Volume 14, Issue 6 - November/December 2012

Road to Recovery?
Industry Insiders Make Predictions for 2013
by Kaitlan Mitchell

As the North American auto glass industry drives toward 2013, industry experts are unsure of what the year will bring economically. Most make their projections by identifying patterns and trends based on historical data. The years 2011 and 2012 presented subpar marks for the auto glass industry, according to industry experts.

“We are approaching 2013 with a bit of caution as we think there is cause for continued concern,” says Safelite Group president and CEO Tom Feeney. “Next year could look a lot like this year with weather uncertainty, continued economic struggles as indicated by relatively low consumer confidence, fluctuating gas prices and depressed miles driven.”

In order to formulate a forecast for 2013, AGRR magazine looked at a few leading indicators for the industry: America’s economy, miles driven, weather and consumer confidence.

Miles Driven
Experts generally agree that the best single predictor of auto glass breakage is the number of miles driven by a population, and that number of miles driven correlates directly to the price of gasoline.

“We certainly see a correlation between gas prices and demand. The less people drive, the less opportunities they have to need our services,” says Paul Heinauer of president of Glasspro Inc. in Charleston, S.C.

According to the U.S. Energy and Information Administration (EIA), the price for transportation fuels, both gasoline and diesel, never dipped below $3 per gallon in 2011, a national pump-price first.

The dramatic rise of gas prices in 2011 had consumers thinking twice before jumping in their car, as reflected in the year’s accumulated mileage. From 2010 through 2011, travel trends on all roads and streets in the nation decreased by 1.5 percent, resulting in 3.7 billion fewer vehicle miles driven, according to the U.S. Department of Transportation’s Federal Highway Administration. Cumulative travel for 2011 in turn fell by 29.8 billion vehicle miles at a rate of -1.3 percent. This total can be further broken down into 82.0 billion vehicle miles on rural roads and 162.3 billion vehicle miles on urban roads and streets. Dissecting the yearly total and focusing on a single month, the approximate travel for the month of September 2010 reached 247,945 billion vehicle miles while September 2011 dropped to 244,244 billion vehicle-miles.

Traffic trends shifted as well. Experiencing similar decline, the North-Central area fell to 56.5 billion vehicle miles at a rate of -1.5 percent, according to a report conducted by the State Highway Agencies. The West followed close behind, experiencing -1.4 percent growth, for a total of 50.8 billion vehicle-miles driven. The South-Gulf region saw the biggest travel decline with a 1.7-percent drop, or 46.8 billion fewer vehicle miles than the previous year.

Of course, the local weather will play one the most important roles in the number of windshield repairs and replacements needed in 2013. To fully leverage the potential of the weather on the auto glass industry, winter needs to bring more snow, ice and hail.

“The lack of a winter in 2011 has been a large contributing factor to the shrinking of the market,” says David Rohlfing, vice president of the Auto Glass Safety Council.

The National Oceanic and Atmospheric Administration’s (NOAA) National Climatic Data Center states that the United States’ second hottest summer on record occurred in 2011, with an average nationwide summer temperature of 74.5 degrees Fahrenheit, 2.4 degrees above the previous record. According to NOAA, during 2011 a majority of the states east of the Rocky Mountains obtained annual temperatures above average. Approximately 16 states recorded annual temperatures that ranked among their 10 warmest to date. The summer heat seeped into the winter months, making the winter of 2011 the fourth warmest winter to date. December through February held a nationwide average of 36.8 degrees Fahrenheit, almost 4 degrees higher than previous years.

Collective nationwide winter conditions from December 2010 through February 2011 revealed above-average temperatures in the Southwest, according to NOAA. The estimated 2011 snow depth across the nation accounted for 1.1 inches in December, 6.3 inches in January and 6.7 inches in February, according to the NOAA. Although the heat index was above average in the majority of the nation, below-normal temperatures were noted in the eastern half of the country.

The northeastern region of the United States was hit with several snowstorms during January. In addition, mid-January also contributed to snowstorms in the Great Lakes and Northeast U. S., both of which earned a Category 3 ranking on the Northeast Snowfall Impact Scale for their significant snow accumulation. The average amount of hail was also lackluster. Nationwide, the U.S. experienced nearly 2/3 of the hail storms that U.S. had in 2011, according to a report released by HailReporter.com. Despite last year, there is hope for the upcoming 2012-2013 winter. The Farmer’s Almanac projects temperatures will be significantly colder from the East Coast westward to Texas than in 2011-2012.

National unemployment in August 2012 came to an estimated total of 12,544,000 persons, compared to the 13,920,000 jobless in August 2011, according to a survey conducted by the Bureau of Labor Statistics. While there has been a decrease in unemployment, and the U.S. has been dubbed out of the recession, the economy is still on the mend.

“In the current economy, we’re still hobbling along,” says Rohlfing. “People tend to keep more cash available in an expanding-deductible market. They spend it on more important things than getting their windshield replaced right away.”

Consumers’ confidence in the economy also played a role in the auto glass industry in 2011. Because households were on tighter budgets, the auto glass industry saw car owners putting off the necessary treatments to fix and replace chipped or cracked windshields in an effort to save extra money. Young adults, one of the industry’s biggest consumer age group, bought fewer new cars, according to industry experts.

“The older the car, they might not be buying as much comprehensive coverage,” Heinauer says.

According to a report released by the Project on Student Debt, the average debt for 2010 college seniors broke previous records by accruing a nationwide estimate of $25,250. This amount jumped 5.2 percent from 2009 with a figure of $24,000 debt average, according to the Department of Education.

In 2010, the percentage of 34-year-olds without a driver’s license increased to 26 percent, compared to the 21 percent in 2000, according to the Federal Highway Administration.

This statistic runs current with public transportation becoming more economical and popular with the idea of “going green.”

In 2009, occupancy of public transit ridership was an estimated 10.4 billion unlinked trips, with bus ridership at 5.5 billion, heavy rail ridership at 3.5 billion, and other modes of combined ridership reaching 1.4 billion. Total transit ridership through 2006 to 2009 was the highest since 1956, according to the American Public Transportation Association. This spike in mass transit ridership is attributed in part to more people moving to cities. A total of 80.7 percent of Americans lived in urban areas in 2010, up from 79 percent in 2000, according to the Census Bureau. As more look people to public transit as a means to of travel, there will be fewer people driving and, in turn, fewer cars on the road and in need of auto glass repair.

The decline of miles driven, the rebounding economy and uncharacteristic weather took a toll on state the auto glass industry in the last year.

“Those three factors, thrown all together, have not been a recipe for success in 2012 for the industry,” Rohlfing says.

The trio of ever-changing variables makes company survival through harsh times an accomplishment in itself. As 2013 approaches, auto glass companies should remain hopeful but stay realistic. n wKaitlan Mitchell is an assistant editor for AGRR™ magazine.
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