Volume 12, Issue 1 - January/February 2010

feature

The News of the Decade
The Events That Rocked the Industry

The last decade has seen a variety of events that have changed the way the industry operates. Though change is certainly constant and more of these likely are to come, AGRR magazine has selected the top-ten industry-altering events and news stories of the last ten years, and in the below information, we’ll take a look back at them.

1. Centralized Insurance Company-Auto Glass Network Influence
When we began the decade, local insurance agents were still somewhat involved in “advising” their insureds in choosing a glass service provider. A decade later, that model barely survives in only a few pockets around the country.

Instead, most insurance companies have tightened the reigns and leveraged their influence by requiring their policyholders to call an 800 number for glass claims. And that 800 number is usually answered by a glass company of the insurer’s choosing or by insurance company representatives themselves, using carefully worded scripts that help influence the insured to choose an auto glass service provider that agrees to its pricing and terms. Proponents say this system helps keep customer costs down and glass shops honest. Opponents say the prices insurers want to pay are kept artificially low and compromise safety and quality.

These auto glass networks and claims administrators weren’t invented in the last ten years, but since 1999, several new ones have come on the scene and many independent businesses have formed love-hate relationships with them.

Some even have attempted to abandon them cold-turkey—but this isn’t always easy.

“I think it’s like heroin,” says Neil Duffy, owner of Auto Glass Menders in San Jose, Calif. “I think you get addicted to that ‘free’ insurance work.” 

The networks also have come to control a large part of the business, from the advent of State Farm’s “Offer and Acceptance Program,” which includes guidelines on pricing, billing procedures and other quality requirements, to more recent rulings regarding OEM glass and how it should be handled during this past year.

Many shop owners blame the rise of the networks for a number of industry maladies, such as low margins (and the competitive pricing structure most networks have in place), and a lack of business caused by possible steering issues among others.

2. AGRSS-ive Standards
Though the work on the Auto Glass Replacement Safety Standard first began in 1998, it wasn’t until three years later that the official standard was released and submitted to the American National Standards Institute for official approval in 2001. The creation of a uniform standard for auto glass aftermarket installations was one of the—if not the greatest—milestones to ever occur, as it truly defines for all what a safe installation is and includes.

Once the AGRSS Standard was published, the AGRSS Council quickly began another undertaking—that of a credentialing program, through which auto glass businesses could register that they were following the Standard. The group soon added a self-audit facet to the program, requiring AGRSS-Registered shops to submit certain materials and deliverables showing that they were following the Standard. And, this past year, the group embarked on one of its—and the industry’s—largest milestones, the creation of an independent third-party validation program in September 2009.

“Our ultimate goal is to provide those who use AGRSS-registered companies for their auto glass replacement needs with a level of confidence that their auto glass is being replaced properly. We are excited that so many companies are part of this initial program,” says Jean Pero, incoming chair of the AGRSS credentialing committee.

“It’s an amazingly innovative program,” adds Pero. “These companies allow truly independent, third-party auditors to come in and validate that they are doing the job right. It’s an amazing advancement for safety.”

3. Belron the Behemoth
It’s no secret that Belron has had a long history with both the international and U.S. auto glass markets. The Belgium-based company and international auto glass giant had several U.S. distribution operations in the 1980s, including Windshields America in the 1990s, and eventually merged that company with the Globe Glass/U.S. Auto Glass Network in 1995, to form Vistar. Then, in 1997, Belron negotiated a deal by which it would own a 40-percent interest in Safelite Auto Glass. Vistar was purchased by Safelite as part of that agreement, but Belron management had many differences of opinion with Safelite, and quickly exited the deal three years later. For the next five years, Belron had no major U.S. holdings—but in 2005, that all began to change when the company announced it had signed an agreement to purchase Elite Auto Glass in Denver. From there, a firestorm began. Belron purchased Southern California-based Windshield Pros and Madison, Wis.-based Auto Glass Specialists later that year. Then, in early 2006, the company acquired Phoenix-based Maverick Glass. The buying frenzy slowed down slightly until February 2007, when Belron announced the acquisition of Safelite Auto Glass. Though Belron has acquired several other U.S. chains since then, including Cindy Rowe Auto Glass, Diamond Glass and the retail and network operations of Iowa Glass Industries, the Safelite deal is the one that gave it a super-sized presence.

4. The Demise of the Regional Player
In the earlier part of the decade, several national and regional auto glass chains existed within the United States, including Safelite Auto Glass, Glass America, Auto Glass Service, Iowa Glass, Diamond Glass, Elite Auto Glass, Windshield Pros, Auto Glass Specialists, JN Phillips Auto Glass, Globe Amerada Glass, Cindy Rowe Auto Glass, Maverick Glass and more. Today most of these are gone.

Belgium-based Belron, of course, has been responsible for the largest piece of this, buying up not only Safelite but several other major industry players, such as Diamond Glass, Elite Auto Glass, Windshield Pros, Auto Glass Specialists, Cindy Rowe Auto Glass, Maverick Glass and the auto glass assets of Iowa Glass.

This has created a fragmented market with few regional chains left, and the leadership of these companies have either become Belron employees or retired.

Today, a few strong regional players still exist that don’t wear Belron colors, but the numbers are far smaller than existed ten years ago.

5. Repair on the Rise
A decade ago, HSG (formerly Harmon Solutions Group) probably had a repair rate of somewhere in the high teens or low twenties, according to the company. Now, the Eau Claire, Wis.-based network, the third largest in the total solutions provider realm, says its repairs constitute almost half of its business—46 to 48 percent to be accurate. “I definitely think that repair is coming into its own element or has fully matured,” says Paul Gross, president and chief executive officer of HSG. “There’s been a substantial movement from that standpoint in terms of repair at the insurance carrier level.”

Others in the industry are also seeing this trend. “We’re starting to see more and more people doing windshield repair,” says Dan Mock, vice president of operations for Glass Doctor, a replacement and repair provider based in Waco, Texas.

While the sentiment expressed by Mock and Gross isn’t universal, there’s definitely a feeling that the repair has some headwind behind it. There’s the environmental movement, the cost savings in repair, and the ability to maintain the integrity of the windshield’s original seal pushing the business.

“We’re saving them deductibles and time. People are starting to see the environmental aspect of windshield repair,” Mock says. “I think there are a lot of things at play. It’s not just one single thing that’s making a big difference. I think there are several different things coming together at once—kind of a perfect storm.”

In just this past year, an ad campaign by the industry’s largest player has helped as well. The Safelite campaign echoes Belron’s worldwide push for repairs—and even those outside the company have benefitted from the growing awareness about this service.

6. The China Syndrome: Where Have All the Manufacturers Gone?
Many industries have seen a move toward China in the last several years. And it’s been no different for auto glass. Not only have several Chinese manufacturers launched their own businesses and have begun importing to the United States, but some American manufacturers, including Pittsburgh Glass Works, have begun producing glass overseas as well. China began aggressively courting OE manufacturing early in the decade and succeeded in making great inroads a few years ago, both in OE contracts and reverse-engineered aftermarket products. Much of auto glass manufacturing has followed.

A 2009 study showed that glass production in China had increased by 67 percent (more than $567 million) since 2003, according to the Economic Policy Institute.

And the Chinese government’s provision of subsidies for the industry have also bolstered this. The 2009 report cited statistics from the National Bureau of Statistics, China, that showed that China’s glass industry received $1 million in government subsidies in 2004, compared with $15.7 million in 2008, illustrating a gradual increase over this period.

At press time, discussion of glass tariffs was just beginning to gain traction. Supporters say such tariffs will help the glass industry, which, like the tire and steel industry, has been losing business to Chinese companies that are, in turn, subsidized by the government. Opponents say that in a truly free market economy, each company will manufacture what it does best and most cheaply and may have to lose some industries all together.

7. It’s the Stupid Economy, Stupid
Many have called it the worst economic downturn since the Great Depression, and, even now, no one’s quite sure where the bottom is, though in early 2010, many predicted it was near the end. Whatever is in the future, though, the recent economic period has had many effects—both positive and negative—on the industry. It’s also had drastic effects on the automotive industry.

And those who do buy new cars are seeing newer, more innovative, expansive uses of glass—and often the glass is now playing an even larger role than before in the car’s structural integrity.

The automotive market also is being influenced by a move to cities and urban areas—decreasing the demand for vehicles. And, of course, as the number of cars on the roads decreases, so does the chance of glass breakage.

8. Lists of List (Prices)
Though NAGS still remains the industry’s only nationwide benchmark price list, in the past several years other pricing lists have begun to be utilized. A semi-covert Chicago Auto Glass Group was formed in the early part of the decade to develop a new benchmark system, but it seems to have lost some traction and stopped much of its work. (Many of its leaders, such as Wes Topping of Elite Auto Glass, have sold their companies to Belron.) As such, more and more distributors and manufacturers have developed their own price lists.

The NAGS numbering system, though, still remains crucial.

“Though [NAGS is] conscious of distribution, I don’t think they understand completely what we go through,” said Paul Anaya, national accounts and marketing manager for Mygrant Glass, during an interview conducted in early 2008.

And, though NAGS attempted to fix many of its users issues with a 2007 re-balancing, many still note that the reduction in the glass prices listed (when labor was broken out separately) has been detrimental to business.

9. Auto Glass Replacement in the Crosshairs
It was just a few months after the launch of AGRR magazine that the now-infamous 20/20 exposé about unsafe auto glass installations first ran on network television. Since the 12-minute segment introduced by Barbara Walters first ran on February 25, 2000, the feature has not only been show repeatedly at industry events as a call to the industry for safe auto glass installations—but also has been the most major call to consumers the industry has had yet to show them the importance of a proper auto glass installation.

The segment, which was narrated by Arnold Diaz, began with a bang by profiling cases where faulty installations led to windshield ejections that ended the life of a 25-year-old woman and paralyzed a mother in California. The stories of these tragic cases highlighted the importance of the windshield in both the structural integrity of the car and occupant retention.

Though many felt the piece portrayed the industry in a bad light, even Patrick McKernan, the owner of the only company identified in the piece, American Mobile Glass in Newfoundland, N.J., said he felt the exposure would make his company better in the long run.

“This will make us stronger,” he told AGRR magazine shortly after the incident. “It will make our guys more aware of doing it the proper way. I will also have stricter guidelines to make sure it is done the proper way.”

The other two companies featured were Safelite and Diamond Auto Glass (which is now a part of Safelite).

There’s no doubt, though, that this segment brought safety to the forefront of the industry’s collective mind, and played an important role in the rise of the Auto Glass Replacement Safety Standard (AGRSS) and the efforts of the group behind it. (See No. 2 for more on this.)

10. Today’s Professional Tech
Today’s techs aren’t just technicians—to the customer, they’re the face of the company. This increasing customer interaction, along with a demand for quality customer service from the general public, has led to something more—an increased emphasis on professionalism, training and knowledge. Today, technicians are seen as experts in their fields and they are the ones on whom customers lean for information about safe installations, what procedures should be followed after the job is done and more.

Industry competitions also have added to this heightened knowledge. The advent of the Pilkington Auto Glass Technician Olympics and the Walt Gorman Memorial Windshield Repair Olympics have given technicians a chance to spotlight their skills. n

Penny Stacey is the editor of AGRR magazine.

AGRR
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