Does the AGRR Industry Need to Worry About a Recession?
by Leslie Shaver
Are we or aren’t we? That’s the question business leaders, politicians, economists and the media had been grappling with for about a year. Well, in late 2001 the answer finally emerged, although after the terrorist attacks of September 11 it was almost anti-climatic. The United States’ economy was indeed in a recession and had been since March 2001.
The impacts of a recession are obvious—less spending, more layoffs and more consumer apprehension. Combine this with the economic affects of the September 11 attacks—fear of public transportation (airlines, buses and trains), increased government spending and more expenditures for security—and no one knows what to expect from the economy.
As 2002 winds into full swing, the country will probably get some answers as to how long we will be in recession and how painful it will be. As the answers arrive, the glass industry will also be looking for signals.
Unlike some major industries—such as the technology sector—the retail auto glass industry did not thrive during the 1990s boom. Some of the major players in the industry suffered much-publicized financial setbacks, while many independents struggled to stay afloat in the face of price erosion and their loss of influence with insurance agents.
Now with industries struggling all across the board, what will happen to the glass industry? How will individual state laws affect a shop’s health? And how are the tragedies of September 11 affecting the industry?
These are just a few of the questions industry professionals ponder as they gaze into the future.
When looking at whether their businesses are susceptible to the recession, most glass shop owners first need to determine whether auto glass is an essential item—that is, something upon which a consumer must spend his money, even in a tight economy.
In most cases, the answer depends on the state in which the shop is located. In states that require auto glass inspections, auto glass is an essential item if a person wants to drive. Janet Parkhurst is owner of Oakes and Parkhurst Glass, a chain of glass shops headquartered in Winslow, Maine. She says her business is not affected by recession because Maine requires an annual inspection that includes auto glass. This keeps a steady stream of business coming to Oakes and Parkhurst, even in bad times.
“The economy can’t affect us here,” she said. “People will have to get their windshields replaced at some point if they want to keep driving.”
“When you have inspection laws, the customer has to come in every 12 months,” said Tim Conklin, owner of Wholesale Glass Distributors in Greenville, S.C.
In states where no inspection is required, a person can drive with bad glass until the break becomes unbearable.
“If the customer is worried about other things, he will put a glass replacement off,” Conklin said.
The state in which a shop is located is also important because of deductible issues. If state law allows deductibles to be waived, customers would theoretically be more likely to get their glass replaced in bad times because no money is coming out of their pockets. However, this is not always the case, said Dan Fishburne, owner of Fishburne’s Glass Specialties, a multi-store chain headquartered in Aiken, S.C.
Fishburne has felt the economic turndown in spite of the fact that South Carolina is a non-deductible state.
“You would think we would be immune to this,” he said, “but I guess when there is a crisis everyone is affected, even those who would not be normally.”
The Big Picture
While state laws can play a big role in a glass shop’s health during down times, the industry is still susceptible to basic economic factors, such as unemployment.
Walter Krause, owner of Michigan Mobile Glass and Trim of Southgate, Mich., says his shop’s economic well-being is at least partially reflected in the health of the automotive industry around it.
“How the auto companies do is how Detroit does,” he said.
The automotive industry, and by extension Detroit, is doing fairly well now because the automakers’ 0-percent financing promotion boosted sales in late 2001. But Krause has no idea what the future will bring.
Tom Taylor, owner of Thru-Way Autoglass Distributors, a retailer and distributor in Syracuse, N.Y., had a 2001 that was on par with 2000, but some recent layoffs in his area have him concerned.
“Two big companies have had layoffs,” he said. “Carrier laid off people and Martin Marietta laid off people.”
One glass shop owner, who preferred not to be identified for this story, thinks that it will take a huge economic downturn to truly affect the industry.
“I don’t see it [this business] being overly reflective of the economy,” he said.
The economy (and gas prices) would have to be bad enough to keep people off the road, where things like rocks can break windshields, to have a serious impact.
“It would have to be bad enough to cut into the numbers of miles driven to harm business,” he said. “If the miles driven stays steady, things will be fine. But something like 15-percent unemployment would have a long-term effect. It would keep people out of their cars. If they don’t drive cars, they won’t have broken glass.”
In this one way, he said, the industry may see more business because of the nation’s fear of flying in the aftermath of September 11.
“People are not getting on planes,” he said. “You may have people driving instead of flying after September 11.”
Others look at the hit the industry’s major partner—the insurance industry—took on September 11 and wonder what it could mean for the future.
“It seems the insurance industry is out to make money no matter what,” one shop owner said. “[Hurricanes] Hugo and Andrew were bad for the glass industry in the long term because they accelerated a price squeeze. The insurance industry turned around and saw the vulnerability of auto glass repair and took advantage of it.”
While this situation is different because of the great human toll of September 11, some wonder if the industry will look even further into the auto glass arena to make cuts.
Most shop owners think the immediate shock of the terrorist attacks kept customers in front of the television set and out of the glass shop (and all retail shops) following September 11. But many say business jumped back up in the following weeks and months.
Steve Pierick of Binswanger Glass of Memphis, Tenn., saw a decline in business for his company, but things did get better.
“We started to see them come back in the next couple of months,” he said.
Krause said he saw much of the same.
“Up until September 11 we were having a record year,” he said. “After that the customers started coming back slowly.”
Fishburne, for one, thinks the American economy and the glass industry will reap the benefits of a decisive victory in the war on
“With a successful outcome in the Middle East, I think the economy will come out of the recession early,” he said.
Those in the industry (and all Americans, for that matter) hope he is right.
Leslie Shaver is a contributing editor for AGRR magazine.
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