Volume 44, Issue 1 - January 2009

Glazing Over the Crystal Ball
Experts Predict What 2009 Holds for the Glass Industry 

There’s no way of telling for sure what’s ahead for 2009, but the bleak outlook from the national news gives one a pretty good idea. And with commercial construction forecasted to show a 7-percent decrease in commercial construction in 2009, on top of a 12-percent decline in 2008 (see page 30), there’s no doubt that the glass industry has reason to sit up and take notice. 

But what do these forecasts mean specifically for the glass industry? USGlass talked with professionals at all levels of the industry, from manufacturers and fabricators to glaziers, as well as individuals from supporting associations, to get their input on what’s ahead and how they’re preparing. 

“Based upon what we are hearing from GANA members, 2009 commercial construction will continue to slow.” –Bill Yanek, executive vice president of the Glass Association of North America

“All areas of the industry—commercial, residential and automotive—are trending downward. The only exception is the solar industry. We won’t see an upturn until there is recovery in the credit market. We need to establish resolution of debt financing for commercial projects, as well as affordable and available home mortgages and car and truck loans.” –Russell Ebeid, president of Guardian Glass Group

“We’re expecting to see a continuing decline in commercial construction activity in 2009 as we have seen in 2008. We have not experienced the number of ‘delayed/stalled/cancelled’ projects that some contractors have experienced; however, these situations are occurring all across the nation. This has the effect of skewing some of the traditional econometric data because many contractors are still carrying these projects in backlog. We also expect the decline in commercial construction activity to be more dramatic with the smaller-sized projects. Many small glazing contractors are really hurting right now. Alternatively, we are not experiencing the same level of decline in the world markets as in the United States.” –Ed Zaucha, chief executive officer of APG International and chair of the Finishing Contractors Asociation Glazing Advisory Committee

“So far it appears that there is already a significant slowdown in bidding and design for new commercial projects. In addition, numerous projects that were scheduled to go ahead the second half of 2009 have been placed on hold or cancelled.” –Jeff Haber, managing partner of W&W Glass LLC in Nanuet, N.Y.

“We have been fortunate enough to establish strong relationships that have placed us in a position to contract some very large and lucrative contracts for 2009. The contracts are government, so the funds are available. In general, I expect volume and profitability to be down for the industry.” –Andrew E. Canter, Jr., vice president of Ridgeview Glass Inc. in Upper Marlboro, Md.

“We probably have 24 months before we get back to some normalized level of activity. That’s what I’m preparing for.” –Russell Huffer, chief executive officer of Apogee Enterprises

“It’s just a very difficult time to have good visibility right now. In the commercial construction space in North America we have not seen a significant downturn yet in 2009 … Now on the other hand we’re beginning to see the inklings and forecasts from customers of potential delays in 2009 and Global Inisghts, who we work with, is forecasting as much as a 14-percent decline for commercial construction in 2009 so we’re looking at those as parameters for what we expect to see in 2009.” –Vicki Holt, senior vice president of glass and fiberglass for PPG Industries

“Our backlog is solid through the end of the third quarter of calendar year ’09. The fourth quarter and beyond is where we’re scratching our heads …” –Tom Niepokoj, vice president of sales of Harmon Inc. in Eden Prairie, Minn.

“Companies who are highly leveraged with financial stress through acquisition, merger, expansion or other burdens will be challenged.” –Robert Price, director of sales of JE Berkowitz LP in Pedricktown, N.J.

What impact do you think the new administration will have on our industry in 2009?

“First, the economic ‘crisis’ must abate or the new president will not have much of an ability to move forward with anything other than economic stimuli. If the crisis does abate, I see an immediate emphasis on energy. I predict that the focus on renewable energy sources (hopefully solar) will increase. The new House leadership on energy seems to favor a more ‘command and control’ approach to energy regulation. GANA members and the glass industry will be impacted by greenhouse gas regulation at the federal level.” –Bill Yanek

“Like many Americans, we are thrilled and excited by the change in administration and are hopeful that the new president and the new ‘economic team’ will have a more dramatic impact than the outgoing administration. Unfortunately, change is often not possible with the House and Senate, which seem to never get anything accomplished.” –Ed Zaucha

“Hopefully he will realize that small businesses drive this economy and, in light of the current situation, he will forestall both personal and capital gains income tax increases. We may even see a reduction in corporate taxes with incentives for new investments and jobs, which could mitigate the downside we are currently expecting.” –Jeff Haber

“I think that what we’ve seen historically out of a Democratic administration is that they tend to support the research and development and health care programs a little more extensively, and hospital work is a big part of Harmon’s portfolio so we’re fairly excited about that potential.” –Tom Niepokoj

“Any administration right now, and the Obama administration is no different than any other that would come into play, will be looking toward infrastructure- and investment-type incentives in order to drive employment … If you read Obama’s plans … certainly green building, green infrastructure and renewables are part of his story …” –Vicki Holt

“I’m very encouraged to see the new stimulus bill by the new administration funding these institutional projects that are ready to go …” –Russell Huffer

“Higher demand for better performing products. Higher energy standards will be imposed. There will be more demand for product utilizing renewable resources.” –Robert Price

What do you think will be the most important industry trend in 2009?  

“Unfortunately I think the trend for 2009 is one that we are already seeing: lower prices. Owners and general contractors are well aware of the reduction in fuel costs and certain raw materials like aluminum for curtainwalls and windows. In addition, decreased demand due to cancellations and other projects going on hold is well known and will no doubt add to their desire to try and make up for the price increases they have been subject to from 2004-2007, in spades.” –Jeff Haber

“The most important trend will be selling government contracts as the number of private industry projects declines. The funds will be available and payment will be guaranteed.” –Andrew E. Canter, Jr.

“We think there is going to be an increased emphasis on ‘alternative’ energy programs for certain. New developments in solar power will continue to be developed, including solar film on vision glass, double-skin walls and other energy-efficient applications.” –Ed Zaucha

“As commercial construction slows, overall glass demand may decrease.  However, demand for value adding energy-efficient products will increase.”   –Bill Yanek

“Obviously there’s no question that the country would like to more proactively pursue the green building product lines. Our question is, can we afford it? So we’re kind of wondering if that trend will get a little sidetracked by the economy and the cost of those green elements.” –Tom Niepokoj

“I think there’s really two areas, and that’s the focus on energy efficiency, both green building and energy-efficient glazing … The other is the growth in renewables, with solar, and I think that’s going to provide a great opportunity for the glass industry.” –Vicki Holt

“Job preservation. Investing in people instead of products, through training, leadership opportunities or challenging and positive work environments. Companies will be strategically looking at the overall picture to make people their brand.” –Robert Price

“The emergence of the worldwide solar industry.” –Russell Ebeid

What do you think will be the most significant challenge for the glass industry in 2009?  

“The glass industry must engage in the national debate on energy. The glass industry has a great story to tell. Our energy-efficient products are perfect for green building. With such a huge amount of energy consumption (approximately 40 percent) directly linked to commercial buildings, energy-efficient glass should be in huge demand.”  –Bill Yanek

“Profitability. Preservation of the bottom line. The professional challenge will be to navigate through the economic uncertainty of what may occur.” –Robert Price

“The most significant challenge will be maintaining profit margins. Historically when an industry panics due to market instability, the industry reduces its margins. Lower volumes and lower margins create a formula for disaster.” –Andrew E. Canter, Jr.

“The economy. We are not likely to see an improvement until the middle of 2009. We are in for a lengthy and slow recovery and that’s only for the companies that are able to weather the storm …” –Russell Ebeid

“We believe the biggest challenge is going to be trying to keep prices at reasonable levels that are reflective of one’s actual costs and not of a desire to just stay in business at any price, as the latter will only fuel a further decline in prices. … I expect that American manufacturers will come under greater pressure than ever to lower prices as Canadian, European and British manufacturers have seen a significant drop in their currencies against the dollar. This makes it a lot cheaper to import goods now than it was just 3-4 months ago and this against a backdrop of declining demand could make 2009 the worst year for the domestic suppliers in a very long time.” –Jeff Haber

“When you look at the glass industry, one of the biggest challenges we have is to match all of our capacity with the demand. We’re taking steps at PPG in order to react to what is weaker demand across all glass markets—residential, of course automotive and we expect commercial construction to begin to slow down …” –Vicki Holt

“One of the biggest challenges for our industry will be retaining the talent we have developed in our industry since the last big construction downturn in the early 90s. This includes not only field personnel but also project managers, estimators, designers, engineers, etc.” –Ed Zaucha

USG
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