Volume 40, Issue 7 July 2005
There's a 900-Pound Gorilla in the Room ...
The Entrance of International Contract Glazing
Companies in the United States Continues to Grow
by Charles Cumpston
For the past several years, something has been going on in the contract glazing industry that has caused some concern and hushed mutters … the proverbial 900-pound gorilla is in the room. It’s time to talk about it.
How Big Are They?
How much business are these foreign-owned companies doing in the United States with their U.S. operations? Contract glazing is not your normal ‘let’s increase sales 5 percent next year’ business. The amount of work a contract glazing company does can vary significantly from year to year. Add to this the fact that all these companies are privately held and don’t have to release any financial data.
However, they have been very candid with USGlass about the amount of their sales in the United States. Annual sales at Seele are in the range of $20 million to $30 million. Starline Windows expects to have sales of $50 million on its commercial operations in the U.S. this year. The last year that figures are available for Permasteelisa is 2002. That year the company had sales of $264 million in the United States.
Foreign-owned companies have become a force in the United States’ domestic contract glazing industry. Whether from Europe or closer to home, the Canadian border, companies are setting up operations in the United States to expand or compensate for weak conditions in their own homeland.
Anecdotal evidence suggests that some of these off shoots of foreign-owned companies have come in cutting prices to gain presence and market share. Executives and owners of most U.S. contract glazing companies with whom USGlass spoke do not want to go on record criticizing their competition, but they are willing to share their insights on how this has changed the market.
Michael Haber, managing partner of W&W Glass LLC in Nanuet, N.Y., says that his company, which is one of the largest specialty contractors in the New York City area, is seeing more competition both in its curtainwall business and its fabricated products business.
“The competition is coming in on the larger jobs,” he explains.
Putting it bluntly, he states, “It comes down to price.” When they bid, they give furnished installed prices, he explains.
“The product suppliers are foreign themselves, which gives them an ‘in’ [closer working relationship] for working together,” Haber points out. “These products are made in Europe or Canada, etc. These firms have facilities around the world so you never know where it (the product) is coming from.”
On the contract glazing side, Haber states, “They don’t know how labor works in the States. They don’t know what prices are but they are learning and then their prices should rise.”
How do you respond to this challenge? “You change your focus,” Haber again states bluntly. “We are focusing on the medium-size jobs that are under their radar screen so they are not so competitive. By smaller job, I mean maybe 20 stories, not 60 stories.”
According to Haber, “We’ll see more competition because the European market is slow.
The chance that they will learn labor costs will level the playing field and that’s fine with us.”
Lyle Hill, president of MTH Industries, one of the largest contract glazing companies based in Chicago, sees these foreign-owned companies as having a tremendous impact on the contract glazing industry and “in some markets are now the dominant player.”
“It seems to me as though they are ‘buying their way’ into various markets by way of unbelievably low bids on large projects,” he says.
One senior executive at an industry glass supplier wishing to remain anonymous, makes the point that these companies are coming into the market with more of a world attitude, where they have been held to higher standards.
“I’ve been saying for years that foreign companies are going to come into our market. They challenge us to be more creative and also from a quality point of view. I see it as having a positive impact on the industry,” he states.
He continues, “They’re more experienced. They’re more documented in the way they do business. Outside the United States, companies working on a project have to do a lot more documentation than we do in this country. That makes a difference.”
Noel Valdes of Cambridge Architectural Sales LLC in Cambridge, Wis., points out that a lot of Canadian companies are coming into the Chicago area.
“It’s on the really big projects,” he states.
The owner of a large contract glazing company in the west says that he is seeing competition from Canadian owned companies as well.
“They can give the product away because of the rate of exchange,” he states.
He has seen the presence of the giants from Europe as well.
“Permasteelisa wanted to come out here and make a presence,” he says. “So they came out and bought a lot of work and lost their shirt [because their price was so low]. Now, they’ve woken up and smelled the coffee.” He makes the point that the foreign company had to learn the effects of bidding low just to get the job and how to price a job with the way in which U.S. labor is factored.
How does he respond to his competition?
“It would be idiotic to try to match their prices. If they bid a project we wouldn’t bid it but now they’re being more selective.”
(Editor’s Note: Permasteelisa was contacted to be included in this article, but officials did not return calls.)
One Canadian company that has come into the United States is Starline Windows, which has a manufacturing plant in Langley, B.C, and U.S. offices in Woodinville, Wash., and San Diego. The company has been in business for 35 years, and has had offices in the United States for close to ten years.
Del Bankston, hi-rise project coordinator for the company, explains that Canadian clients brought Starline into the U.S. market because as they bought property in the states they wanted to have a company they already knew do the work. He points out that this is how the company expands. “I assume we will be in the Las Vegas market soon because we have clients who are moving there.”
The company’s focus is on mid- to high-rise condominiums of 40 stories or more.
According to Bankston lots of companies shy away from condo work because of the threat of class action lawsuits.
“Bid as built is what we do. We manufacture the product and then install it as well, taking all the liability,” he states. For installation, the company uses independent installers who are bonded and insured; “they become subcontractors for us,” Bankston explains.
As a fabricator serving the contract glazing market, Max Perilstein of Arch Aluminum & Glass Co. Inc. in Tamarac, Fla., says he is seeing increased competition from abroad as well.
“We concentrate on smaller companies and it’s the monumentals that are having problems with this,” he states.
The German Philosophy
Coming into the U.S. market was a natural step for Germany based Seele, according to Hans Frey, vice president of its U.S. operation.
“We came into the U.S. market because there were lots of interesting projects and it would be a good add-on for the company. We were also following certain architects that we were working with on projects at other places around the world,” he explains.
Frey described the United States as “way more mass-fabrication oriented,” than other parts of the world, so the company has focused here on “specific solutions and sustainability.”
Frey says that the company is definitely operating in a niche in the United States.
“We do high-end retail stores like the glass stores with stairs for Apple Computer and storefronts for Burberry stores. These are very customer specific solutions. The designs are helping them market their products,” he explains. “Then there are the structural glass projects and the point-supported glass applications. This is an area that we are definitely active in,” he adds.
There is a synergy between what the company has done around the world and what it does here, Frey points out.
“You are always building on past experiences and knowledge of the glass and the metal components, and so we have continuous development and build on our experiences here and around the world.” The company’s technology is developed at its headquarters in Germany, Frey explains, which ensures that it is based on one company philosophy.
As far as describing its marketing philosophy, Frey says that the company deals with a very special work field.
“We don’t advertise, but we do have a lot of architects approach us for advice and we do a lot of design/build so we get involved in projects early and build relationships and become part of the team. You can’t expect the architect to know all about the systems and how to design and build the structures so we are there as a partner with our knowledge to design and engineer and build.”
When asked about price, Frey laughs.
“We don’t convince a client by price; we do it by technology. More of these advanced systems are not subject to the cheapest bidder but the best value and the quality that you are delivering.” Price is important of course, he adds. “Too often, I have to admit, price is a determining factor, and that is the reason that we have not built more projects than we have. We try to get into the value and performance market not where price is the determining factor. The added value.”
Certain clients understand all this, Frey states, and will pay for the services that the company offers.
“We’re not trying to get market share through price. It’s always quality with us,” he says.
According to Frey, the company doesn’t have set goals for expansion into the U.S. market. “It’s not our goal to grow as large as some of the competitors [here]. The idea is to do interesting projects and to do them efficiently.”
Is the market big enough for everyone? Will the 900-pound gorilla go on a diet and fit more naturally into its new environment? Time will tell, but it is certain that the U.S. industry has changed and is integrating new foreign-owned competitors.
Seele was founded in 1984 by Gerhard Seele and Siegfried Gossner, who still manage the company together with Thomas Geissler (also president of Seele L.P.) and Hannes Marterbauer.
The privately held company has approximately 350 employees worldwide at various locations.
Seele’s headquarters are located in Bavaria, Germany, and it is active worldwide. The company has offices in Austria, Czech Republic, Great Britain, United Arab Emirates and the United States. It fabricates at its headquarter location in Gersthofen, Germany and at its Plzen, Czech Republic, location.
The U.S. subsidiary, Seele L.P., was formed in 2001 and is located in New York. It has completed a number of high profile jobs in the United States including the curtainwall of the new Seattle Central Library. It is currently working on such prestigious projects as the storefront of the New York Times headquarters in New York City. Presently, there are five employees in the New York office and the company has a various number of field employees depending on the size of ongoing jobs.
Foreign Affairs: A Cautionary Tale
Dealing with foreign companies requires the same diligence and skepticism as dealing with a competitor around the corner—sometimes even more. Consider this cautionary tale about a well-known, upper Midwestern glazing contractor who was contacted by an up-and-coming German firm that wanted to supply product for a job in the Midwest.
“They told us they were product suppliers and that they wanted to joint venture the project,” said the owner the of the contract glazing company who asked not to be identified. “They came in, saw our operation and we had a very productive day. We’d been working on a bid for the project any way. They told us we would have an inside track as they would not work with anyone else, and we shared how we would engineer it and went over numbers. We had a handshake on our work and I had no reason to think they were not reputable.”
The contract glazier heard from the German company again just before bid day—to be told that it had decided to bid the job by itself and do it themselves.
“We decided we could handle everything ourselves,” he recalls them as saying. “We ultimately lost the job to them.”
A lack of ethics should not be the only concern for domestic companies dealing with foreign ones such as this one. Experts say that unless there is a U.S. corporate entity, you have many of the same concerns you have with fly-by-night companies. Will they be accessible for warranty work, insurance claims or other liability problems?
“There’s a reason those prices are lower,” said another. “These companies often don’t have the same liability insurance coverage. A plaintiff may have a cause of action against the domestic general contractor, but if the general, in turn, has a cause of action against its sub, it’s much harder, and more expensive, to handle legal challenges internationally.”
Permasteelisa Group, based in Italy, is involved worldwide in the design, fabrication and installation of external facades for monumental buildings. It has operations on four continents through 30 companies and 18 manufacturing plants in more than 20 countries.
Permasteelisa set up its operation in the United States in 1997 as an interior operation specializing in the turn-key service of interior fit-out of retail stores and commercial spaces.
In 1999, under the name of Permasteelisa Cladding Technolo-gies Ltd., the company expanded into the building envelope market, providing design, engineering, manufacturing and installation of curtainwalls and metal claddings.
The company’s headquarters and the East Coast operations of the exterior division are located in Windsor, Conn., while the interior division is located in Enfield, Conn. The headquarters support engineering and project management regional offices in Minneapolis, Los Angeles, Johnson City, Tenn. and Montreal.
In May 2000 the Windsor location opened the first Permasteelisa production facility in North America, occupying more than 250,000 square feet.
In the United States Permasteel-isa also owns Joseph Gartner USA, Allied Bronze and Glassalum.
Charles Cumpston is a contributing editor for USGlass magazine.
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