News of the Last Decade
From Boom to Bust and Everything in Between
by Tara Taffera

The industry has certainly undergone a great deal of changes during the past ten years and many of those changes are no surprise, and some are still at the forefront of people’s minds. It’s interesting to note, too, how many huge, significant changes have occurred just in the past few years. Has the industry borne the brunt of that change or is there more to come? Let’s take a look back and see how the changes of the past will affect the industry’s future.

1. Housing Market Boom
When housing numbers reached their peak in 2005, the industry was at an all-time high in terms of window sales. Then, toward the end of that year, all you heard about was the dreaded housing bubble and whether or not it would burst. And, of course, we all know now it did burst—in a big way.

Future Prognosis: Should housing numbers ever return to those record levels, or even close to it, let’s remember the lessons learned from the boom and subsequent bust. Company owners will no doubt be even more cautious when investing in major expansions or new plant openings. Perhaps they will think of the slew of companies who closed (see number three ). Proceed toward growth, but with caution.

2. Housing Market Bust
When the housing market went bust, it set in motion a few other items on our list (see numbers 3 and 4). It also had everyone scrambling to figure out when the worst would be over. In 2008, when politicians were campaigning for president, they all did so using a platform of change—to put Americans back to work. When President Obama was elected, he set the American Recovery and Reinvestment Act into motion in 2009 and out came federal tax credits (.30/.30), first-time homebuyer tax credits and a host of other measures. Whether these had the intended effect is up for debate as well.

For example, the Administration touted Serious Materials as an example of the Stimulus Act at work for its part on purchasing the defunct Republic Windows and Doors (see number five) but the number of workers brought back to work are nowhere near what they were before the plant closed its doors.

But there is no doubt that the state of the housing industry plays a monumental role in our country’s economy, and its collapse had a major impact. The bust was so large that it caused the government to intervene.

Future Prognosis: See number one above.

3. Company/PlantClosings and Bankruptcies
In 2008, DWM’s pages were dominated by news of plant closures—approximately 28 in 2008 and 22 in 2009—and likely there were more beyond that. Add to that the number of company closing and bankruptcies and the number rises even higher (see charts at right). The rumor mill also worked overtime during that time period, as many suppliers weren’t being paid and people started to wonder if even more manufacturers would close their doors—and eventually many did. Others who didn’t do so filed for bankruptcy and then re-emerged as viable companies.

Future Prognosis: According to Michael Collins, vice president of the Building Products Group at Jordan, Knauff and Co., the slow rate of company closures through 2010, as well as plant closures, seem to confirm that the worst is over.

4. Mergers and Acquisitions
Some companies facing financial troubles that didn’t close were fortunate enough to be acquired by another. But acquisitions occur in both healthy and unstable markets and both types are outlined here. In fact, the chart at right shows the highest number of acquisitions taking place in 2004 when the market was exploding. However, 2008 had an amount almost similar to that year when the housing market was crashing.

Looking back at a few notable transactions, Who can forget Andersen’s purchase of Silverline in 2006, crossing over from wood to vinyl windows? That same year, Fortune Brands purchased SBR Inc. and its home products brands (including Simonton Windows). Another shift took place in 2007 when Pella, a residential manufacturer, bought commercial window maker EFCO.

According to Collins, 2010 has seen only six mergers and acquisitions in the fenestration industry to date, as opposed to 29 in 2009. Until recently, financing has been very difficult to obtain, which also could be a contributing factor to the decrease in activity.

Collins says another reason for the slowdown stems from a trend that is, in itself, positive for the industry. A number of the sales conducted in 2009 involved companies that, in a stable market, would not have been for sale in the first place. Thus, as the market has improved and companies have started to stabilize, there are fewer sales driven by a lack of finance dollars.

Future Prognosis: “We continue to believe that mergers and acquisitions (M&A) activity in the industry will be strong in the next 12 to 18 months,” says Collins. “Private-equity buyers, for their part, are holding or raising billions of dollars that must be put to work in acquisitions. Thus, the pace of M&A activity in 2011 should strengthen and will serve as an important indicator of the market’s belief in the recovery of this segment.”

5. Republic Windows Closing
The closing of Chicago’s Republic Windows in December 2008 wouldn’t have ordinarily stood out amidst the many companies that had already closed that year. But a few things that happened made sure that it did. Here are a few key news events to refresh your memory: the sit-in; the opening of Echo Windows (formerly TRACO’s residential division); the apparent executive-level corruption; the closing of Echo windows two months later; the arrest of Republic’s president; and the purchase of Republic by Serious Materials. All of the above were news stories on their own. Put it all together and you have a story that received national media attention.

Future Prognosis: Former Republic president Richard Gilman is out on bail and a trial date has not been set yet, but when it is, you can bet the industry will be watching. And, surely in future years plant closings will be viewed a little differently than they have in the past, after the industry and the public watched this story unfold—from how it affected employees to suppliers and even the city of Chicago at large.

6. Government Regulation/Intervention
There is no doubt that Congress and various government agencies such as the Environmental Protection Agency (EPA) and the Department of Energy are more involved than ever in setting standards. Some come with praise from the industry (such as formaldehyde regulations) and others are marked by fierce debate (lead-safe work practices, for example).

Formaldehyde legislation urged by the Composite Panel Association, signed into law in 2010, will establish the first comprehensive national standard for formaldehyde emissions from composite wood products, and directs the EPA to promulgate implementing regulations by January 1, 2013.

While many in the industry are pleased with this new law, as it was developed with industry consensus, the same cannot be said for the EPA’s lead-safe work practices rule, which it issued in December 2008.

Skim through the comments readers have posted on the DWM website and you will quickly see statements such as, “Big brother strikes again because he knows what’s good for us.” And another: “This law was constructed to the point where the government almost wants you to fail. It’s almost like trying to put in a window with handcuffs on.”

Readers have also expressed dismay with everything from healthcare and the effect it will have on small business owners (including window manufacturers) as well as President Obama’s decision to pour billions into the Stimulus Act.

The topic of the government playing a role in energy is its own issue altogether and is the focus of a few stories in our anniversary-issue coverage. But from a possible climate bill to tightened Energy Star® requirements, government regulations
are definitely driving the industry.

Future prognosis: Don’t look for government intervention to end soon. In fact, it will likely be even more of an issue in the next ten years.

7. Energy Star® Program Gets More Stringent
Several changes have occurred within the Department of Energy’s (DOE) Energy Star program. First, it is no longer administered by the DOE, but rather by the EPA, with the DOE’s input. We also have new maps, new zones and a whole other host of changes, some of which have already taken place and others that are in the works.

New Energy Star changes went into effect in January 2010, and phase three is likely to go into effect in 2013, with even more stringent standards. But these aren’t the only set of changes that has taken place with the program in the last ten years.

In 2005, there was fierce debate over a change that implemented performance-based ratand South Central Regions, thus allowing trade-offs in these areas.

Some in the industry were concerned that the changes would complicate the otherwise simple rating system, and cost more energy by allowing lower performing products to claim Energy Star ratings.

Future Prognosis: DOE and EPA representatives have stated that windows within the Energy Star program now account for 50 percent of the marketplace and that the program was designed to identify superior products, signaling that more stringent products are forthcoming. It is no doubt that Energy Star standards will continue to evolve and will become even more stringent as time goes on, and as government officials continue to work to set Energy Star products apart from their industry counterparts.

8. Blurred Distribution Lines
Ten years ago you heard a lot about two-step distribution in that the manufacturer sold to a distributor who in turn sold to a dealer. This was traditional two-step distribution. Today we have one-step and no-step distribution as well as distribution lines become increasingly blurred. Sometimes a manufacturer goes right to the dealer (whether that be a lumberyard, a window dealer, a big-box store, etc.—the list goes on). Other manufacturers go right to the homeowner.

"There are so many variables that impact the way the distributor and manufacturer do business today."

The Association of Millwork Distributors CEO Rosalie Leone states, “So much has changed in our industry; there are so many variables that impact the way the distributor and manufacturer do business today.”

“Which direction the banks move with lending is going to affect our industry. Issues with foreclosure documents will most likely prolong the slow recovery in the housing market,” says Leone.

Future Prognosis: Leone admits, “No one can say what the industry will look like next year. We can only take one day at a time. I do see companies continuing to implement strategic plans,” she says. “A strategic plan is a great roadmap as long as it is flexible and adaptable to a change in direction.”

9. Associations Working for the Industry
Like any organization that changes throughout a decade, so do associations, and there have been a few major highlights in the past ten years. In 2000, the Insulating Glass Manufacturers Alliance formed as a result of a merger between the former Insulating Glass Manufacturers Association of Canada and the Sealed Insulating Glass Manufacturers Association. The result was an association that is well respected today and drives many industry standards.

Some associations haven’t been as successful at a merger, though—or have explored the idea of merging but have never pursued. The Window and Door Manufacturers Association (WDMA) and the American Architectural Manufacturers Association (AAMA) tried twice within the past decade to merge but ultimately weren’t able to unite.

Both seemed to have found their strides, though. Following a few management changes, the WDMA has emerged as a force on Capitol Hill fighting for the rights of the industry. AAMA, known as pivotal for developing key standards for the industry, works hard for its members as well, including speaking up on key issues such as the recent lead-safe work practice rules.

And while remaining separate, industry associations have found ways to work together, as they did in 2001 when the landmark North American Fenestration Standard (NAFS) was created. NAFS is a comprehensive standard that combines the U.S. fenestration standard, AAMA/WDMA 101-IS2 standard, the AAMA/WDMA skylight standard and Canada’s fenestration standard, A440, into one standard for all of North America.

Future Prognosis: Though IGMA looked close to a merger with the Glass Association of North America this year, that didn’t happen, which seems to indicate that the industry’s major associations will stand alone for now. Hopefully their ability to unite on key issues will remain in play for years to come.

10. The Green Scene
Some may grow tired of the word “green,” but whether it’s green, sustainable or energy-efficient, this has been a major theme over the past several years and this will continue. There are so many things that point to the evolution and growth of the increased push toward energy efficiency (several are mentioned on this list and the one on page 20) but following are a few examples of our industry’s commitment to this issue.

From commercial buildings to homes to neighborhoods and even to cities, the U.S. Green Building Council’s Leadership in Environmental Efficiency and Design (LEED) program has pushed everyone from buildings owners to homeowners to consider environmental principles when designing a project. Though some items have generated controversy, such as what gets a certain amount of points, to an insane amount of paperwork, the program has taken off.

While the overall appeal of energy-efficient programs is saving energy, it also can save companies money and the smart ones are finding ways to capitalize on this concept.

Future Prognosis: As associations and research bodies look at items such as life-cycle analysis and as the government debates climate change legislations, it’s clear that the green scene is here to stay.

DWM
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