santa Claus is
31:31
Speaker 1: their hero. So just to be clear, before you get
31:34
Speaker 1: the pitchforks out, I obviously don't mean to suggest that
31:38
Speaker 1: all HVAC guys or most of them are like this.
31:43
Speaker 1: I don't mean to smear the good name of the
31:44
Speaker 1: entire HVAC industry. Plenty of people have good experiences with it.
31:50
Speaker 2: Plenty of very good people in the industry, of course.
31:53
Speaker 1: And I should also acknowledge that With all the money
31:56
Speaker 1: flowing into the industry, HVAC now offers a great opportunity
31:59
Speaker 1: for young people to earn a living without incurring massive
32:02
Speaker 1: college debt. This is from the Wall Street Journal article
32:05
Speaker 1: I mentioned earlier. It focuses on a 43-year-old man named
32:08
Speaker 1: Aaron Rice. Quote, Aaron Rice has two logos tattooed on
32:11
Speaker 1: his left leg, one from the plumbing business he co-founded
32:14
Speaker 1: more than a decade ago, another from the private equity-backed
32:16
Speaker 1: company that he recently bought it. In Rice's case, he
32:20
Speaker 1: struggled with addiction and had spent five years in prison
32:22
Speaker 1: for selling meth, before co-founding his plumbing business in 2012
32:26
Speaker 1: with his business partner, Mike Nagel. It specialized in sewer
32:31
Speaker 1: inspections and repair. At the time they had sold the company,
32:33
Speaker 1: it had 18 employees, was bringing in about $ 3 million
32:36
Speaker 1: in revenue a year. Rice continues to work as a
32:39
Speaker 1: sewer department manager at Rightway and plans to stay with
32:42
Speaker 1: the company until he retires in seven years at age 50,
32:45
Speaker 1: something he's looking forward to. His co-founder has remained with
32:48
Speaker 1: the company, too. I want to hunt, fish, drink beer,
32:51
Speaker 1: and cook meat, Rice says, adding that selling his company
32:53
Speaker 1: has given him greater peace of mind for his family. Well,
32:57
Speaker 1: you can't fault Aaron Rice's ambitions there. He's got it
33:01
Speaker 1: figured out. And look, we've done so many shows on
33:03
Speaker 1: how college is a scam, and it very often is,
33:06
Speaker 1: and how students are graduating with $ 150, 000 in debt with
33:10
Speaker 1: a useless English degree or whatever. It's important to mention
33:14
Speaker 1: that an alternate career path is available. You know, we
33:17
Speaker 1: could talk about the problems with the industry and how
33:19
Speaker 1: private equity is making it worse while also acknowledging that
33:23
Speaker 1: employees in this field are now making more money than
33:25
Speaker 1: they used to. And you can have a very lucrative
33:28
Speaker 1: career beginning at a relatively young age if you choose
33:31
Speaker 1: to pursue it.
33:33
Speaker 2: You can become an entrepreneur.
33:34
Speaker 1: You can start your own company, as this guy Aaron
33:36
Speaker 1: Rice did. He evidently made mistakes in his life. He
33:38
Speaker 1: was addicted to drugs and spent five years in prison
33:40
Speaker 1: for dealing meth. But he was able to become wealthy
33:43
Speaker 1: in large part because of the massive infusion of capital
33:47
Speaker 1: into the HVAC industry. The article continues, quote, the workers
33:50
Speaker 1: benefit financially too, says Graham Weaver, founder of private equity
33:53
Speaker 1: firm Alpine Investors, based in San Francisco. Alpine, an early
33:57
Speaker 1: investor in HVAC companies, says technicians at the HVAC business
34:00
Speaker 1: it acquires get a 20% pay bump in the first
34:04
Speaker 1: year after a company is sold, mostly through a combination
34:06
Speaker 1: of higher wages, bonuses, and commission. The company has rolled
34:10
Speaker 1: up more than 200 companies across 43 states into a
34:14
Speaker 1: larger service platform, APEX, which did a combined $ 2. 2 billion
34:19
Speaker 1: in business in the past year. Still, some workers say
34:22
Speaker 1: that when private equity buys up their companies, they wind
34:24
Speaker 1: up pushing new systems on customers rather than simply fixing
34:27
Speaker 1: what's not working. The pressure to make sales is less
34:30
Speaker 1: satisfying than doing real repair work, some sounding off an
34:34
Speaker 1: online forum say. So this is the trade-off that a
34:38
Speaker 1: lot of HVAC technicians are facing right now. The job
34:40
Speaker 1: pays more, but it's less interesting and rewarding. It feels
34:45
Speaker 1: like you're a salesman rather than a technician fixing things.
34:49
Speaker 1: And on the bright side, there are more opportunities to
34:51
Speaker 1: start a business and sell it. But on the other hand,
34:53
Speaker 1: if you do that, then your company will almost certainly
34:56
Speaker 1: turn into a husk of its former self trading on
34:58
Speaker 1: your reputation while it scams customers for every dime they're worth.
35:04
Speaker 1: And then you'll spend the rest of your life hunting, fishing,
35:07
Speaker 1: drinking beer and cooking meat, just like Aaron Rice, which,
35:10
Speaker 1: you know, Might get boring after a while.
35:13
Speaker 2: Although it does sound appealing.
35:14
Speaker 1: And in the meantime, as you pass the decades with
35:18
Speaker 1: fish and meat and Bud Light, you might find yourself asking,
35:22
Speaker 1: what if I hadn't sold? What if I had built
35:24
Speaker 1: the world's biggest HVAC company instead without giving it away
35:26
Speaker 1: to private equity? What if we created a reliable, honest, efficient,
35:30
Speaker 1: low-cost repair company with a stellar reputation across all 50
35:33
Speaker 1: states without ever defrauding a single customer? This is a
35:37
Speaker 1: novel business model in the industry, admittedly, but it's worth
35:40
Speaker 1: a try. And now that everyone's aware of what private
35:43
Speaker 1: equity is doing, now that it's clear they're secretly running
35:46
Speaker 1: many of the HVAC companies in the country, there's a
35:50
Speaker 1: real market opportunity for a company to buck the trend.
35:53
Speaker 1: For the first HVAC company owner who's willing to put
35:56
Speaker 1: down the beer and the smoker and to suspend retirement
35:59
Speaker 1: and really take on private equity, the market is clearly
36:03
Speaker 1: there for the taking. And every homeowner, myself included, will
36:08
Speaker 1: be lining up to hire them. will run their ads
36:11
Speaker 1: on every show. They'll be offering a service that's desperately
36:15
Speaker 1: needed and one that private equity vultures, it seems, are
36:20
Speaker 1: unwilling to provide.
36:21
Speaker 2: That'll do it for the show today. Thanks for watching.
36:24
Speaker 2: Thanks for listening. Talk to you tomorrow. Have a great day. Godspeed.
37:07
Speaker 3: Professor. Let me out!
37:16
Speaker 2: You will remember your duty.
37:18
Speaker 6: This isn't heroism!
37:20
Speaker 2: You useless sod. You sit there and shake because you're
37:23
Speaker 2: dependent on drink.
37:23
Speaker 5: You're sick as all over you.
37:27
Speaker 6: Have you ever seen a child starve to death, Professor?
37:32
Speaker 4: No.
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