July/August 2000

AGRReports     breaking news


PPG-Harmon Agreement
Makes Strange Bedfellows

The 108-page agreement between PPG Industries and Apogee Enterprises Inc. offers an interesting insight into the formation and future plans of the new PPG Auto Glass L.L.C. (PAGL).The agreement, signed by Gary Goudy, PPG’s vice president, ARG, and Robert Barbieri, Apogee’s financial officer, details the scope of the new company. Barbieri, who announced his resignation less than three weeks after the signing of the agreement, signed the contract to create a new distribution company of which PPG holds a 66 percent equity stake and Apogee a 34 percent equity stake. Among the interesting provisions:

Asset Transfer:

The agreement calls for Apogee to convey all its assets that are used or reserved for use exclusively in the operations of the company’s field locations. There is a long list of exempted assets, including Apogee’s “National Distribution Center” and its inventory. The assets of Harmon Retail and Harmon Solutions are also specifically exempted from the sale.


Both companies are leasing employees to the new company. The agreement calls for a “leasing period” during which employees from both PPG and Apogee will be leased to the new company. At the end of the leasing period, the contributed employees will be offered positions with PAGL. Contributed employees who receive an offer of employment from PAGL will not be eligible for severance benefits from either PPG or Apogee. Those who do not become leased or transferred employees will be provided severance benefits.

Management and
Operating Policies:

The new company has a board of managers consisting of five people—three designated by PPG and two by Apogee. The new company also has nine officers—chair, president, chief financial officer, controller and four regional vice presidents. As long as PPG’s equity is greater than 50 percent, the president, CFO and director of human resources will be elected by the managers designated by PPG. As long as PPG’s equity percentage is greater than 50 percent, PAGL will adopt the financial, accounting, environmental, health, safety, human resources, budget preparation, capital expenditure approval, contract approval and other similar policies of PPG.

Purchase Right in the Event of a Change in Control of Either Company:

Should the control of Apogee change, PPG may choose to take one of three actions. It may purchase all of Apogee’s interest in PAGL at a value determined by a prescribed buyout formula, it may increase its membership interest through purchases to 80 percent, or it may choose to accept the new minority member.

Should the control of PPG’s glass business change, Apogee could choose one of two actions. It could require PPG to purchase all of Apogee’s interest at a value determined by a prescribed buyout formula, or it could accept the new majority member without objection. There is an interesting note in the contract that defines PPG’s glass business to mean its automotive flat glass manufacturing, auto glass fabrication and automotive replacement glass businesses so long as these businesses continue to be an integrated operation; if they are not integrated, then it shall mean only PPG’s automotive replacement glass business. For avoidance of doubt, PPG’s automotive replacement glass business may have a Change of Control independent from the rest of the PPG Glass Business.

 Poor Financial Performance:

The contract calls for each company to have differing options in the event of what it calls “poor financial performance.” In such an event, Apogee could “trigger” PPG to do one of the following:

• Purchase Apogee’s interest at a value determined by a prescribed buy-out formula;

• Permit Apogee to transfer all its interest to another party; a partial transfer is not allowed.

• Require both to pursue a reorganization transaction;

• Require both parties to pursue liquidation.

PPG can also trigger either of the last two actions in light of poor financial performance.


Donnelly Reports Record High Quarterly Earnings

Donnelly Corporation, based in Holland, Mich., reported financial results for the second quarter of 2000 that included the company’s highest-ever operating income for a single quarter. This marks the sixth consecutive quarter or record operating performance for the company.

Donnelly reported net income of $7.1 million on net sales of $227 million, or $0.70 per share. The same period for the previous year reported net earnings of $7.3 million on net sales of $243 million. However, this included sales of $18 million from the company’s interest in Lear Donnelly Overhead Systems, which the company sold in 1999. The previous year’s results also included a one-time net gain of $1.3 million resulting from a cash payment received upon the formation of Schott-Donnelly L.L.P. Smart Glass Solutions. Without the one-time gain, net earnings for the same quarter in 1999 were $0.59 per share.

“It is clear that the strength of our products and our customer base can lead us to sustained earning increases over the long term,” said Dwane Baumgardner, chairman and chief executive officer. Sales in North America were helped by the company’s strong product presence on such popular vehicles as Ford’s Expedition and Taurus and the Chrysler minivans.

In other news, the company announced it has won its largest-ever order for complete outside mirrors. The order to supply mirrors for a North American light truck program is expected to generate annual sales of $32 million per year over the life of the program. The company will begin production in early 2003 in its Newaygo, Mich., plant.

“This is an important next step for Donnelly as the world’s largest automotive mirror supplier,” Baumgardner said. “The size, scope and technological complexity of this program will help us expand our leadership role for complete outside mirrors that offer the best-in-class design, price and advanced

Complete outside mirrors are ready-to-install units that include mirror glass, mirror housing, mounting hardware and any added features such as the actuators and wiring harnesses for power adjustment.


Over 150 Vendors Join
IGA Buying Program

Nearly 150 businesses have already enrolled in the Independent Glass Association’s (IGA) AmeriGlass Group-Buying Program, according to the association. The Program is designed to bring its members discounts and rebates on a wide range of products and services that glass shops use on a daily basis. According to IGA, participants will receive savings of up to 40 percent off list price on items purchased through AmeriGlass.

To date, 142 businesses representing 274 locations have enrolled as Ameriglass members. “Currently, we’re in negotiations with 25 vendors who offer everything from glass, accessories and tools to cleaners and towels,” said Tim Smale, chief executive officer of IGA.

The program is expected to debut in September and enrollment is open to all IGA members.


GM and Suppliers Combine for New Automotive Complex

General Motors and 16 suppliers joined forces and experiences to create a unique automotive complex that functions as one single plant in Gravatai, Brazil. The new Automotive Complex is based on two main concepts, an efficient vehicle production system and a newly-built industrial site referred to as an industrial condominium. The main production difference is that the GM vehicle assembly plant receives pre-assembled modules delivered just-in-time by neighboring suppliers. The physical location of each supplier was strategically located for maximum efficiency. Among the advantages of the new production process are low inventories, increased speed by shortening routes, quick correction of problems and lower costs.

The plant will produce the Chevrolet Celta. One of the complex’s partners is Santa Marina, a provider of window glass.


Erie Says Use of AGR Coupons May Be “Insurance Fraud”

Customers who use coupons from auto glass companies that cover the cost of insurance deductibles are helping auto glass shops commit insurance fraud, according to the most recent issue of IN-SYNC, the Erie Insurance magazine for policyholders.

An article about insurance fraud in the Summer 2000 issue asks readers to decide whether or not they would be committing insurance fraud in a number of hypothetical situations. “You receive a coupon from an auto glass shop, offering to cover the cost of your deductible when you replace your windshield,” says the article. “You’ve been meaning to call about that crack in your windshield for a month, and now you don’t hesitate.”

The article says customers using such coupons help auto glass companies commit fraud. “Many times when companies offer to cover your deductible they’re simply increasing the price that they bill the insurance company,” the article continues. This means your insurer pays your deductible—not the auto glass company. You decided how much of a deductible you could afford when you bought your policy, and you premium is based in part on that decision. If you agree to go along with the company’s plan to submit an inflated bill to your insurer, you are helping the company commit fraud.”



Quest Software Opens New Claims Center to Assist Insurance Industry

Quest Software of St. Johns, Mich. recently started operation of its full-service claims administration, Quest Claims Service, for the insurance industry. The process begins when the customer or agent notifies Quest of a loss. The company then locates the best-qualified repair shops in the area and lets the agent or insured choose the shop. Quest then notifies the glass shop with repair information and approved pricing. The invoice is sent directly to Quest, who approves it and submits it to the insurance company. The carrier pays Quest who then pays the shop.

Quest says the insurance companies benefit from having each claim audited, having to write only one check to Quest rather to hundreds of repair shops. Terry Miller, vice president of Quest Software, says the glass networks (subcontractors) “make money by marking-up repair bills, thereby reducing the insurer’s potential claims savings. Subcontractors have no reason to be loyal to a particular insurer so the carrier risks compromising service, quality and customer satisfaction.” Miller explained that Quest, as an independent call center, “assures customer choice by allowing all vendors to compete on an equal basis.”

Quest Claims Service has contracted to operate call centers for 11 insurance companies in the Midwest.


Conversion Vehicle Deliveries Increase 2.7 Percent

Overall conversion vehicle deliveries were up 2.7 percent for 1999 with 152,600 units delivered, according to DCM Company of Elkhart, Ind. The increase reverses a downward trend and is led by the increasing popularity of conversion pickup trucks and conversion sport utility vehicles.

DCM president Bob Vogelzang says this is good news for glass shops across the country as conversion vehicles will continue to need replacement windows. But he also says sourcing windows and glass for repairing conversions can be a challenge to glass shops. The previous down-trend in conversions led many manufacturers to discontinue sizes deemed to be obsolete.

Vogelzang recommends checking with both the converter and the window company. He also suggests trying salvage yards. For the fastest source, he recommends calling a conversion replacement window distributor. Vogelzang’s company manufacturers obsolete parts under the
SOLUTIONS® name, which includes windows, ladders, tire carriers and roof racks.


C.R. Laurence on the Move in Canada

Los Angeles-based C.R. Laurence (CRL) Co. has purchased Jackson Manufacturing’s Canadian-based distribution business, Progressive Glass Co., located in Mississauga, Ontario. The terms of the agreement allow for CRL to serve all customers out of its Concord, Ontario, branch making available a complete line of truck sliders, sunroofs and other automotive accessories. The purchase of Progressive Glass will not affect Jackson’s business in the United States, which is based in Elkhart, Ind.

CRL has also opened a new distribution facility in the city of Richmond, British Columbia, which will replace the company’s current branch operations in Port Coquitlan, B.C. According to the company, the 30,000 square-foot building features state-of-the-art shipping equipment and computer systems and will double the inventory for its Western Canadian customers.

“The purchase and expansion of this facility demonstrates our deep commitment to the Canadian market,” said Donald E. Friese, president and chief executive officer. Along with the new facility in Concord serving Eastern Canada, Friese said the message to Canadian customers is clear, “We’re here to stay!”


Speedy Auto Glass to Market AutoRescue™

Speedy Auto and Window Glass Ltd. has recently signed an agreement allowing it to market, sell and install AutoRescue and AutoRescue PLUS™ vehicle location and emergency notification systems through its retail sites. Toronto-based Centraxx Inc. developed the AutoRescue product line.

Auto Rescue is a vehicle-tracking device that is self-arming. When a vehicle equipped with AutoRescue is moved, a 3- by 5- by 1/2-inch plate that is bolted into one of several locations in the car to deter theft, recognizes a tag installed in the driver’s key fob.

“The Speedy organization is a perfect fit for us,” stated Centraxx vice president of sales Bob Hill. “As an industry leader, Speedy will provide excellent retail exposure for our products. They have a concentrated presence in Southern Ontario and in many other key markets Centraxx expects to enter. They [Speedy] currently provide a similar service for several major insurance companies.” Speedy, however, is not the exclusive distributor of the Centraxx product line, as it is hoped that when demand for the Centraxx line increases, expanded retail sites will include other retailers, insurance agents and auto clubs.

“The auto glass industry is a natural retail channel for Centraxx Auto Rescue, and certainly at Speedy, where we are always searching for better ways to serve our customers and to offer quality automotive aftermarket products,” said Speedy vice president of sales and marketing Bill Robertson.


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