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Volume 7    Issue 5        September/October  2005

AGRReports
    
Breaking News

ACQUISITIONS 
Pilkington Acquires Autostock
Pilkington North America Inc., part of the UK based global glass manufacturer, has acquired the U.S. auto glass and related products distribution business of Autostock Distribution in a deal valued at approximately $18 million.

The company had been part of Burnaby, B.C. based Autostock International, a division of TCG International Inc. (TCGI).

Operating under the brands Autostock Distribution, Trans America Glass and Lo-Can Glass International, the business operates from 21 distribution locations selling auto replacement glass for the U.S. market for all makes and models of domestic and import vehicles. 

The company is being amalgamated into the Pilkington North America operation and its management team remains intact. 

Coinciding with the sale, SRP Corp., a unit of Autostock International, has entered into an agreement with Pilkington for the company to be a national distributor of its auto glass urethane and primer product line, SRP Totalseal. In addition, SRP cleaning products and accessories will roll-out across the Pilkington network and be available nationwide by the end of autumn.

“This divestiture is part of Autostock International’s strategy to focus our energies where we have a competitive advantage and strong market positions,” said Allan Skidmore, Chairman and CEO of Autostock International.

“Pilkington is better positioned in the distribution business as a larger manufacturer, while an ongoing purchasing relationship between our U.S. Speedy Glass unit and Pilkington will complement the success and growth of both companies.”

This acquisition is designed to strengthen Pilkington’s position in the distribution and wholesale auto glass aftermarket in North America.

“This acquisition is another step in our transition to Stage 3 of our three-stage ‘Cash for Growth’ strategy, identifying opportunities for profitable growth in our existing businesses,” said Stuart Chambers, Pilkington Group chief executive.

Diamond Triumph Acquires Settles Glass
Diamond Triumph Auto Glass Inc. has acquired the retail auto and fabrication glass assets of Settles Glass Cos. Inc. 

The acquisition gives Diamond Triumph an additional 18 full service retail locations in Massachusetts and one full service retail location in New Hampshire. Annual unaudited revenues of Settles Glass were estimated at approximately $9.5 million for the fiscal year ended March 31, 2005.
Both companies were founded in 1923. Diamond Triumph is headquartered in Kingston, Pa. and Settles Glass is headquartered in Quincy, Mass.

“This transaction positions Diamond Triumph for growth in an important geographic market,” said Norm Harris, chief executive officer of Diamond Triumph. “As we integrate in this marketplace, our first priority is to continue to enhance Settles strong tradition of providing superior quality customer service and value. We believe by leveraging the strengths of both organizations, we will provide outstanding opportunities for our employees while giving our customers additional access and service potential.”

Doug Boyle, chief financial officer of Diamond Triumph, said, “Although the replacement auto glass industry has been challenging over the last several years, we feel there are opportunities for our company to grow its market position by making strategic investments. We look forward to exploring new opportunities when they align with our strategy and make business sense for our company.”
Richard Settles, the third generation to head the company, had been president of the family owned business. “It just seemed like the time to do this,” he said. “I’m going to continue on with Auto Glass Wholesale Inc. (AGW), our distribution business,” he stated. AGW, an auto and flat glass distributor which has always operated under the umbrella of Settles Glass, was not part of the acquisition and continues as an independently owned business. 

It must seem like the time to a number of owners of mid-sized industry companies as the sale of Settles is the latest in a series of such transactions. 
At the beginning of the year, JC’s Glass, a regional company headquartered in Phoenix, was sold to Auto Glass Centers, the retail division of Iowa Glass.

Glass America has purchased Auto Glass Service LLC, Murfeesboro, Tenn. and all but one of the Globe Amerada retail auto glass locations. Belron, the world’s largest AGR business, reentered the U.S. market with the purchase earlier this year of Elite Auto Glass, a regional AGRR business headquartered in Denver.

LEGAL
IGA Anti-Steering Suit Goes Forward: Some Charges Dismissed 
By Brigid O’Leary

The judge overseeing the Independent Glass Association (IGA) v. Safelite lawsuit ruled in late August that the anti-steering aspect of the suit could continue while dismissing the remaining claims.

In a 21-page opinion, Judge Ann D. Montgomery of the U.S. District Court of Minnesota ruled that Safelite’s Motion to Dismiss and to Compel Joinder “is granted in part and denied in part.” The ruling allowed false advertising and deceptive trade practice claims (counts II and V) and deceptive trade practice claim (count V) to continue, while all other claims were dismissed and Defendant’s Motion to Compel was denied.

The judge ruled that one claim of false advertising, brought by plaintiff Jeff Winters, would remain, though all other false advertising claims brought by the IGA were dismissed. The deceptive trade practices claims against Safelite by co-plaintiffs Winter and Jane Roe will also go forward. 

Safelite’s Motion to Compel Joinder and bring insurance companies into the case was denied. The court found that “there is no evidence adduced that Safelite’s contracts with the insurance companies require it to engage in ‘steering’ or other allegedly illegal business practices.” Montgomery wrote that “while Safelite might have been faced with inconsistent obligations if this Court found its third party administrator functions constituted unlicensed insurance adjusting, this claim has been dismissed.” The judge further ruled that “At this time … there is no evidence before the Court to suggest that the content of the scripts is dictated by the contracts between the insurance companies and Safelite. As a result, Safelite has not shown it could not comply with an injunction prohibiting it from steering customers to Safelite glass shops without violating its contractual obligations to the insurance companies.”

In dismissing the false advertising claim, the court did not agree with Safelite’s interpretation of “public benefit,” as the third party administrator defined it in its Motion to Dismiss filed in May. Citing the description as narrow, Montgomery wrote that “while consumers and their insurance companies might hypothetically face higher costs if this suit is successful, Safelite’s alleged business practices impact consumers in diverse ways ... If successful, this suit might also encourage more competition in the auto glass replacement industry and ultimately drive prices down.” 

IGA’s common law fraud claims were dismissed for lack of associational standing. All claims of consumer fraud against Safelite were dismissed, as well due to IGA’s lack of associational standing and the fact that IGA is not a consumer of any product or service offered by Safelite. The failure to meet associational status was also a factor in the dismissal of the claims of deceptive trade practices. All claims of unlicensed claims adjusting were dismissed as well.

The conversion claim brought by the IGA regarding the paper invoice fee was dismissed by the court because “the glass shops’ voluntary decision to submit paper invoices and not utilize the electronic invoice system offered by Safelite does not state a conversion claim.” Further, Montgomery ruled in Safelite’s favor with regard to all counts related to naming its various division parties to the suit. 

Both sides could claim the ruling as victory, and the IGA did so immediately, issuing a Beacon Bulletin on August 29, 2005 quoting association president Dave Zoldowski. At press time Safelite declined to comment.

SPECIAL REPORT 
Gas Prices Affect AGR Shops
by Les Shaver

With the price of gas shooting up to $3 a gallon, how is this affecting the industry? 

In essence, gas prices leave auto glass retailers susceptible in two ways. Not only do gas prices have the potential to influence the amount of broken windshields they see and the types of vehicles with windshield damage, but since many shops have a mobile operation, gas prices also put a dent in their bottom line.

Although gas prices are going up, so far that’s not keeping people off the road. In most parts of the country, driving is essential to get to work. So, unless people are car-pooling or live in an area with light rails or buses, higher gas prices won’t cut into those miles driven. 

That’s what Paul Heinauer, president of Glasspro, a chain based in Charleston, S.C., has noticed. “We’re in an area where public transportation isn’t real big, so there’s not that many other options [for people to get around],” he says.

Across the country, Gary Gifford, owner of Maverick Glass in Glendale, Ariz., makes a similar observation. “Certainly, the volume of sales hasn’t gone down with gas prices going up,” he says. “I don’t think consumers have deviated much from their driving patterns and habits due to gas prices. I haven’t seen an effect on that.”

These observations are consistent with what Geoff Sundstrom, a spokesperson for the American Automobile Association (AAA), says his organization has noticed. “To this point we’re not seeing any slowdown in the amount of driving that Americans are doing based on the higher cost of gasoline,” he says.

Even in areas where gas is most expensive, like California, driving patterns haven’t changed that much. “People still have got to get to work,” said Jenny Mack, a spokesperson for AAA of Northern California. “They have to get their kids to the soccer game. They have to go pick up groceries.”

Sundstrom also sees driving as a necessity. “There seems to be a tendency to think that consumers do a great deal of discretionary driving, but we believe that most of the time when people get in their automobiles it’s to do something that’s pretty important and a task that they have to accomplish, like going to work, school or the grocery store,” he says. “Other than the vacation drive, and it’s debatable whether that’s discretionary or not, Americans like their cars but they don’t like to negotiate stop and go traffic. If they get in their vehicle, it’s for something they really need to do. It’s not easy for them to scale back on the amount of driving because of the cost of gasoline.”

While people will stay on the roads, Mack said their driving patterns might become efficient. “It [gas prices] can affect people’s driving behavior a little bit,” she says. “You start to hear of more interest in car pooling. People tend to be a little more conscientious about stringing their trips together and being more efficient in the way they drive.”

But there’s usually only one thing that causes people to dramatically alter their driving habits.

“The only time AAA has ever seen people radically alter the way they transport themselves from one place to another based on fuel prices is when we’ve had gas shortages,” Sundstrom says. “When we had shortages in mid and late ‘70s and early ‘80s, that’s when we saw car-pooling, people changing their residence and people selling vehicles at a loss and being upside down in a loan to get a car that had better fuel economy. What drove that behavior was that gas was scarce, not the fact it was expensive.”

But Sundstrom isn’t ruling this out from happening again. “That’s not to say we won’t have a period of scarcity,” he says. “It will be touch and go over the next few years as we try to bring more energy resources online.”

Scaling Down
While Americans may not be able to scale back their driving, they can switch to more fuel-efficient cars. Recent news reports show this is indeed happening. SUV’s and trucks, once the craze in the late 1990s and early 2000s, are now being replaced by smaller, more fuel efficient cars and hybrids. The reason, according to most people: gas prices.

“In new car sales, SUV’s and trucks fell off a cliff at the beginning of the year,” Sundstrom said. “We’ve seen a big surge in interest in hybrid vehicles and vehicles that get higher gas mileage. We would expect that trend to continue.

We believe that over the long term, prices of fuel will go higher. We would think moving into more fuel-efficient cars will be one of the strategies people adopt to adjust to the higher price of fuel.”

Some glass retailers have seen this trend, but others say the cars they see really haven’t changed over the past few years. This seems to be a largely geographic issue, as people in some parts of the country just prefer their trucks and SUV’s. 

“You would assume the consumer will look for more economical ways [to drive] as prices go up, but Arizona is a little different,” Gifford says. “We still drive a lot of trucks and SUV’s. We haven’t seen an influx of hybrids. I couldn’t even tell you what a windshield number for a hybrid would be.”

If drivers do migrate from SUV’s and trucks to smaller cars to save gas, it could give glass installers a break, say many shop owners.

“It’s easier to replace the windshield in a smaller cars, at least in the sense of the size of the glass and the wear and tear on the body,” Gifford says. “You’re not on a step ladder. You’re not hanging on a door putting on a piece of glass like you would on a big truck.”

Of course, even with more ease of installation, some shops won’t change how they install windshields. “The SUV’s are more difficult because they’re higher up,” said Gerald Zwart, owner of Clearview Windshields, in Inwood, Iowa.

“But we send two guys out to install everything.”

Of course, when gas prices do go up, shop owners might consider saving money and not sending anyone out to do mobile service. Heinauer would like his customers to come into his shop for a number of reasons, including keeping his installers out of the South Carolina heat and giving them access to the shop’s full array of tools. He does realize this isn’t always possible.

“If we didn’t do mobile, we’d be asking the customer to absorb that cost,” he says.

A New Plan
Others are even more adamant. “We always try to save money, but we won’t change our service,” said Colleen Jenson, office manager for P&D Premium Auto Glass in Sauk Rapids, Minn. “Our customers are used to the way we provide service for glass installation and we won’t change that because of gas prices.”

But shops can try to operate more efficiently. “We try to route the guys as effectively and as efficiently as we can so that they are actually driving from our location in the morning to as close to their house as they can get,” said Cindy Ketcherside, owner and president of JC’s Glass in Phoenix. “We don’t require the technicians to come back to the shop in the middle of the day.”

Sometimes, though, getting a job done quickly can ruin the best-laid plans.

“We try to do the routes as efficiently as we can, but if the customer calls today, they want the service today,” Zwart says. “If they wanted it tomorrow, they would have called tomorrow.”

There are other ways shops can save gas costs too. Ketcherside requires her technicians to use the lowest grade of gas possible. In the past, they could switch between low and medium grade. She’s also requiring them to turn off their trucks while they’re working.

“There have been times in this heat when they’ve been keeping the trucks going with the air conditioning running,” she said. “We can’t allow that to happen. We’re telling them to turn off the vehicle to save gas.”

FINANCIALS
PPG Reports Mixed Results for Glass Operations
Glass manufacturer and fabricator PPG Industries Inc. reported mixed sales and earnings results for its glass operations for the second quarter and half year which ended June 30.

Glass sales for the quarter decreased $3 million, or 1 percent, to $581 million as lower selling prices and lower volumes across all businesses except automotive replacement glass exceeded the impact of foreign currencies.

However, for the six months of the year glass sales were up to $1.135 billion from $1.121 billion in the first six months of 2004.

Despite improved manufacturing efficiencies, operating earnings in the second quarter of this year were down $18 million to $52 million as a result of inflation, including higher energy costs; lower selling prices; and lower other income. Operating income for the six months ended June 30 was $93 million, down from $95 million in the same period the year before.

Overall, the company reported second quarter net income of $231 million.

Sales were $2.66 billion, a record for any quarter. That compares with second quarter 2004 net income of $187 million. Sales for the second quarter of 2004 were $2.43 billion. 

For the first six months of 2005, PPG recorded net income of $326 million and sales of $5.15 billion. For the first six months of 2004, the Pittsburgh, Pa. based company recorded net income of $306 million on sales of $4.69 billion. 

Vitro Reports Decline in Auto Glass Segment
Vitro S.A. de C.V., the Mexican based manufacturer of glass products, reported that for the second quarter of 2005 its sales were up 9 percent over the same period last year. Profits were back in the plus column at $37 million versus a loss of $41 million in the second quarter of 2004.

However, the company saw automotive sales decrease 2 percent from the same period in 2004, driven by a decline in domestic and exports volumes in the auto glass replacement segment. New platforms resulted in a 2 percent volume increase at the OEM segment over the second quarter of last year.

Sales from the company’s foreign subsidiaries rose 17.5 percent from the previous year to a total of $153 million from $130 million. Sales at Vitro America rose by 6.4 percent, compared with the same period last year which the company credited to the U.S. construction market continuing on an upward momentum. 

Ralph Nader to Deliver Keynote Speech at AGRSS Conference 
Noted automotive safety advocate Ralph Nader will be the keynote speaker at the first-ever Auto Glass Replacement Safety Standards (AGRSS) Council Conference October 16-17, 2005 at the Rio All Suites Hotel in Las Vegas. Nader will discuss automotive safety and how it relates to AGRSS.

He is the author of the book Unsafe at Any Speed. The book, published in 1965, is an expose of alleged disregard carmakers held for consumer safety.

The book sparked Senate hearings and resulted in the establishment of motor vehicle safety laws.

Nader has been actively involved in automotive safety issues for nearly 40 years; in addition to having helped shape motor vehicle safety laws, he also was instrumental in facilitating the recall of defective motor vehicles over the years. His original research organization, the Center for Study of Responsive Law, headquartered in Washington, D.C., has produced reports on subjects such as Interstate Commerce Commission, corporate welfare and government procurement, and other groups such as the Disability Rights Center and Congressional Accountability Project have taken their lead from him.

Nader will open the Conference on Sunday, October 16 at 9 a.m. All conference participants are invited to hear him speak. 

The AGRSS Conference is open to everyone involved with auto glass, insurance or related industries. As a bonus, participants at the AGRSS conference can attend the separate Auto Glass Technician Olympics, to be held Monday, October 17, after the AGRSS Conference ends, at no charge.

The Olympics is not affiliated with AGRSS, but organizers are extending free registration to AGRSS conference participants as a courtesy.

For more information about and to register for the AGRSS Conference, see pages 44-48.

State Farm in the Forefront on AGRSS 
State Farm Insurance has been in the forefront of connecting AGRSS and the insurance industry. AGRSS committee member Carl Tompkins has announced that State Farm confirmed it will reference AGRSS in its next Offer and Acceptance program. 

This support from one the nation’s leading insurers was exactly what the AGRSS council was looking for to help promote the “Prove It” portion of its program. Tompkins anticipates this will be the first of many insurers to use AGRSS language in their programs.

Bob Bishoff, national glass manager of State Farm, will speak at the AGRSS Conference October 16-17 in Las Vegas. For more info see page 47.

AGRSS Unveils Self-Audit Program
AGRSS has unveiled the first part to its Self-Audit Program, which is designed to help AGRSS-registered companies gather and review the documentation necessary to prove that they conduct their business according to AGRSS standards and comply with registration requirements.

“We’ve ratcheted up the format of the registration program, taking it to an elevated tier of registration,” said Carl Tompkins, chair of the AGRSS accreditation committee. This means that the participating glass shops are moving on to the element of validating their conformance to the standard versus just promising to keep it—this gives the registration program more credibility and demonstrates to our customer bases, such as the insurance industry, that we are really walking the walk.” 

Tompkins added, “The self-assessment provides a huge benefit to companies by giving them an orchestrated way to go through a step-by-step assessment of how well they meet the requirements of the AGRSS Standard. Companies that have gone through the self-assessment have given us great feedback. In every case, they’ve told us they found areas that were non-complaint, and they were able to rectify the situation and know they were doing everything right.

The ultimate effect of this is that is lowers the liability risks for these companies.” 

Safewindshields.com Receives Facelift
The consumer website for AGRSS, www.safewindshields.com, has undergone a reorganization of material resulting in a user interface-lift.

The site provides visiting users with a searchable database of AGRSS member companies. When users put in their zip code, the software pulls up the closest shops dedicated to the AGRSS safety standard to that user.

Additional items on the site are frequently asked questions, an in-depth explanation of AGRSS, its purpose and goals. The site also suggests a list of questions a consumer should pose to a potential shop about to a windshield replacement.


AGRR
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