Katerra’s Vision Was Lost In Big Money

Article by Rich Donnell, Editor-in-Chief, Panel World July 2021

We are saddened by the demise of Katerra, the company that stormed in like gangbusters to put a totally new spin on how building construction is managed and completed. We’re very aware that many people in our industry are chuckling and saying “I told you so,” because many people took offense at Katerra’s brashness and many people didn’t see any way in heck that Katerra could pull off what it said it was going to do.

Katerra blew through $3 billion in a heartbeat, and we’re not feeling much sympathy for the massive Japanese holding company that kept feeding money to Katerra. They’ll be okay, considering they reported a net profit of nearly $46 billion for the recent fiscal year. And we’re not feeling too bad about the Katerra leadership who brought a Silicon Valley flavor to the endeavor. They’ve already landed on their feet just fine.

But we do feel sorry for the Katerra public relations team of people who performed duties like keeping up the web site and sending out press releases and conducting plant tours. And we’re upset over all of the workers who have quickly lost their jobs at the new cross-laminated timber facility in Spokane, Wash. and the wood components plant in Tracy, Calif. Katerra’s problem was much bigger than those plants, but the workforce suffers the consequences. And what about all of those communities with Katerra construction projects now on hold?

As this is written, the Spokane and Tracy plants and lots of other Katerra affiliate companies up and down the supply chain were planned to be put up for bid or auction toward the end of July. Maybe (and it could have already happened as you read this) somebody will step up and purchase those facilities and get them rolling again, with many of the same workers. Perhaps such a buyer will be a little more focused on the real world of the construction industry, instead of trying to defy it and reinvent it. After all, the plants themselves seem to have run okay. Our magazine visited the CLT plant in Spokane and came away impressed at the diverse technologies in there and with the supervisory team overseeing it.

Unfortunately a major roadblock the Katerra CLT plant ran into has been the tremendous rise in lumber prices. Every other U.S. CLT plant is in the same boat, unless they had developed a remarkable prearrangement of their lumber procurement pipeline.

Katerra could have had a better handle on their lumber raw material costs if it had also built a sawmill; you know, one of those $150 million, 300MMBF a year sawmills that seem to be popping up with some regularity in the U.S. It did put in dry kilns and a planer mill, which alleviated some of the lumber processing costs it would have encountered were those tasks also farmed out. But owning a sawmill to manufacture green lumber would have been nice. Then it would have been more about log procurements and log costs, and the circle would have been completed.

Of course the almost ridiculous escalation in lumber prices, coming off the pandemic, took everybody by surprise. But for a company that touted itself as the new frontier of construction, perhaps there’s no excuse for not having ownership of your raw material.

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