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Volume 6, Issue 1                                                January/February 2005

EFG:  Economy, Fenestration Standard and Glass
Hot Topics Were Discussed at AAMA's Fall Meeting

Those who attended the recent meeting of the American Architectural Manufacturers Association (AAMA), held in late October in Naples, Fla., heard from some prominent people in the industry. From the top executive at Lowe’s to DuPont’s economic expert, AAMA members were educated on a variety of topics. Following is an update. 

View from the Big Box
Robert Tillman, CEO and chairman of the board of Lowe’s Companies Inc., spoke to AAMA members during one of the luncheons held during the meeting. Tillman began by highlighting his company’s success noting that during fiscal 2003, profits rose 37 percent versus 21 percent for Home Depot. 

Lowe’s has experienced great success in recent years and Tillman credits this to transforming the company to meet the needs of its customers as the home improvement industry has definitely changed. Just look at some of the statistics noted by Tillman:
        • In 2003, there were $626 billion in sales in the home improvement industry—the fast growing segment of retail sales in general;
        • The average home in the United States is 30 years old;
        • Twelve percent of new homebuyers are headed by someone born outside the United States.
        • Generation Y, the boomers children, represent 71 million people between the ages of 10-28. There is estimated to be about $10 trillion in consumer spending by this group;
        • The average age of the second homeowner is 47 with an average household income of $86,000. The average drive time for a second home is 2 ½ hours away from the primary residence; and
        • Women’s role in becoming a homeowner is two times the rate of single men, due to single career women and divorced women heading households.

“The best way to predict the future is to create it,” said Tillman. 

He has done just that as Lowe’s has changed its focus from targeting home construction and men to homeowners, specifically women. 

Hopefully AAMA members left that luncheon thinking how they can transform their own companies based on the current state of the fenestration market. 

Encouraging Innovation
While Tillman explained how Lowe’s success is due to the implementation of innovative ideas, Robert Tucker, president of Innovation Resources, continued this discussion of innovation during one of the sessions during the CEO conference. 

He started by encouraging attendees to think about from where their breakthrough ideas come while also challenging them to redefine innovation.

“Come up with ideas and bring them to life–solve a customer’s problems. Create new value for your customer and your company,” he said. 

Tucker warned that some companies are still in the product mindset for innovation and says that strategy innovation includes product. 

“We need to assault our assumptions: ‘You can’t differentiate in this industry.’ ‘A spring is a spring is a spring.’ When you have that mindset, get up and yell, ‘there’s got to be a better way!’” 

Tucker encouraged companies to invent the future and to determine what are the unarticulated customer needs. He also invited them to find different ways to get their creative juices flowing. 

One of these is to schedule 24 hours each month for yourself where you can write a journal, think, harvest more ideas and download your ideas. 

NAFS Task Group 
When AAMA members got down to business, one of the best attended meetings was that of the North American Fenestration Standard (NAFS) task group. The sponsoring organizations, AAMA, the Canadian Standards Organization (CSA) and the Window and Door Manufacturers Association (WDMA) are on their 11th version of the draft. 

Representatives of WDMA and CSA joined AAMA to discuss the Standard/Specification for Windows, Doors and Unit Skylights, AAMA/ WDMA/CSA 101/IS.2/A440-04. Since the draft has not yet been fully approved it cannot be used ad the basis of any certification program but it has been submitted for inclusion in the 2006 International Residential Code and International Building Code anticipating approval before January 2005. Some time will be required to initiate certification and labeling programs that will allow manufacturers to test and label to the new standard for code compliance. 

While several finer points of the document were reviewed, the issue that received the most attention was that of retention of previous standards. 

Currently, AAMA allows its members to certify to the 1997 and 2002 versions, and many members still certify to the 1997 version. However, according to Jeff Lowinski of the WDMA, his association recommends that 1997 and 2002 be dropped. In fact, the WDMA Hallmark Certification Committee met in Chicago on November 12 to discuss phasing out the old documents as soon as possible.

“The worst thing we can do is go to the code floor divided,” said Lowinski.

This view was reiterated by Rusty Carroll, one of the code officials present at the meeting.

“Nobody else has more than one standard. If you have, kiss it goodbye,” he said. “I’ve never seen an organization so wishy-washy. If you approached a code official with this situation, they would make the decision for you.”

Carl Wagus, AAMA technical director, stated the organization does have a plan regarding phase in and phase out of standards. This will be discussed over the coming months and approved by the membership at the next meeting. 

“If only the new standard were referenced in the IBC and the IRC then there would be no acceptable products tested and certified as in compliance with the codes,” said Wagus. 

“Retesting in a matter of months [there are only 14 months until the new codes take effect] would be beyond the capacity of all of the existing test labs and would place a burden of millions of dollars on the manufacturers in less than one year when they normally would be allowed at least four years to spread this cost and find an available lab. This would create chaos.”

Wagus also stated that a comparison of the three versions is available to AAMA members to help them determine what works best for their products. They were encouraged to email their feedback to Ray Garries, chair of the group following the meeting. (After the session, numerous AAMA members picked up this information sheet.)

Glass Materials Council 
Another well attended session was that of the Glass Materials Council. 

Bill Lingnell and Margaret Webb from the Insulating Glass Manufacturers Alliance (IGMA) presented results from the IGMA Field Correlation Study. This is the only study that has tracked insulating glass units in the field over a 25-year period. Bill Lingnell reported that this study covers all geographic areas of the United States, different IG configurations and all of the units have southern exposure. The expected completion date of this study is late 2005 and the final results will be presented at the 2006 IGMA Annual Conference. A copy of the results at the 10 and 15-year mark were distributed to the AAMA members in attendance.

Margaret Webb gave a status report of the research project: The Performance Sustainability of Insulating Glass Units, Development of a Test Protocol for Argon Permeability through Insulating Glass Units Phase 1: Evaluation of the Permeability of Sheet Materials. Webb reported that the sealant samples have been prepared and are ready for shipment to the TNO laboratory. 

AAMA, NFRC and WDMA have all agreed to provide funding sponsorship for this first phase of the project.

At an earlier session, Webb presented the final results from the GasGlass round robin testing. Webb reported that this was the second round robin testing to determine comparability between the noninvasive GasGlass device and the Gas Chromatograph for the determination of initial gas fill in insulating glass units. Webb reported that the results of this latest round of testing is favorable and will be reviewed by the IGMA Technical Services Committee at its next meeting.

Sealants for Installation 
The Sealants for Installation Task Group, chaired by Jimmy McElreath of SchneeMorehead, worked on its revision to AAMA 808 specifications, which encompasses butt joints and lap joints. 

Regarding primers the group decided to stay with 719 testing. Type I (primed) versus Type II (unprimed), depending on substrate, currently uses glass, aluminum, concrete test for adhesion before substrates. The group discussed whether or not movement should be defined as the specification doesn’t dictate what should be used. It finally decided that more testing needs to be performed, particularly on 808 materials.

A point was made regarding the coefficient of elongation to calculate movement. Kelly Charbonneau of Dow Corning volunteered to have her company do some testing as did Sika’s Mark Daniels. The group also decided to perform weatherability testing which will be done by Tremco and ADCO. Both sets of data will be reviewed at the next meeting. 

Regarding tensile strength a motion passed to use ASTM D412 instead of 736. 

Door Hardware
The Door Hardware Task Group was busy with many nuts-and-bolts issues. Pat Junker of Hoppe suggested that for the test procedure for the deadbolt static test, every fourth deadbolt shall be cycled for 25 percent of the cycles. 

The group also discussed whether or not there should be another test for trim. And while they decided that not all trimsets should be tested they discussed whether not there should be a separate test for this. The group will develop test considerations for the next meeting. 

AAMA’s annual meeting will be held February 27-March 2, 2005, at the Marriott Harbor Beach Resort in Fort Lauderdale, Fla. 

Economic Forecast:
Oil Prices Have an Impact; Housing Market Still Strong
Robert Fry, senior economist for DuPont’s economist office, spoke on the “Impact of Global Economy on U.S. Industry,” during the CEO conference. Fry, a noted expert in his field, received first place recognition in the Wall Street Journal’s semiannual forecasting survey for the second half of 2002. He loaded AAMA attendees with the most recent statistics concerning the state of the economy. 

Fry claims we’re in a bit of an oil shock right now as prices have spiked. Fry is not calling for a recession, but says these prices are definitely impacting the economy. 

“U.S. retail sales show extraordinary growth in consumer spending,” he said. “There is a correlation between retailers seeing things slow down and the oil prices.”

He added that oil prices hit the lower end of consumers, while stock prices hit the higher end. 

“When oil goes up, stocks go down,” he said. “Consumer confidence affects the oil prices; the labor market conditions (stock prices) used to be the main influencer.”

Fry says that if oil prices come back down, we’ll see an expansion and a growth over the next few years. 

“The oil prices right now are being impacted by supply and demand. China is the second biggest consumer behind the U.S. for oil, and this is driving prices up,” he said. 

Fenestration manufacturers have heard a lot about China in recent years. Fry gave his forecast saying “this is the best year for global growth since 1997.”

“In Western Europe, the industrial production is mirroring that of the United States,” said Fry. 

“The leading indicator is still pointed up.”

Manufacturing production is showing growth mostly in Asia and Eastern Europe; Korea is flat as is Taiwan and Japan; Latin America is showing good performance; and Brazil, Argentina and Mexico are similar to the United States, according to Fry. 

“Preliminary evidence is showing a slowdown in China’s growth,” he said. “China is both a manufacturing threat and an opportunity–it’s a big market.”

In the United States, Fry says the forecast for the housing market is still positive, despite the fact that some economic experts warn of a bubble that is ready to burst. He pointed out that U.S. mortgage applications and home sales are still going up.

“Housing starts are down a little the last couple of months but are still very strong,” he said. 

“Mortgage rates are up a little over a year ago, and that correlates with the housing starts." 

Forecasts show the housing starts will drop off next year to 1.7 million.

“Residential construction is forecasting down but still strong when looking at a 15-year period,” he said. 

While Fry says the commercial market is not seeing a lot of new buildings a gradual upward trend is forecasted. 

Regarding U.S. manufacturing production, Fry says this is projecting up (excludes high tech sectors) with annualized growth rates of 3.8 percent for 2004 and 2.1 percent for 2005. He adds that there will be a mild and short recession overall for manufacturing that is longer than normal. 

U.S. industrial production of construction supplies is similar to manufacturing production. New orders index points to slower growth, and the same is true for stock patterns. 

“We’ve underperformed for two reasons: massive inventory draw down the last several years and the trade deficit has bloomed,” said Fry. “The trade position (deficit declining); exports have picked up but imports are enormous. The dollar got too strong in 2002. 

But when it comes to inflation, Fry says the outlook is positive as this is being driven by energy prices. 

“Gas is at high levels and not showing any signs of coming down,” said Fry. “It’s a threat to competitiveness. If you remove energy from the equation, you still see slowdowns. It’s hard to pass through costs or you will be a major drop in profit margins or jump in inflation. There will be low inflation next year after the next couple of quarters.”

Fry left AAMA members with good news regarding the upcoming economic climate.

“Global expansion has slowed—but we’re experiencing a slowdown, not a downturn … 2005 will still be a good year,” he said. 

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