TheStateOfTheIndustry_Feature,January/February 2012

Volume 14, Issue 1 - January/February 2012

Feature

The State of the Industry
What’s in Store for 2012?
by Penny Stacey

AGRR™ magazine has surveyed several of the industry’s leaders for their predictions on the year ahead. Though opinions vary on what’s in store, one thing is for certain: how many miles are driven will continue to be a significant indicator for the industry.

On a positive note, Michael Barry, who recently was named CEO for Chicago-based Glass America, predicts miles driven will remain somewhat level in 2012.

“Being relatively new to the industry, I believe that 2012 will probably not be much different than 2011 for the industry as a whole,” says Barry. “Our economy is still facing stiff headwinds from the all the government and consumer debts here and around the world. Also, dynamics specific to oil will keep the price of gas high. Thus, miles driven will probably not grow much next year, if at all. My guess is all of this will keep demand for our services in check.”

The economy’s effect on what’s ahead also is a recurring theme among the industry’s leaders. Tom Feeney, president and CEO of Safelite, predicts a “challenging year.”

“We all have felt the impact of a struggling economy, particularly in the vehicle glass repair and replacement industry,” says Feeney. “With high unemployment rates and falling consumer confidence continuing to put pressure on the economy, 2012 will likely be another challenging year. Miles driven are down, new car sales are stalled and, of course, the weather always remains unpredictable.”

He adds, “With these pressures, the vehicle glass repair and replacement industry is likely not to grow much, if at all, in 2012.”

David Casey, president of Orlando, Fla.-based Superglass Windshield Repair, is hopeful about the new year—but remains modest in his predictions.

“Since cars sales are staying healthy, and products continue to be trucked across the country, I would think auto glass could retain the growth from last year,” says Casey. “I don’t see any reason that the auto glass industry is going to create many new jobs in 2012 or see giant growth this next year. The most optimistic view would have the industry not go backward in sales.”

Economics and Elections
As the United States embarks on a significant election year, several industry leaders have offered their insights as to what the coming election could mean for the auto glass industry. One major trend among industry representatives is a hope for a new focus on small businesses across the nation.

“I think this election could have a big impact on the economy and ultimately all of our businesses,” says Troy Mason, owner of Techna Glass in Salt Lake City, Utah. “I think auto glass retailers, along with all businesses, are looking for a president that is pro-small business and will move our economy forward from the bottom up instead of creating more government bureaucracy and big business bail-out.”

Mark Liston, president of Waco, Texas-based Glass Doctor, agrees.

“The country needs confidence in the person in the White House and their legislators,” he says. “Auto glass retailers need someone who understands how important small business is to the U.S. economy.”

David Zoldowski, president of Auto One Glass and Accessories in Brighton, Mich., takes this outlook a step further.

“I believe that regardless of which party is elected, more pressure will be placed on ‘made in America’ and small business being the core to the future success of our country,” says Zoldowski. “The Walmart in our industry will experience significantly more pressure to divest itself from its [third-party administration] services.”

David Casey, president of Orlando, Fla.-based SuperGlass Windshield Repair, says he thinks any impact depends on the results of the election.

“In the election, if we go left, I see more infrastructure building, including glass and automotive projects that will include glass. If we go right, I see no spending, no lending and a downturn for all types of glass business,” says Casey. “As far as what we in the auto glass business are looking for in the country’s leadership, I don’t think it differs from most Americans in that we are starving for a government that puts the country ahead of party lines and uses its supposed superior intelligence to create solid solutions that serve us today and in the future.”

Tom Feeney, president and CEO of Safelite, cites concerns about what the timing of the election might do to an already down economy.

“I am afraid that the upcoming presidential election will further stall any economic improvement as Washington gets paralyzed with inaction,” says Feeney.
Michael Barry, CEO of Chicago-based Glass America, says he doesn’t expect the industry at large to see major effects—but is optimistic about the economy.

“My hope is that all of us in the industry vote and elect leaders at the local, state and federal level who can make intelligent and meaningful changes,” says Barry. “If we accomplish this, then the 2012 election will have a very powerful impact on our country and economy for many years going forward.”

Consolidation Concerns
Mark Liston, president of Waco, Texas-based Glass Doctor, predicts a “modest rebound, especially on the flat glass side of the business.”

“We will continue to see a softening in auto glass and a continued consolidation of glass shops across the country,” adds Liston.

“Since cars sales are staying healthy, and products continue to be trucked across the country, I would think auto glass
could retain the growth from last year.”
—David Casey,
SuperGlass Windshield Repair

Casey, however, thinks such consolidation will slow in the new year.
“Although it would appear at first that more consolidation would continue, I think it will slow greatly for two reasons. First, trying to be everything to everyone everywhere is no bed of roses and I don’t think it’s making anyone a lot of money right now,” says Casey. “Secondly, the independent companies that are still standing are the strongest, most talented and most determined shops left. They’re not giving up their market share and they are doing a better job than ever in promoting, installing and repairing.”

Some predict that growing comprehensive insurance deductibles also will continue to impact the auto glass industry.

“I think that we will continue to see higher deductibles for glass coverage and the cash market [will] continue to grow,” says David Zoldowski, president of Auto One Glass and Accessories in Brighton, Mich. “That being said, the newer windshields in today’s new cars are far more complex and we will continue to see this as a bigger and bigger problem for aftermarket glass manufacturing, resulting in consumer complaints associated with quality and functionality.” (See related story on page 34.

Troy Mason, owner of Techna Glass in Salt Lake City, Utah, agrees. “I believe the trend of our industry becoming more and more of a cash, service business will continue,” he says.

With a growing cash market, the number of consumers looking for high-quality service will increase as well, according to Feeney.

“The main influences will be driven by our customers and the vehicle designs that we work on every day,” says Feeney. “Clearly customer service, speed of that service, high-quality installations and repairs as well as our ability to get the work done where and when our customers want it will continue to emerge as a trend in our industry as it transforms.”

Consumer confidence also will play a role. “If consumers don’t feel confident in the economy, we’ll see customers driving longer with chipped or cracked windshields,” says Liston. “If they are confident, as hopefully Black Friday sales numbers indicate, we’ll see an upswing in the auto glass business.”

Challenges Abound
David Rohlfing, who recently resigned from the role of president and CEO of Glass America, predicts 2012 will be “a difficult one for the industry as a whole.” He points to the third-party administration arena as a concern to be looked at in the year ahead—particularly with the move of Allstate’s glass claims administration to Safelite Solutions, which was effective January 1.

“The move of Allstate to Safelite is obviously a negative one to everyone but Safelite, but depending on how successful both of them are in persuading Allstate agents to not recommend choice to insureds will determine how negative,” says Rohlfing. “Hopefully the insurance industry will wake up to the negative long-term effect of putting all their eggs in one basket will have to [the insurance] industry and the [auto glass] industry as well. Without someone taking a leadership position to really challenge Safelite, the probability of them continuing to put notches in their belt seems a given.”

Zoldowski predicts that 2012 will be a banner year for legislation related to third-party administrators’ relationships with insurers and auto glass shops. His own state currently is reviewing legislation that would create a code of conduct for third-party administrators that also have auto glass divisions.

“I believe next year will be a watershed year for the U.S. industry. The independents across the country have legislation in the legislative process in several states … ,” says Zoldowski. “I hope this will answer the question of whether an auto glass company can make glass, sell glass, install glass and provide [third-party administration] services for the majority of automobile insurance underwriters in America.”

Penny Stacey is the editor of AGRR™
magazine/glassBYTEs.com™. Follow her on Twitter @agrrmagazine, read her blog at http://fortherecord.agrrmag.com, and like AGRR Magazine on Facebook to receive the latest updates.