Volume 39, Issue 10, October 2004

Challenges Ahead
for the Glass Industry
by Alan B. Goldberg

Like many others, the glass industry seems to be in constant motion. Priorities for surviving in a changing and competitive market vary. While developing new products is paramount to any company’s success, there are many other considerations involved in growth. Comments from executives indicate that the focus is on other issues as well: internal programs to improve manufacturing efficiencies, customer programs to maintain quality and conceptual programs to better understand the market and consolidation to better control operations.

Challenges
International Trade 
“China will be the new force to reckon with, particularly with commodity products,” said Brad Austin, senior vice president, Viracon. They have invested heavily in technology and it is just a matter of time before they will be on U.S. soil,” he added.
Foreign trade continues to be a very significant issue, according to Fred Wallin, vice president of marketing for AFG. Imports are on the rise. He said that 40 percent of the total float glass capacity is located in China.
“For us, this is the first time, imports exceeded exports (see related story on page 30). Since 1996, this has put an extra two tanks of capacity in the float glass market. The long-term effects have yet to be fully evaluated but in the meantime, we must provide our customers with exceptional service and value-added products and just do a better job for them,” said Wallin. “With planning underway for the 2008 Olympics and the 2010 World Expo, we will see a tremendous amount of industrial capacity,” said Tom Kaiser, vice president of Cardinal Industries. “We can expect large numbers of apartment complexes, with an aesthetic eye appeal, in Beijing and Shanghai. In the coming years, China will be focused internally on their cities. But, make no mistake about it, they are coming over here.”

Kaiser points out that delivery and fast production times will prove to be very difficult.  They can’t ship fast enough so they will look into components or raw materials—it could be vinyl lineals or coated glass or hardware, he added. Components could find a home in China. “They will need major access in the states to make a custom window. They will lose because of the emphasis on speed of delivery,” said Kaiser. 

Transportation
“Simply moving product from manufacturer to customer presents issues. There is a shortage of specialty transportation trailers. New regulations restrict driving time. And then there is the cost of diesel fuel,” added Wallin.
He said what is needed is some creativity in trucking and he suggested that rather than have trucks return empty, why not transport other goods for the return trip as a means of deferring the cost. 

Rising Fuel Cost

“Oil pricing, which is abnormally high, is more speculative and could come down. However, most of the glass industry uses natural gas for melting. Not that long ago, there was a more than 50-percent price increase in natural gas and it does not look like these prices will be reduced. We will import higher cost liquid natural gas from the Middle East and elsewhere increasingly and energy costs will remain on the rise. The impact of these rising prices will be felt in glass production costs as well as in the cost of freight,” said Peter Walters, group vice president of Guardian Industries.
“Natural gas is the largest, single factor in cost and its detrimental effect on the float glass operation and fabricating has made business more difficult, less profitable and tougher to manage,” added Wallin.

Responding to the Market
Speed of response and delivery will continue to be a key aspect of residential glass, according to Kaiser. He said that with the advent of aluminum and vinyl windows came greater demands for faster turnaround and delivery. Glass companies have had to pattern their manufacturing in response to this change. Plant expansions, he said, are driven by the need to be better sources of supply. Proximity to customers translates to speed and lower transportation costs.

“We seem to be caught up in the need to produce faster and make it better because in today’s climate, that is the way to survival,” said Kaiser.

He added that the challenge is producing a product that is commercially viable, after backing out all of the costs from glass-making to window-making to getting the product to dealers and, ultimately, the consumer. There are energy issues and code issues, and the technology of coatings must be driven by an economic model. To make products better and faster requires capitalization. A new coater, he explained, costs $30-40 million and that type of investment requires a certain volume—a lot of glass and a lot of glass coating. New technologies are in low-E glass where glass is coated and fired for color or light transmittance or solar heat gain. Kaiser pointed out that the company is focused in three areas: codes, builder values and the consumer.

Codes will have a tremendous impact. The storms that are pounding the Southeast and the memories of Hurricane Andrew brought about code modifications or new codes that will remain long-term factors in marketing glass. 

“Automation will continue to impact manufacturing and improve efficiencies,” said Robin Pannecouk, manager, corporate communications for Visteon Corp. 

She said there are trends—colors in architectural glass, improved reflecting and low-E glass—that will continue to drive the market.

“As a whole, the industry is facing some tough challenges, such as expanded competition and increased energy costs.”

Consolidation
“For us, one of the most significant changes taking place is consolidating the AFG and AFGD commercial business into one family. We are moving our Atlanta office to the AFG corporate headquarters in Kingsport (Tennessee),” said Wallin. He said that there are five AFG residential fabrication operations and their focus is on residential and light commercial. 

“We don’t market a particular insulating system. We go to our customers and ask how we can help differentiate their products. This flexibility has been an asset to our customers and their demand has encouraged our growth.

Value-Added Products
Chris Dolan, director of commercial glass products for Guardian Industries, sees many benefits from products that offer value to the consumer.  

“With more and more of Guardian’s business in value-added  specialty glass, we are involved in an increasing number of projects and sales,” he said.

He referred to solar control glass and scratch-resistant glass as examples of products that have a positive impact because the “true value to the customer comes from the value-added process more than the glass substrate.” 

Viracon offers very little in the way of commodities, according to Austin. Value-added applies to most of its products, including protective coatings, decorative coatings, value-float products, low iron glass and aesthetically-pleasing glass.

Interpane Closing
“Interpane was a relatively small player in the market so the overall impact of their closing is limited,” said Dolan. He said they were not in the post-temperable coated business  which he referred to as the fastest growing segment.

Kaiser says there are lessons to be learned from the closing. 

“Given the current business conditions and highly competitive market, here are some old rules of thumb: operate with a plan; know your market; stay focused; and knowing that people often make a difference, invest in people who are passionate about the products they sell and services they perform,” he said.

Programs

“Glass is at the forefront of technological change,” said Scott Smith, market manager of architectural glass business for PPG Industries.  

He pointed out that the glass industry has been undergoing a technological revolution for the past decade. 

“Architects will tell you that the biggest change they face is in the glass. It is a time for glass fabricators and manufacturers to embark on a new era,” he said. 

Smith said the company has viewed these developments as an opportunity to embrace coatings more widely, most recently in non-structural uses. As a means of monitoring the market and helping fabricators improve their operation, PPG developed many types of certified fabrication programs. Through them, Smith says the company has been able to provide in-house training, introduce techniques and technologies and its new glass products.

“People like glass—they like open spaces,” he said.

The fact that glass can be delivered easily to a job site and it can be an off-the-shelf product makes it that much more viable.  
 
“We’re always investing in new equipment at Viracon,” added Austin. “But what has really made a difference for us is a program that has significantly improved manufacturing efficiencies.”

He pointed out that for the past four years, the Six-SIGMA culture, which establishes process improvement based on statistical analysis, has impacted the company’s manufacturing and non-manufacturing sectors. He believes Viracon is one of a few companies doing both.

Looking Ahead
Looking ahead the glass industry will face many challenges and will have to set priorities for meeting these. 

“Things will be tight next year, and we are estimating that capacity will be at 95 percent,” said Wallin. 

the author
Alan B. Goldberg is a contributing writer for USGlass magazine.


USG

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