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May/June  2004

AGRReports
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INSURANCE


Speedy Glass Accused of Fraud 


The Insurance Corp. of British Columbia (ICBC) has accused Speedy Glass of operating a kickback scheme and conspiring to defraud the public auto insurer.

Court documents filed on February 25 implicate at least five top officials at Speedy as being involved in the scheme and say that the officials and Speedy’s parent company, Burnaby-based TCG International (TCGI), conspired to falsify documents and offer “kickbacks.”

These “kickbacks” were made, it is alleged in the court documents, to attract large car dealerships and auto body shops after the initial, appropriate deductibles were paid.

According to reports, there has been no estimate on the amount of money exchanged during the alleged fraud but that the court documents show that ICBC has paid Speedy $20 million since January 2002 for glass claims.
ICBC, a provincial insurance company owned and managed by the [Canadian] Province of British Columbia (BC), handles the majority of auto glass business in BC. It has severed all ties with the auto glass company and is pursuing the case in civil court. Thus far they have not asked for a police investigation.

TCGI has released a statement regarding the accusations and has suspended the two employees named in the court documents, general manager Bill Nears and company regional manager Gordon Fraser. Tom Brown, general manager of Speedy Glass Operations of Ontario, has assumed leadership duties for Speedy Glass British Columbia.

“Further action is possible pending the outcome of the review,” said Steven Schober, president and chief executive officer, in a statement released on February 26. “This action is not intended to imply that these employees are guilty of any wrongdoing. We believe they are entitled to their day in court; however, we feel the suspension is appropriate given the nature of the allegations and the confidence our customers must have in us.”
He continued, “We are shocked at the heavy-handed nature of ICBC’s actions, which contravene and greatly exceed their past practices,” the statement said. “ICBC [has] put [itself] in the position of both judge and jury, utilizing [its] monopoly strength and position to jeopardize the livelihoods of hundreds of B.C. employees.”
During an exclusive interview with AGRR magazine glassbytes just three days after the Insurance Corporation of British Columbia (ICBC) filed suit against Speedy Auto Glass, alleging fraud practices, Schober spoke a little more frankly.

“I’ve had better weeks,” he said wryly.

Schober acknowledged that the ICBC has looked into Speedy practices previously, noting that the company had small isolated cases before and dealt with them on a shop-by-shop basis (see box). 

“We Lost Half Our Business Overnight,” Says Speedy Auto Glass Executive

“I’ve had better weeks,” said Stephen Schober wryly during an exclusive interview with AGRR magazine/glassbytes just three days after the Insurance Corporation of British Columbia (ICBC) filed suit against Speedy Glass, alleging fraud practices. Schober is the president and chief operating officer of Autostock Inter-national, which is owned by TCG International (TCGI) of British Columbia. Autostock is a division of TCGI emcompassing all of TCGI’s glass businesses, including Speedy. It is estimated that Speedy did more than $22 million worth of business with ICBC during the last two years. Excerpts from the March 8 interview with AGRR publisher Debra Levy follow:

Q-First would you explain what ICBC is?

A-ICBC is a provincial insurance company. It is owned by the [Cana-dian] Province of British Columbia (BC). It is an insurance company owned and managed by the government. If you live in BC, you must have basic insurance through ICBC but you can choose your comprehensive through other carriers. Ninety-five percent of all auto glass business that is insurance work in BC is done through ICBC.

Q-This isn’t the first time that Speedy has been sanctioned by ICBC is it?

A-That would be true. We have had small isolated cases before and we have been able to deal with them on a shop-by-shop basis. We have had shops sanctioned, but in each case we’ve understood it to be because of a renegade manager or a unique problem.

Q-So are these current allegations true?

A-Right now, I don’t know what’s true and what’s not true. It’s actually a complicated question. It involves contracts and civil laws. The main allegation, from what I understand, centers around the payment of finder’s fees, rebates, etc. to the trade. We all know these types of payments are common in the auto glass industry and 95 percent of the auto glass industry would say ‘what’s wrong with that?’ but I now understand that our contracts with ICBC say ‘don’t do it.’ Their rules say ‘Don’t do it.’ 

I don’t know yet if we did or we didn’t. I do know that the Skidmore’s [the Skidmore family owns TCGI] are honest people and have always wanted their businesses run ethically and honestly, so these allegations are a great disappointment to everyone.

Q-So how is Allan [Skidmore] holding up?

A-Oh, he’s okay [laughs], me, I’m not so sure.

Q-I know this has been an extremely difficult time for you. It must be very hard on you …

A-Operationally, it’s been incredibly difficult. We lost about half of our business overnight. We are having to compete now, overnight, on whole different level in a whole different way. We have to change our pricing to survive.

Q-What are you doing to help rectify the situation?

A-A number of things. We have started a full internal review. We are also using an outside auditing company, Ernst and Young, to review all our policies and procedures. We have placed the two employees named in the lawsuit on paid leave until we can get to facts. We are also setting up an “Ethics Position” in the company—a person who will have a clear avenue for review and oversight …. we do have a strict employee code conduct policy and we have reviewed it again with all our employees. We have also brought our general manager from Ontario over to BC to run this area for awhile.

Q-Let me ask you this then: how would you respond to people who say that in order for something of this magnitude to happen either upper management needed to be involved or turn or blind-eye to it, or at very least have a corporate culture that encouraged it?

A- [long pause] Well, until two weeks ago, I would have agreed with the statement myself—much more than I do today. It’s easy to say ‘we should have had this, we should have done that.’ But it’s really hard, especially with the margins in the auto glass industry today, to monitor everything … and there’s a limit to how much you can audit.

Anyone who runs more than 2 or 3 retail shops in any business knows that there are many opportunities for funny business to happen and that you can’t catch them all, even when you are trying.

Q-So any company is only as good as its weakest manager?

A-If you have 2-3 branches you can know all the employees. Beyond 4-5 branches, you could have problems. Oh, you can get people to read policies, but you need to get them to believe them. The reality is that the Skidmore’s are honest people. They don’t ask people to do things that are wrong. The company has been built on three watchwords—‘Quality, Service, Integrity’ so these allegations are especially distressing.

Q-Is there anything else you’d like our readers to know?

A-That we are committed to ascertaining the facts. That’s our first goal, we want the facts. Once we know the facts, we will go from there. We have been pleased, however, that lots and lots of customers have let us know of their support.

Q-Thank you for your time.
A-Thank you.

Three North Texas Auto Glass Companies Charged with Price-Fixing
Three Fort Worth, Texas, auto glass companies have been charged with participating in conspiracies to raise and maintain the prices of replacement auto glass in the central North Texas and Lubbock areas of Texas, according to the Department of Justice. This comes one year and a half since the first of these, Windshield Sales and Service Inc., was indicted on the same charges.

Windshield Sales and Service Inc., Windshield Sales & Service of Dallas Inc. and Mesquite Auto Glass Inc. were charged in U.S. District Court in Lubbock, with conspiring with others in central North Texas from February 1998 until May 1998 to raise and maintain prices for the purchase of automotive replacement glass.
Additionally, Windshield Sales & Service Inc. was charged with conspiring with competitors to raise and maintain the prices of automotive replacement glass in the Lubbock area from March 1998 until May 1998.
“Today’s charges reflect the division’s commitment to prosecute those who seek to deny the benefit of competition to American consumers,” said James M. Griffin, deputy assistant attorney general in charge of the Antitrust Division’s Criminal Enforce-ment Program.

In February 2003, James D. Kuhn, a former owner and officer of Windshield Sales and Services Inc., d/b/a Auto Glass Center, was convicted at trial for participating in two conspiracies to raise and maintain the prices of auto replacement glass in the central North Texas area and the Lubbock area. Eldon Flyn Simmons, also a former owner and officer of Windshield Sales and Services Inc. (Auto Glass Center), was convicted for participating in the central North Texas area conspiracy. Both were sentenced to serve ten months in jail and to pay a fine of $75,000 each for their roles in the conspiracies. Simmons has appealed his conviction and sentence to the Fifth Circuit.

The companies are charged with violating Section One of the Sherman Act, which carries a maximum penalty for a corporation of a fine of $10 million, per count. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The investigation is being conducted by the Antitrust Division’s Dallas Field Office and the Federal Bureau of Investigation’s Dallas Division.

HB705 Repair Bill Becomes Effective in Texas
In a new law believed to be the first of its type in the nation, Texas now requires “residential delivery companies that deliver, install, place or assemble a product” to conduct background checks on its employees. The background checks must come from either the Department of Public Safety (DPS) or from a background check company that is approved by DPS.

The law will also allow these companies to communicate directly with the DPS to receive criminal background and arrest records of current and prospective employees and grants a presumption that a company is not negligent for sending an employee to a customer’s residence if the employee’s background check shows no felony convictions in the last 20 years or misdemeanor convictions in the last ten years for a crime against a person, property or for public indecency.

FINANCIAL
VITRO Continues Positive EBITDA Trend in 2003 Fourth Quarter
San Pedro Garza Garcia, Nuevo Leon, Mexico-based Vitro S.A. de C.V. has announced its 2003 fourth-quarter and 2003 year-end un-audited results. For the quarter, Vitro posted a 57-percent and a 24.1-percent year-over-year increase in consolidated EBIT and EBITDA, respectively. 

EBIT increased by $14 million (U.S. dollars) and EBITDA by $19 million (U.S. dollars) during the period. Flat glass was the major contributor to the improvement, with year-over-year increases of 166.5 percent in EBIT and 42.5 percent in EBITDA. Consolidated EBITDA margins improved year-over-year by 382 basis points, with all three business units contributing to the increase. Annualized EBITDA improved from $345 million (U.S. dollars) as of September 30, 2003 to $364 million (U.S. dollars) for fiscal year 2003, reflecting the improving trend.

Goldfus Plans to Sell 130,000 Shares 
Minneapolis-based Apogee Enter-prises Inc.’s director Donald W. Goldfus has entered into a Rule 10b5-1 trading plan to sell up to 130,000 shares of the company’s common stock. The shares may be sold any time once they achieve a certain prearranged minimum price. Sales will take place over a period of three months, which began January 19, 2004, and will end April 19, 2004. The counter party under the plan is Piper Jaffray & Co., and the plan is dated January 5, 2004.

Solutia Receives Bankruptcy Court Approval
St. Louis-based Solutia Inc. has reported that it has received interim court approval of a $500 million debtor-in-possession (DIP) credit facility, $350 million of which will replace Solutia’s current senior credit facility. The company has also received approval of a number of “first day motions” from the U.S. Bankruptcy Court for the Southern District of New York, including authorization to continue paying employee wages, employee business expenses and obligations under the company’s self-insured and third-party insured benefit plans, as well as certain company-sponsored benefit programs, without interruption.

“We are pleased with the prompt approval by the Bankruptcy Court of our ‘first day motions,’ which, taken together, will enable the company to operate without interruption and meet normal business obligations,” said John C. Hunter, chairman, president and chief executive officer of Solutia. “Moreover, these accomplishments will allow us to remain focused on serving customers, which is our top priority.”

Hunter said Solutia’s operations worldwide have continued without interruption and customer needs have been met.

“Our operations in the United States and around the world continue to function normally and we are maintaining our commitment to provide quality goods and services to our customers,” he said.

Pilkington Chairperson Says Auto Glass Business Doing Well, Despite Slow Car Sales
At U.K.-based Pilkington plc’s 2003 annual meeting, its chairperson, Sir Nigel Rudd, said despite slow car sales, the company’s OE auto glass manufacturing business is going strong.

“Our sales to the OE manufacturers are slightly better, due to strong demand for some key models featuring Pilkington glass,” Rudd said. “Efficiency and productivity levels in our OE businesses in Europe and in North America continue to improve, and overall results are a little ahead of last year.”

He added that demand for auto replacement glass in Europe is very strong, while the North American market has “experienced a slow start.”

“Continuing increases in productivity and cost reductions over the last few years have, however, helped to ensure that results have held up relatively well,” he said.

AGRSS
Klein-Dickert Registers with AGRSS Standard
Klein-Dickert Auto Glass, which is based in Madison, Wis., has registered all of its locations to the Auto Glass Replacement Safety Standard (AGRSS), the American National Standards Institute’s safety standard for auto glass replacement. The company announced its new status as an AGRSS participant in early February.

COMPANIES
Chance’s Ex-Wife Opens Own Shop
Jill Scott, the former wife of the late Empire Glass founder Rick Chance, has opened her own glass shop and serves as president of the company, the Arizona Republic reports.

Monarch Glass has set up shop in the same Phoenix building where Empire was once located.

Monarch is also using a promotion similar to that of Empire’s: offering free dinners at a Mexican restaurant if a customer gets his windshield replaced.

Chance and Scott divorced in the 1990s. Chance was allegedly murdered on August 9, 2002, in a hotel room in Tempe, Ariz.

AP Technoglass Parent Renames, Reorganizes North American Auto Glass Aftermarket Business
Asahi Glass Co. Ltd. retired the AP Technoglass name, effective January 1, 2004, combining all of its North Ameri-can entities under AGC Automotive Americas. The company’s aftermarket business segment is now known as AGC Automotive Replacement Glass. The name changes are part of a global marketing consolidation of the company’s automotive glass business.

Two key organizational changes within this unit also have been announced: 

Richard A. Sahler, who has been with the company for more than 20 years, has been named national sales director and Ron Quinones, who has been with the company for more than 20 years, has been appointed sales manager.

GLOBAL
Guardian Industries to Expand in Mexico
Auburn Hills, Mich.-based Guardian Industries has announced that it has broken ground for what will be its 24th float glass plant. The new plant, located in El Marques, Querétaro, just north of Mexico City, represents an investment of $120 million for Guardian.

Russell Ebeid, company president, and Mark LaCasse, managing director of Latin American operations, attended a ground-breaking ceremony at the site of the future plant in late August, along with Fernando Canales, Mexico’s minister of the economy, Ignacio Loyola, governor of Querétaro, Leopoldo Mondrago, secretary of sustainable development and Javier Martinez, mayor of El Marques.

“Guardian Industries is confident in Mexico’s long term growth,” said Ebeid. “We are here to support that growth while serving an expanding customer base in Latin America. With the completion of this world-class glass manufacturing facility, we will add quality jobs and enhanced services that will generate innovation and growth in the Mexican glass industry.”

Scheduled to begin production in the third quarter of 2004, the facility will employ approximately 300 people and produce 650 tons daily of float glass for architectural and automotive applications. 

European Operations to Nordic Countries
San Juan Capistrano-based Diamon-Fusion International Inc. has reached an agreement with GlasConsult to expand DFI’s Euro-pean operations to the Nordic countries (Denmark, Sweden, Norway, Finland and Iceland).
GlasConsult, a Copenhagen-based company, says it has been consulting to the glass industry in Denmark and the Scandinavian countries (Sweden, Norway and Finland) for more than 30 years under various capacities.
“DFI’s technology has a natural place in this geographical area,” said Erik Johansen, managing director of GlasConsult. “I am confident the added value of Diamon-Fusion will generate many business opportunities in various market segments.”

KUDOS
PPG PROSTARS Sponsors “Eye Care for Kids” 
Pittsburgh-based PROSTARS Cer-tified Auto Glass Technicians took part in the “Eye Care for Kids” program. During this past summer, PPG PROSTARS donated a portion of the proceeds from windshield repairs and replacements to provide eyeglasses for disadvantaged children.

“Many school programs and nonprofit organizations provide eye exams to children who need them,” said Paul Rice, director of PPG PROSTARS, “but few programs actually provide the eyeglasses themselves for kids who can’t afford them.”

As part of the program the company presented needy children and their families with certificates that can be redeemed for one pair of quality eyeglasses at various local eyeglass retailers.

“Growing up today is tough enough,” said Rice. “We’re just trying to help kids enjoy the view, to see a brighter future for themselves, by giving them access to eyeglasses that we hope will help them excel in school and improve their overall quality of life.”

Visteon Workers Raise Money for Abused Children
Employees of the Utica, Mich., Visteon plant raised $5,000 in May for the Care House in Mount Clemens, Mich., during the Tin and Steel Ride for Kids motorcycle event, according to a June 11 story in the Detroit News. 

The Care House is a center for abused children, and this is the first year the ride has been held, though its organizers told the News that they hoped to make it an annual event.

ACQUISITIONS
Keystone Automotive Acquires Auto Parts Distributor in Quebec
Keystone Automotive Industries Inc. has acquired MultiPro Auto Body Parts Inc., a privately held company based in Quebec that distributes automobile collision replacement parts. MultiPro recorded sales of approximately $13.5 million CAD ($9.7 million USD) during its most recent fiscal year. Terms of the transaction were not disclosed.

“The acquisition provides a solid platform for Keystone to expand throughout Canada. MultiPro has a very good business model, an excellent distribution system and a strong management team,” said Charles J. Hogarty, president and chief executive officer of Keystone.

DuPont Acquires Czech Republic PVB Business
Wilmington, Del.-based DuPont has acquired Retrim, a safety glass interlayer company, with plant operations in Zlin, Czech Republic.

DuPont will acquire the complete Retrim business, including some 50 employees and proprietary technology allowing the re-use of polyvinyl butyral (PVB) trim materials produced during the manufacture of automotive and architectural laminated glass.

Craig F. Binetti, vice president and general manager for DuPont packaging and industrial polymers said PVB products from the Czech plant will continue to be marketed using the Czechtrim® brand.

EXPANSIONS
Visteon Unveils Design of New Corporate Offices
Dearborn, Mich.-based Visteon Corp. has unveiled the design of its new corporate campus under construction in Van Buren Township, Mich. Featured at the spring meeting of the Urban Land Institute, the campus is designed to facilitate innovation through collaboration among customers, employees and supplier partners. The 265-acre site is called Visteon Village.

“Visteon Village is designed to enhance our customer-facing organization, create a sense of unity among our people and help us share best practices,” said Mike Johnston, president and chief operating officer. “The model Visteon is creating is one of an aligned, boundary-less organization geared toward operational excellence. Visteon Village will help us expand and evolve that model.” 

AGRR

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