Volume 40,   Issue 1                             January 2005

theBUSINESS

Because I Promised!!!
by Lyle R. Hill

There have been times, probably even a few I don’t remember, when I wasn’t able to keep a promise. But I assure you that those times have been rare. Very rare. And so, as I promised to Dick Petrie (Architectural Glass Services) publicly, and to several others privately, I am making one more shot at trying to get some answers to what can easily be described as the most confusing and frustrating program in our industry today … the infamous “energy surcharge.” I knew it wouldn’t be easy, but after four unsuccessful attempts to get someone to speak candidly about the matter, I finally broke through.

“George (not his real name), it’s Lyle Hill (my real name) and let me begin by thanking you for taking my call. I know that as a sales executive with a firm the size of yours, you must be quite busy.”

“You’re right … I’m busy … what do you want?”

“Well, George, I’d like to talk to you about this energy surcharge thing. I’m trying my best to understand it and I thought maybe you could help.”

“What did you say your name was?”

“Lyle Hill … MTH … a glazing contractor from Chicago.”

“Hmmm … and you say you’re a customer?”

“Yeah, George, we are. In fact, before I called I asked our accounting people to do a little research and they tell me that over the past 25 years, we’ve bought, in one form or another, more than $30 million dollars of your products.”

“That’s nice, Larry … or was it Lou? Whatever … what did you want to ask me?”

“Actually the name is Lyle Hill, but I guess that’s not important. What I wanted to do was get a little information on this energy surcharge thing. You see, I promised some people that I would try to figure the thing out—you know, how it’s calculated? Does it apply to everyone equally? Is it price-based or product based or simply a square-foot calculation? Those kinds of things.”

“Well, Bill … it was Bill, right?”

“No, it’s Lyle Hill.”

“And you said you are primarily a glazing contractor or something like that?”

“That is correct, George.”

“OK then. I’ll keep it as simple as I can. You see, Kyle, there are a lot of factors involved here that are in a constant state of flux. Take for instance the various indexes. You got your NYMEX, the COMDEX, the FEDEX and the TEXMEX. These are all used in the calculation process and believe me, it’s very complicated.”

“But George, can you tell me why I got a letter from your firm just a couple of weeks ago announcing yet another hefty energy surcharge increase in spite of the fact that oil prices have been declining for weeks. And you know George, I regularly get e-mails and calls from all over the country … like the one I received from Bruce Gray (Burhans Glass of King of Prussia, Pa.) on December 29, 2004 … letting me know that natural gas prices in his area have dropped and are projected to decline further in 2005. How can you justify an increase in energy surcharges in the face of this?”

“Well, Miles … it is Miles isn’t it? As I said before, it’s a complicated issue. For instance, are you aware that the NYMEX average futures price for natural gas is now above $7.49?”

“No I wasn’t, George, and I really don’t care. I’m not buying my glass in the future. I’m buying it now. This is like saying that the cost of sand is projected to go up in 2007 so you need to raise your prices today. You’ll probably want to name it a ‘raw material depletion surcharge’ or something similar.”

“Who told you about that? That was supposed to be top secret. We weren’t going to spring that one on you guys until 2006 … right after the planned glass shortage of 2005 comes to an end.”

“You gotta be kiddin, George.”

“Listen … what did you say your name was?”

“Lyle”

“Ok. Listen, Lyle, we got a whole bunch of these things just waiting to be sprung on you guys. You see, it’s like a drug for us manufacturers and distributors. We’ve become addicted. So you better quit your complaining and get used to it. We’ve been at the bottom of the food chain for too long. It’s our turn now, baby!” 

“Why not just come out with a sensible price increase and make it stick. Wouldn’t that be simpler?”

“That’s the problem, Kyle. It would be simple and if it’s simple, you guys can figure it out and start using it to your advantage. So learn to live with the surcharges, Sweetie, cause they ain’t going away!” 

“What if we all stop paying it … simply refuse to pay for what you can’t justify?”

“Never gonna happen. You guys aren’t that organized. In fact, you don’t trust each other enough to ever do anything in an organized, intelligent fashion. And those little articles you put out whining all the time ... totally meaningless. I mean, at first they worried us a bit, but only for a little while. But let’s face it. You’re powerless.”

“Well, George, that’s certainly interesting, and I want you to know that while you were talking, I was making a little promise to myself.”

“Really? What kind of a promise?”

“Can’t tell you, George. But it will be kept … I promise!”

the Author:
Lyle R. Hill
is president of MTH Industries of Chicago.  lhill@mthindustries.com


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