Volume 42, Issue 2 - February 2007

the BUSINESS
I’m Sorry… Kinda!
by Lyle R. Hill

Before we get too far along, let me apologize … and not just to the readers, but also to the fine people who produce this outstanding magazine as well. Let me explain a bit. Casual readers don’t always realize the amount of planning that goes on relative to what topics are covered by this widely-read and critically-acclaimed publication. A great deal of planning and forethought goes into the editorial content of this magazine. In fact, at the beginning of every year I am given a very official looking document that says Editorial Guide at the top. It lists out what topics are to be covered in each month’s issue for the coming year. I am then instructed to try to write something of interest that will somehow relate to whatever the theme of a given month’s issue is going to be. Actually, if truth be known … and it seldom is, mostly what they want me to do is not offend the target audience of any given issue. In other words, if an issue is featuring something about the importance and influence of architecture on the well being of society, they don’t want me making fun of architects that month. I understand this, and most of the time I try to cooperate.

This month, February of 2007, was originally supposed to be a continuation of the January article about Ben Franklin. It was going to be a bit of a “take-off” on some of Franklin’s cute little sayings from a couple hundred years ago and pretty harmless. But I can’t do it. I’m pushing it back to March because I’m just going crazy (and I’m not the only one) over something much nearer and dearer to me. And even though I promised publicly to never bring it up again, I cannot help myself. It is too injurious … too sinister … too “slick” to ignore. And besides, people are constantly sending me all kinds of stuff about this topic and I just don’t have the time or room to deal with it all. And to what, some may ask, am I referring? Oh, I think many of you already know. 

Thanks to a number of readers, I receive all kinds of documents and information related to the energy surcharge situation and, based upon the 20 to 30 things sent to me in the last month alone, I will now provide a little current “factual” information about the country’s current energy situation. For instance, we have now been told that the year 2006 was the warmest (on a worldwide basis) ever recorded. This past December and January may go down as the warmest ever in the United States. In mid-January, an organization that tracks oil product trends in the United States stated, “The market continues to move lower in response to increased inventories and decrease in demand.” I personally can attest to the fact that gasoline prices in the western suburbs of Chicago are down by at least 65 cents a gallon since last summer. And the biggest wholesaler of diesel fuel in the Midwest cut its wholesale price by 13 cents a gallon in December and another 10 cents in January—a 23 cent decline in fewer than 60 days. And lastly, based on actual copies of quotations that have come from private providers of natural gas and electricity, there are deals to be had that may reduce, and should at least stabilize, the costs of those energy products when compared to prices of a year ago. 

Now, let’s review some of the really spiffy stuff we get from those sharp minds and quick wits in our industry. The first one is a beauty. It is dated December 20, 2006, and it states that the energy surcharge for the next quarter (the first quarter of 2007) will decrease to $1400 per truckload. However, when I referred to the release they sent to us in late September of 2006, it, too, was quoting $1400 per truckload. So what am I missing? How can you claim to have decreased your charge to $1400 when it already was $1400? There’s no decrease. It is the same. I called them about this and they said they would get back to me … that was two weeks ago. Two other notices (one from a supplier with a 9 percent surcharge and the other with a 10 percent surcharge) simply stated that they were “pleased to announce” that there would be no increase in the first quarter of 2007. OK … but why no decrease if indeed energy costs have gone down and the surcharge is only a surcharge and not a hidden price increase? And one of the suppliers … and this is a direct quote … states “our suppliers have advised that they will continue to review and revise the energy surcharge matter every quarter. However, for the foreseeable future, the current 7.5 percent charge will continue to be in effect.” Now, one more time, I want you to pause for a moment and think about the logic of a straight percentage surcharge. For comparative purposes only, let’s say that a square foot of ¼-inch clear tempered float goes for $2.25. The energy surcharge at 7.5 percent would then be a little less than 17 cents a square foot. However, if the glass is a low iron equivalent product selling for $7.75 a square foot, the energy surcharge is now more than 58 cents a square foot. There’s no additional energy cost involved to either produce the product or to ship it. It’s just a very nice 41 cents per square foot pick-up for the supplier. By the way, on a truckload of this stuff, the supplier picks up at least $4,100 in additional energy surcharge money … or should we dare to use the profit? The energy surcharge is a wonderful way to add revenue for doing absolutely nothing … it almost smells like argon. Oh wait a minute … you can’t smell argon or see it, and the real cost of energy has nothing to do with it. Quite honestly, I’m jealous and my guess is that many of you are, too. 

OK, I could go on forever with this but it would serve no purpose, and what I really want to do is announce my surrender … and I know more than a few of you are going to criticize me for this. However, there is really nothing more to be said or done. For the first time in a very long time, we the buyers have lost to the suppliers. It pains me a bit, but in some strange way, I’m happy for them. They have found a gimmick that works and in spite of the fact that some of them can’t stand each other and regularly criticize each other, they have remained unified in their position. Some have faltered, but none have fallen. You gotta be a little impressed. I know I am. 

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



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