Amid a split industry response, worsening market conditions and the ramifications of an international incident, the U.S. International Trade Administration attempts to determine if the U.S. auto glass replacement industry has been
The U.S. International Trade Commission’s (ITC’s) preliminary finding on April 16 that there is a reasonable indication that the U.S. glass industry is being materially injured because of imports of automotive replacement glass from China was met with relief by some and total disbelief by others in the glass industry.
The six-member commission voted unanimously in the affirmative to a petition by PPG Industries of Pittsburgh, Viracon of Owatonna, Minn., and Safelite Glass Corp. of Columbus, Ohio, alleging that aftermarket windshields from China are being sold at less than fair market values and that the petitioners may have been harmed by these actions (see related news story in AGRReports).
As a result of the vote, the U.S. Department of Commerce will continue to conduct an anti-dumping duty investigation of the situation and will provide a preliminary determination due on or about August 7, 2001. That determination will affect the future of the auto glass industry and independent AGR distribution companies significantly.
The preliminary decision left the petitioners gleeful in victory, and those against it wondering if the decision had as much to do with auto glass as the strained relationship between the United States and China in light of the downed U.S. spy plane. “It would be inaccurate to say that current tension with China doesn’t effect extend to the trade arena,” one State Department official who preferred not be identified told AGRR magazine. “It [the spy plane incident] puts a spotlight on anything happening with China, and trade is no exception.”
“The ITC decision is an important step in our industry’s efforts to restore fair trade conditions in the U.S. for replacement windshields,” said Garry A. Goudy, vice president of ARG for PPG, in a news release issued four hours after the ruling. “Chinese imports have been offered at very depressed prices, creating serious problems for domestic producers.”
In The Beginning
On the surface, the petition seems simple enough. The petitioners in the action alleged that Chinese companies are selling aftermarket windshields manufactured in plants there in the United States at less than fair market value. Opponents say that each of the Chinese companies is profitable and growing and that these companies have developed more efficient ways to produce and deliver aftermarket auto glass than their U.S. counterparts. But as the hearings conducted by the ITC on March 21 show, the issues below the surface are complex and not without controversy. While the petitioners’ case has been well-documented and reviewed, the hearings offered the first opportunity to hear from those who opposed any anti-dumping actions.
OE versus AGR—The Same or Different Products?
One of the most important issues in the case is the distinction between original equipment (OE) windshields and aftermarket (AGR) ones. The petitioners contended that there is a strong difference between the two, citing that fact that AGR windshields are built to forecast and OE windshields are built to contract; that the development time for an OE windshield ranges from 14-30 months versus the three months it takes to “reverse engineer” an AGR windshield. The petitioners also stated that OE windshields are made to proprietary specifications at tight tolerances. AGR windshields often are the result of reverse engineering and do not require nearly as close tolerances.
“The production facilities are also different for the vast number of ARG part numbers and OEM part numbers,” testified Alan Dumbris, plant manager at PPG’s ARG windshield fabrication plant in Berea, Ky., before the Commission on March 21, 2001. “We can change the tooling for different part numbers in Berea in under one-half hour,” he said, “In our OEM facilities, it would take three to four times that long.”
“OEM and ARG windshields are sold to entirely different customers,” said Robert Chimka, director of marketing for PPG ARG at the same hearing. “… the ARG windshields that we produce at Berea could not be sold to an OEM customer for original installation on the assembly line ….”
In the hearing opponents countered that none of these characteristics is indicative of differences in the windshield themselves, but rather distinctions of development processes, labeling and application. “All windshields sold in the United States must meet the same rigid safety standards of the U.S. government, regardless of the type of customer to whom the windshield is sold,” said Jim Carino, vice present and general manager of Greenville Glass Industries, a U.S. importer of windshields manufactured by Fuyao Group Glass (FYG). “… at FYG, we are able to produce the OEM windshields for the GM Buick Century on the same line used for making windshields sold to aftermarket customers.”
Ed Fennell, general manager of Bartelstone Glass, Bronx, N.Y., concurred in his testimony. “Every glass windshield around the world is produced by heating and bending float glass, regardless of whether the windshield is being sold to OEM or aftermarket customers,” he said. “… In factories where windshield are produced and sold to both [OE and aftermarket customers], the windshields come out of the same production line and are worked on by the same employees.”
The existence of a distinction between OE and AGR windshields is important because it would be difficult for the petitioners to win their case without it. “I would like to bring to your attention the reason that they [the petitioners] are separating OE and aftermarket glass,” said commodity-industry analyst James Lukes of the ITC staff at the hearing. “They want to show the figure, the $45 million in imports from China. They don’t want to compare this to over $3 billion in sales of glass from the petitioners. They want to compare that $45 million for the portion of their sale which is aftermarket.”
Canada and Mexico?
Whether or not to include data on imports from Canada and Mexico has also been a bone of contention for both sides. “The petitioners Mexican and Canadian producers are very competitive with the Chinese factories. Is this the reason the petitioners do not want the Commission to focus their operations in Canada and Mexico?” asked Allan Skidmore, chief executive officer and owner of Trans America Glass and Speedy Auto Glass. “In other words, the real objective of this petition is to protect the petitioners’ operations in Canada and Mexico.”
“The petitioners in this case have a problem,” states the Post-Conference Brief filed on March 27, 2001, with the ITC by Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, attorneys for FYG/Greenville Glass. “Non-subject imports, including the petitioners’ own imports of ARG from Canada and Mexio, hold a dominant position in the United States market. For this reason, the petitioners attempted to estimate consumption figures for ARG sales in the United States by combining … reported total unit sales of windshields from all countries except Canada and Mexico.”
Insult or Injury?
It was alleged in the original petition that the U.S. auto glass industry has been harmed by Chinese imports and that at least two distributors—Amilite of Baldwin, N.Y. and California Calwin Glass Industries of Dominguez, Calif.— went bankrupt as a result of such imports. The petition also cites Chinese imports as one of the reasons for Safelite Glass Corp.’s bankruptcy filing last year (see AGRR magazine, May/June 2000, page 30) and for the formation of PPG Auto Glass, LLC by PPG and Viracon (see AGRR magazine, May/June 2000, page 6).
“One of the principal reasons we decided to merge was the penetration of the U.S. market by Chinese producers as evidenced by an increasing number of wholesale operations that were using Chinese windshields to compete even more aggressively on price,” said Robert Jungbluth, vice president and general manager of Viracon. “We estimate that by the end of 2000, Chinese producers had captured some 16 percent of the ARG windshield market in the United States, up from 3 percent in 1997. There has been no corresponding increase in consumption, which means that the gain by Chinese imports comes at the expense of someone else.”
“As vice president for wholesale sales, I have seen firsthand the impact that the Chinese imports have had on our wholesale truckload business,” said Jerry Tann of Safelite Glass Corp. “In 1995 and 96, our truckload wholesale business accounted for slightly less than half the total wholesale business … This year, our truckload business fell to less than one-tenth of our total business. This is simply because we cannot compete with the Chinese truckload pricing .. It is my view that the dumping of Chinese windshields contributed to the circumstances that led Safelite to go into Chapter 11,” he added.
It was about these points that opponents of the petition were most empassioned. “I worked at Amilite for over 12 years,” Fennell testified. “I can tell you that the reason Amilite got out of producing windshields had nothing to do with Chinese imports … They went our of business because … they made a decision to go to North Carolina from their Ohio place which was very heavily unionized. They brought the machinery down there and never actually got it operating … so they never made a windshield in North Carolina.”
“Safelite, indeed, did file Chapter 11 bankruptcy in June of last year,” testified Norm Harris of Diamond-Triumph Auto Glass. “As part of their reorganization plan, they disclosed the reasons for their financial difficulty … I quote: ‘Significant price competition which lead to reduced per unit pricing was commenced by independent shops and other industry participants felt threatened by market share obtained by Safelite as result of the merger.’ The merger mentioned is the purchase of the former number two retailer, Vistar.”
Perhaps the most vehement opposition to the petition came from Alex Chan of Shenzhen Zinyi Automobile Glass Shenzhen. “There is no evidence that Shenzhen Zinyi is significantly underselling its products. We are not a market leader. On the contrary, we just follow the market and price our products to stay competitive,” he told the Commissioners. “We are now an OE supplier in the U.S. market and we will be actively pursuing OE contracts … The real issue, therefore, is not dumping. The real issue is corporate arrogance and complacency. The real issue is on price collusion and price quoting,” he expounded.
If Not Dumping, then What?
Chimka estimated that the average unit value of an imported Chinese windshield is a little more than $23, as opposed to windshields from Germany, South Africa, Japan and the United Kingdom which averaged $33 to $135. How can the Chinese sell so cheaply? The Proponents of the petition say they can’t without dumping the product. Opponents say Chinese manufacturers are simply more efficient in their distribution. “The Chinese product is shipped in full containers directly from the factories in China to distributors’ doors in the United States,” said Daryl Anderson, president of Dakotaland Glass in Sioux Falls, S.D. “The domestic manufacturers, on the other hand, have layers of distribution that must add—must add—cost that the Chinese have eliminated … It’s my opinion that the way the Chinese distribute is much more efficient than the way some of your domestic manufacturers distribute.”
“They [the petitioners] are trying to starve out the independent distributor and are able to accomplish this where they’re the only one who supplies the product,” said Kip Wiley, regional manager for American Glass Distributors, “… this anti-dumping case is just the latest tactic to eliminate competition from the independent glass business and pool their control over the entire distribution chain.”
“Strengthening their control over windshield procurement through this anti-dumping petition will give the petitioners a stronghold on our industry and do tremendous harm to independent businesses’ ability to compete against the petitioners,” said Harris in his testimony. He also confessed “amazement at the notion of Apogee claiming damage from Chinese windshields when they refuse to sell, regardless of price,” citing the cessation of sales of aftermarket windshields by Viracon to any company other than PPG Auto Glass LLC
(see AGRR magazine, July/August 2000, page 6 ).
The following participated in the International Trade Commission’s preliminary hearing on the matter of automotive replacement glass windshields from China:
In Support of the Imposition of Anti-dumping Duties on Behalf of the Petitioner Companies: Gerald Tann, vice president, wholesale sales, Safelite Glass Corp.; Alan Dumbris, plant manager, PPG Industries Inc.; Robert A. Chimka, director of marketing for automotive replacement glass products, PPG Industries Inc.; Glenn T. Miner, marketing manager for automotive replacement glass products, PPG Industries Inc.; Terence P. Stewart, Eric P. Salonen and Rebecca Woodings, esquires, Stewart and Stewart of Washington, D.C.
In Opposition to the Imposition of Anti-dumping Duties: Jim Carino, vice president and general manager, Greenville Glass Industries Inc.; Ed Fennell, general manager, Bartlestone Glass Distributors; Eve Riedinger, general manager, American Glass Distributors Inc.; Kip Wiley, American Glass Distributors Inc.; Daryl Anderson, president, Dakotaland Autoglass Inc.; Jeffrey S. Grimson, esquire, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt of Washington, D.C.; Wes Topping, Elite Auto Glass; Paul Anaya, Mygrant Glass Co.; Allan Skidmore, Trans America Glass; Garry Dunnegan, Northstar Automotive Glass; Mark Vece, Curved Glass Distributors; Nick Lahigian, Auto Glass Outlets; Norm Harris, Diamond-Triumph Auto Glass; Alex Chan, Shenzhen Xinyi Auto Glass Co. Ltd.; Xiao Wenfan, Shenzhen Benxun Auto Glass Co. Ltd.; William E. Perry and John C. Kalitka, esquires, Garvey, Schubert & Barer of Washington, D.C.
The Next Steps
The commissioners were also interested in what would happen if duties were imposed and asked if an anti-dumping order were put in place, what would independent distributors do? “We will not replace Chinese imports with domestic products,” said Skidmore. “We will search for those windshields in foreign markets to reach the competitive prices that are required by the insurance companies due to the petitioners’ call centers.”
“I find it unfair to reward the petitioners for the artificial contraction of supply in the U.S. market, a development that is a direct result of the petitioners’ own business dealings,” testified Wes Topping, president of Elite Auto Glass of Denver.
Nick Lahigian of Auto Glass Outlets concurred. “If not Chinese, we are going to go to Indonesia. We are going to go to Thailand. We are going to go somewhere and find the glass.”
Debra Levy is the publisher of AGRR magazine.