Volume 40,   Issue 3                             March  2005

Good, Better, Best
Industry Conditions in the West Look Good for 2005

   
by Charles Cumpston

How is the industry doing on the West Coast? 

Good seems to be the general overall answer; better for some segments, especially commercial. The best is the continuing strong housing market.

A review of the overall West Coast glass industry points up that the markets and issues faced by various segments are as diverse as the terrain.

“Like the rest of the country, the West Coast enjoyed moderate growth last year and sees 2005 at the same level,” says Max Hals, president of Intercontinental Glass Technologies LLC, a Scottsdale, Ariz., importer.

Because Northwestern Industries Inc. services most of the major markets west of Denver, its president, Tim McQuade, says he gets a good read on expected business levels in the West. 

“For 2005 there certainly will be some soft areas but, for the most part, we expect to stay very busy. California will be strong and Washington is making a good, but not great, comeback. Oregon has some activity, but overall we consider that area to be a soft market.”

Jon Witkin, vice president, Western States Glass, an Alameda, Calif., distributor and fabricator, puts it this way: “Business is still really strong. Housing is still strong. Commercial is starting to come back. This will be a real telling year in terms of how it is going to come back because a lot of five-year leases for commercial space are up.”

And Carey Mobius, president and chief executive officer of Garibaldi Glass Industries of Burnaby, B.C., says he sees a more positive environment and business attitude than he has seen in a long time.

Of course, conditions are not the same everywhere. As Mobius assesses the situation, “Washington State is growing some stronger legs commercially; British Columbia has good residential business; and Southern California is not as strong as the Northern part of the state; but overall, it’s a positive environment,” says Mobius. 

Housing is still strong in the opinion of Witkin, but Hals says he sees the residential market starting to cool down.

Opportunities All Around
“As far as glass retailers are concerned, the good businessmen are busy,” says Witkin. “The ones who are not as aggressive and trying to grow their businesses have some holes in their schedules. But there seems to be plenty of work.”

Dave Stellman, president of Palo Alto Glass, whose sales are about evenly divided between retail and contract glazing, describes business as “medium.” He says that it was a little slow the end of last year, but that 2005 looks as though it will be a good year.

“Our residential business still is good. Interest rates haven’t had too much effect yet,” he says. “Customers are watching the dollars more closely, though. They’re borrowing this money and want to see that it is well spent.”

The Contract Please
Contract glaziers are also reporting a range of conditions.

“We have some contracts that haven’t been let out but are going to be,” Stellman optimistically says.

Bob Linford, manager of the Los Angeles branch of Giroux Glass Inc., is also optimistic. “We have high hopes for good business this year. Business is great,” he says.

Adjusting to Conditions
The health of the market, and the changes it is seeing, has made both large and small fabricators and distributors make adjustments.

Prime Glass, a Huntington Park, Calif.-based company founded in 1990 did a lot of work for the major high-end department stores, supplying glass for showcase companies, but Lukas Kungl, president, points out all those companies are out of business now because of imports from China as well as Canada and Mexico. 

“Also, the department stores have cut back on opening new stores and on the length of time between remodels. It used to be that they remodeled every three years, but not anymore,” he states.

His company is now doing a lot of work for the military. It supplies cut glass (ultra clear) for a laminator that makes protective glass for Humvees and other applications going to Iraq. 
“We’re doing OK, but the fabricators are in bad shape. The Chinese glass coming in [to the United States] is hurting them. I think the temperers are doing OK because there is architectural work, building is still going on. But [other] fabrication work is sporadic.”

Witkin, of Western States Glass has seen commercial construction start to come back after the 2001 bubble burst in Silicone Valley. 

“We’re adding a second furnace, growing a little bit,” he says. “We’re like an old time distributor; we’ve added sandblasting and smaller fabrication capabilities for glass houses.”

He describes his business as a four-legged stool: fabrication, insulating glass (IG), distribution and tempering.

Al Gauntlett, a consultant for General Glass Co. Inc., a Portland, Ore.-based IG manufacturer, explains that business is very good because “a large percentage of our business is IG replacement, and that market gets better all the time because more [is] installed.”

North of the border, Garibaldi Glass is looking at a strong Canadian dollar, which has had an effect on some export business for Canadian companies, according to Mobius.
“In terms of business on both sides of the border, there has been a role reversal in the last three years in that the Canadian side now seems healthier than the U.S. side,” he says. 

What’s Next?
“The West Coast, like the rest of the country, is in a state of transition and consolidation,” Hals states. “The old ways of doing business have disappeared. The new business model is constantly changing and the Chinese have a big influence on this new business model.”

Change and Consolidation
“T
he West Coast continued to see a consolidation by the large glass companies (Arch Aluminum and Oldcastle Glass are the leaders) that continued their vertical integration,” says Max Hals of Intercontinental Glass Technologies. 

In response, the smaller glass companies are adding equipment, such as edgers and cutting equipment, which allows them to add value to their product line. They are fabricating more of their own glass needs, and buying tempered glass from local temperers. “These smaller shops are working hard to offer reliability and quality to keep their customers, and price has become a secondary issue,” says Hals. 

“The stand-alone tempering houses, having a hard time competing, are searching for ways they, too, can add value and compete. They are looking to make themselves one-stop shops for all glazing needs by adding insulating lines and laminating equipment. They are modeling themselves after the Home Depot approach,” Hals adds. 

Jon Witkin, Western States Glass, agrees. 

“There have been takeovers, such as Arch taking over Trident. And Oldcastle is getting into aluminum; that’s what Arch does.”

Editor’s note: Oldcastle Glass acquired Southwest Aluminum Systems Inc., an Arizona-based manufacturer of custom architectural aluminum storefront glazing systems, in March 2003. Arch Aluminum & Glass acquired Trident Consolidated Industries, which offers tempering, insulating, spandrel, laminating and a proprietary all-glass entry door line in June 2003.

Chinese?  Influence Varies
E
veryone on the West Coast is talking about Chinese glass, but it seems all companies have different approaches toward it. 

Dave Wright, president of Wright Brothers, a seven-year-old fabricator of specialty high-end glass products, says his company buys fabricated imported tabletops. 

“It’s touchy,” he explains, “You have to warehouse so many different products. For one size tabletop, I have to stock nine different pieces. Then there is also the money tied up in buying a container, because that is what you have to buy.”

However, he said that his company’s service is based on a daily turn around, and “if you don’t service efficiently you lose business. Our customers call and need the glass today and we have to get it to them.”

As part of this service, Wright says that the company fabricates its own glass if it runs out of imported product and that it also offers custom fabrication.

Carey Mobius, president and chief executive officer of Garibaldi Glass, has different views.
“We have chosen not to purchase offshore because of the strengths we find in our relationships with our suppliers,” Mobius says. “I don’t know that the cost savings are there in terms of buying Chinese glass that they say are.”

According to Mobius, Chinese glass is having a lower impact on the company today than a year ago. “There have been some cargo shipping issues and the lead times are burdens that prevent the Chinese producers from being more successful,” he says. “The value-added producers, such as ourselves, are less impacted.”

Mobius says that Garibaldi is expanding its capacity and honing in on certain market segments. “We’re putting manufacturing principles in place to better service our customers. We do a lot of commercial work. Commodity products are not our sand box,” he states.

Max Hals, Intercontinental Glass Technologies, gives some history on glass imported from the Far East. 

“Chinese glass was initially sold by independent agents. The only product offered was clear float. The quality and delivery was not reliable. 

“However, Chinese producers made a decision a few years ago to get into the automotive glass market. They had to completely change and upgrade all of their facilities and so did the secondary market suppliers … Now these factories have top-of-the-line fabrication equipment and excess capacity.” With all of these improvements over the past few years, according to Hals, the Chinese have changed how they do business on the West Coast. 

“Now many Chinese companies have their own offices or employees to handle their sales operations. For the first time the Chinese are giving payment terms. They are not very interested in just selling float now; they want the added-value sale such as tabletops, tempered, silvered, etc. This has had an impact on the Los Angeles furniture and lighting companies—many have gone out of business. The ones that are left provide a service that the Chinese cannot yet provide such as lead-time, inventory and many product lines. 

The Author: 
Charles Cumpston is a contributing editor and publisher of USGlass magazine 


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