Volume 43, Issue 11 - November 2008
The Results Are in
You don’t know until you ask, they say. To know how better to serve our readers in these challenging times—where rumors of recession circulate, and the country waits to see what course commercial construction will take after the limping residential housing market—we at USGlass sent out an in-depth survey to our readers in the contract glazing business. Respondents were asked via e-mail to answer anonymously questions about their time in the industry, their businesses, the challenges they face and their plans for the year ahead.
The Year Ahead
Not surprisingly, 94 percent of our survey-takers will be purchasing metal this year, and 96 percent altogether will purchase glass. In addition, more than half will purchase trucks (57 percent) and material handling equipment (54 percent) before the end of this year. Those numbers drop only slightly for glass (94 percent) and metal (92 percent) when it comes to looking ahead at 2009. Our survey respondents do expect to scale back somewhat next year, with 46 percent making plans to purchase trucks and 49 percent planning for material handling equipment. A handful will continue to purchase fabrication equipment each year, including tempering, laminating and insulating lines, as well as metal fabrication tools—not surprisingly, the number is slightly higher for this year over next.
According to Vic Cornellier, president of TSI/Exterior Wall Systems, a contract glazing firm in Hyattsville, Md., that’s because glazing contractors still are working off of a backlog of work. “The real question to ask is how and when you will be able to replace that backlog given the apparent market conditions,” he says. “For most companies, my expectation would be that 2009 will be a repeat of 2008. The real concern should be filling your backlog for 2010 and 2011, as today’s lending problems will affect the delivery of office buildings in those years.”
Ken Smith, president of ASI Limited in Indianapolis echoes those sentiments for 2008 and 2009. “Our current backlog is set with contracts and projects currently under negotiation,” he says. “We see 40 percent growth [in 2009].”
“With the general economy suffering with low confidence, anxiety, tightened credit and global uncertainty, we will most likely see restrained or calculated spending,” predicts Jim Vogelsberg, president of American Glass and Metals Corp. in Plymouth, Mich. “The health care and educational building areas seem to be the market now and for the next year. Private work still appears to be forthcoming, but will obviously depend on how the economy progresses. The election may also have an influence on all of the above. I would anticipate, at this time, a very similar year next year as we are experiencing in 2008.”
A threadbare majority of respondents (51 percent) reported they are satisfied with the state of the contract glazing business right now, finding it to be a good or excellent business, and another 37 percent calling it “average.” For 2008, annual sales are largely expected to increase, according to our respondents. Yet, of those optimistic answerers, the majority (52 percent) expect only a small increase, ranging from 0.02 to only 1 percent. Eighteen percent expect slightly larger gains of more than 1-10 percent, and an additional 18 percent are hoping for sales increases of more than 10-20 percent.
Fewer respondents reported a corresponding increase in their profit margins for 2008 (30 percent)—and of those, the majority (66 percent) are expecting only inconsequential increases.
For 2009, glazing contractors are largely expecting their sales and profit margins to hold steady—whether that’s an optimistic answer is yet to be determined. Nearly 40 percent of respondents are predicting sales will stay at the same place next year as this year, while 52 percent are expecting profit margins to remain the same.
Problems on the Job
Several respondents noted that a lack of licensing for glazing contractors should be a concern. “The contractual and engineering responsibilities are so great and the barrier to entry in the industry is so low that major issues are looming,” commented one individual.“
Unitization and subcontracting helps periodically, but the timing of work load requirements dictates how we handle it,” Vogelsberg says.
“Labor for our company is not a problem whatsoever,” says Cornellier, explaining, “We are a union ironworking company, employing union ornamental ironworkers for the installation of all of our aluminum, glass, and steel products. We have a large source of qualified, well-trained, safety conscious, ironworkers who have always been at the core of our success.”
It seems only 25 percent of our survey respondents share this source, however. For the 75 percent non-union shops, Smith offered a word of optimism: “I think this will get better with the slowing of the economy,” he says. “We hope to better ourselves talent-wise over the next 12 to 18 months.”
In addition to the difficulty of seeking skilled labor is the challenge of doing business against “unskilled” competition. “Competitors that don’t know or don’t care what their cost or selling price is,” was a major concern for our survey respondents. Also noted was the challenge of companies that under-bid projects, and thereby put the industry as a whole at a disadvantage.
“Too many fly-by-night businesses are allowed to bid and get the jobs,” said one survey-taker. “We are drug-free, all insurances paid, workers compensation-paid—and some people just don’t care.”
Part of that problem comes from working with architects and general contractors who know little about the specialized work of glazing contractors, according to our survey takers.
Working Well with Others
When asked about the challenges they face, our glazing contractors often refer to architects and their “lack of knowledge directly associated to our trade,” as one survey taker commented, adding, “Seldom do we see a good set of drawings to bid from.”
“Incomplete architectural drawings,” was another problem cited frequently. More common yet was the challenge of dealing with such problems when under tight deadlines.
One survey respondent, disillusioned with the knowledge base of his customers, commented, “Most are under the impression that glass, doors and hardware are kept in all shapes, sizes and colors—kind of like paint at Home Depot.”
Taking time to educate architects about the glass industry in general can therefore be just as important as promoting one’s company.“We spend a lot of time with architects promoting ASI LIMITED, as well as changes in the marketplace,” says Smith. “We put on box lunches and sales presentations.”
“We spend a tremendous amount of time consulting with our local architects, through seminars, specification and detail review, budgeting and design services. Unfortunately, it doesn’t always end up with a job for us, but I do believe it provides a solid education on the products and services we promote and perform with,” Vogelsberg says.
Read the Full Survey Results