Betting on the future
2010 was a make or break year for many fabricators, with respondents to Glass Magazine's informal fabricator survey split evenly among those that expanded (45 percent) and those that downsized (42 percent) last year. Companies like Hartung Glass Industries, Seattle, and Viracon, Owatonna, Minn., grew through acquisitions. Others, like long-standing Barber Glass Industries, Guelph, Ontario, were forced to close their doors. Still others— like Arch Aluminum & Glass, Tamarac, Fla., and Mexico's Vitro—emerged from bankruptcy or worked to restructure debt.
Looking ahead, 2011 could mean more of the same. While forecasters predict the economy will expand this year, growth will be minimal, and tight lending conditions will continue to affect investments. Surveying the landscape of independent fabricators, those who did well in 2007-08—and hung on in 2009-10—will likely survive into 2011-12, says David Balik, president, General Glass International, Secaucus, N.J. To ensure profitability when the market does rebound, company owners are taking advantage of slow conditions to reevaluate their business plans and product mix.
"Business last year was very difficult," says Chet Day, president, Wholesale Glass Distributors, Memphis. The company offers tempering, insulating, beveling and ceramic frit spandrel services, and distributes cases, stock sheets, shower doors and storefront metal. "Prices have eroded, and our business is probably down 25 percent to 30 percent," he says. "We are very fortunate that we have great relationships with our customers, and it was because of those relationships that we were able to survive 2010."
Of the surveyed fabricators that downsized in 2010, the majority said they did so by laying off employees, followed by reducing the number of employee hours and closing locations. Other strategies included reducing overhead, moving to a smaller location and lengthening lead/delivery times. (See Fig. 1)
Making the best of a bad economy, Wholesale Glass Distributors did move into a larger location in 2010, despite the decline in business. "Our lease ran out, and we moved to a bigger location," Day says. "Because of the number of vacant commercial properties available, we were able to move into a 102,000-square-foot building for the same cost as our 55,000-squarefoot building. Now, we have room to grow, and we're waiting for the next go-round. We're betting on the future."
Also betting on the future is Hartung Glass Industries. With 11 tempering ovens and 13 locations, Hartung offers fabricated monolithic, insulating and laminated architectural and decorative glass products. In 2010, the fabricator purchased the Vancouver, British Columbia, location of AGC Flat Glass North America Ltd., now operating as Hartung Glass Canada. It also purchased Holcam Sales Inc., a Seattle-based manufacturer of bath and shower enclosures. Hartung is among the 17 percent of survey respondents that expanded in 2010 through acquisitions. Of the fabricators that reported beefing up operations last year, the majority did so by adding new products, followed by purchasing new equipment and enlarging their territory (See Fig. 2).
Looking ahead, "there are definitely expansion plans in the future," says Rich Porayko, marketing consultant, Hartung Glass Industries. "The company continues to explore potential acquisitions and opportunities for expansion in the West Coast market on a case-by-case basis, as they become available. It really has to be the right fit," he says. "As far as expanding products and services, we're looking at acquiring new equipment that will allow us to diversify our product offerings."
Among the fabricators surveyed, 67 percent said their expansion plans included adding new products. Thirty nine percent said they planned to buy fabrication machinery in the future. (See Fig. 3 and Fig. 4)
"We're looking at expanding product lines as well as services," says Pete Chojnacki, president, FabTech LLC, Peninsula, Ohio. The company specializes in curtain-wall, storefront and door system fabrication, and downsized in 2010 by cutting back hours and people. "We want to offer more products to the same customer," he says. "And we're looking to geographic expansion, coming into new territories. Product-wise, we're looking to get deeper into pre-glazed and unitized systems. And we're looking at some R&D projects for unique installation types."
While a number of fabricators reported having expansion or acquisition plans in place, a significant minority (25 percent) were in a holding pattern going into 2011. Among them, Pac Rim Tempering LLC, Kailua Kona, Hawaii, a full-service fabricator that focuses on wholesale business to contract glaziers.
In 2010, the company downsized its staff by about 20 percent, says Randy Blake, principal. At present, it doesn't have any future expansion plans. "We're the only temperer in the state," Blake says. "We did a lot of high-end-type work with heavy glass showers, and things just fell off a cliff. [Now, we're seeing] a little bit of life, but every week is just up and down. The work we are seeing is private work," he says.
The year ahead
Survey respondents were in agreement that 2011 could be another difficult year for the industry, citing the economy as the number one challenge, followed by competition from low quality companies, overcapacity and government regulations (See Fig. 5).
2011 looks a lot like 2010, rather flat, says Garret Henson, director of sales, North America, Viracon, Owatonna, Minn. "Our quote volumes are high ... but the reality is that our customer base is split. There are the customers that are satisfied and [ready to build], customers with anxiety about the economic outlook, and customers with despair," he says.
Day shares a similar outlook. "I think 2011 is going to be the same as 2010; it is going to be difficult," he says. "I'm hoping that in 2012, things will be better. We've made operational adjustments, so we're prepared to get through it. As the economy picks up, we may add more equipment and possibly look at new markets."
The economy aside, this year also will present challenges in the form of foreign competitors, some fabricators reported. "Products from other countries are impacting our market," says Barbara Cashman, president of GlasTile Inc., a Greensboro, N.C., manufacturer of decorative glass tile. "Our products are hand-made in the U.S., and we need to support our market base," she says.
"With the recent commercial announcements and signs of activity, offshore competition is a big concern for 2011, especially in western Canada where local curtain-wall and glass fabricators have been facing increasingly stiff competition from offshore manufacturers," Porayko points out.
Going into 2011, Hartung is cautiously optimistic, Porayko says. "There is work out there; however, the industry is just that much more competitive. In Vancouver, there have been several new towers announced recently, which is good news for glass companies throughout the Pacific Northwest. Whether the projects move forward is another story, but it is a good sign."
Looking more long-term, energy efficient glass products offer the most growth potential, according to survey respondents, followed by decorative glass, solar products, protective glazing and dynamic glazing (See Fig. 6).
Demand for soft-coat products, in particular, will continue to grow, Day says. "We are a PPG Certified Fabricator for their soft-coat products. We've done a lot of work this past year with those products, and in the future, there are a lot of specified jobs with, or relating to, those products," he says. "We also fabricate Guardian SunGuard products. That is definitely the wave of the future for fabricators like us."
Fabricators also are offering larger glass sizes. Some companies reported fabricating glass lites ranging in size from 168 inches by 154 inches, to 102 inches by 168 inches, to 96 inches by 204 inches.
Respondents indicated a good product mix will be important going forward, evidenced by the high percentage of fabricators that plan to add products in the future (67 percent).
"Years ago, the saying was you either need to give customers one [product] or the other," Day says. "Today, we're like a grocery store. We don't have just tempered and insulated products. We have a little bit of everything, and that definitely helps in times like these."
The bottom line is that fabricators will need to be faster and more flexible, Chojnacki says. "We have to offer more customer service [and] more efficiency at a competitive price. ... The days of fat juicy jobs where you can take your time are over."