I'm not saying it will happen but a deal between Pulte and FBR...

  1. 2,094 Posts.
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    I'm not saying it will happen but a deal between Pulte and FBR makes sense.
    At least in the beginning, FBR won't have a large amount of machines to put to work.
    It is going to take some time to get to the point where we can even think about saturating a particular market like Florida.
    From a pure efficiency standpoint, FBR working with one builder for thousands of houses is better than them working with multiple builders for hundreds of houses.
    As volume increases, efficiencies add to the overall gains that can be split by both parties.

    Now, if Pulte where smart, they would do a simple cost benefit or NPV calculation.
    What is the Present Value to them, of the dollar value of all the benefits a HX unit can provide in the future, discounted to today using their cost of capital.
    Better (higher price paid by customers), faster (less down time, less time to lock up, less sunk cost, time value of money) and cheaper (less labor requirement, less rework, less scaffolding, less chasing, more parallel manufacturing) etc.
    So all these better, cheaper, faster benefits can be distilled down to a dollar value and then discounted to today.
    So Pulte should be able to justify any upfront investment/funding of FBR in so far as the benefits when discounted meets their Internal Rate of Return requirements or at least their cost of capital.

    The point I am making is that partnering with FBR is not an emotional one. It is one based on finance/economics.
    In other words, funding for FBR can be secured on the grounds that the expected return/benefits, discounted to today meets an acceptable rate of return.

    Outside of this purely economic thinking, I'm sure builders like Pulte are tired of the challenges the come with having to run and pay for the current constraints on labour and particularly brick laying. FBR replaces a headache for builders. It's about simplification in the end.

    Not investment advice. DYOR, etc etc.
 
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