Toll Brothers, major manufacturer of McMansions, has announced its strategy for dealing with the current troubles in the real estate market: Take it out on the employees.
“If things got tougher, we would look more at shedding overhead costs – unfortunately, eliminating employees, doing the tough stuff that management is supposed to do in order to balance the ship,” said Robert Toll, chairman and chief executive officer, in response to an analyst’s question during a conference call.
The company thinking, he said, is that it does not want to sell homes at a lower rate than they are inherently worth. Meanwhile, it will try to ride out the nationwide slowdown in housing sales, caused largely by disruptions in the mortgage industry, by cutting costs. Many financial institutions have tightened their lending standards in response to an increase in mortgage defaults across the country.
Of course, there is a flaw in the reasoning here: a good offered for sale is worth only what someone is willing to pay for it–that’s especially true in real estate.
Mr. Toll’s houses have no instrinsic value, except, perhaps (and economists can debate this for days), for the value of the materials from which they are constructed and the labor of the employees and contractors who turn raw materials into something for which a customer is willing to pay (lots of) money.
The statement quoted above seems to indicate the value Toll Brothers places on the labor of the persons who produced the McMansions which have made them rich.