Volume 43, Issue 2 - February 2008

the Business

Sooner or Later …
by Lyle R. Hill

It’s a few minutes past 9 p.m. on Monday night, January 28th, and I need to get this article in by tomorrow morning so it can be used for the February issue of USGlass. I had already submitted my article for February but I requested that it be pulled so I could replace it with this one. My request was granted, but they only gave me 24 hours, so in spite of the fact that I’m a little tired and a lot overworked of late, I very much wanted to write what you are now reading, even if it takes me most of the night to get it finished. And believe me, at the speed at which I type, this could literally take most of the night.

The decision to substitute articles is an issue of timing … based on some information that I received around noon today. But I also feel that for me and those who I would like to think I represent, it is more than just a timing matter. It’s about who we are and how we feel about what we do for a living. Today, I received a cover letter along with a copy of a legal brief that was being filed in New York requesting class action status for those companies in the glass industry alleging that they had been victimized by way of the energy surcharges put in place by the glass manufacturers and their “co-conspirators” over the past few years. (see Glass Manufacturing Price-Fixing Suits Sweep Across the Atlantic on page 30) To better explain, let me quote a few lines taken directly from the filing: “As a direct and proximate result of the Defendants’ illegal conspiracy, Plaintiff and the members of the Classes have been injured and damaged in their respective businesses and property, in that they have paid artificially inflated prices during the Class Periods that they would not have paid in absence of the illegal conspiracy.”

Remarkably, I am told that this is the third such filing in the past 30 days and that a fourth will soon be filed in either Baltimore or Chicago. Ultimately, I’m told that these suits will most likely all get rolled into one and, over the next few years, some lawyers will make a bunch of money while some in the industry could get hit with some pretty hefty fines. Some settlement dollars may also trickle down to what I guess we can refer to as the victims, for lack of a better term.

I’ve had the opportunity to talk with a couple of the law firms involved … no, I did not call them and neither I nor the company that employs me is a party to any of these actions as yet. It is my understanding that each legal firm has its own unique group of clients. Some are from the fabrication and wholesale end of the business and others are from the installation side. I’m even told that an auto glass company or two might be involved. There appears to be no common of a thread as yet, and I found this particularly interesting. 

While I think the law firms involved are being spurred on by the huge settlements recently announced in Europe for a price fixing situation, the lawyers can’t get too far unless they have clients to represent and apparently, there is no shortage of people lining up to take a swing at those they feel have harmed them by way of the nefarious energy surcharge. Now I have no way of predicting how this will all turn out and maybe in the end nothing out of line has happened whatsoever. But the sharks usually don’t get too excited unless they smell blood and, based on what I’m seeing and hearing, they are plenty excited.

It was exactly five years ago that the energy surcharge matter first surfaced, right here on this page, in a February 2003 article entitled “What Gives …?” Let me give you a direct quote: “What gives with this sneaky new way of getting a price increase pushed through? It used to be that when a manufacturer or supplier needed to raise prices to cover their increased costs of doing business, they simply sent out a notice raising their prices. But now they’ve come up with a new scheme. Don’t call it a price increase … call it something much less ominous … call it an energy surcharge.” And by the way, a whole lot of people noticed early on that many manufacturers were experiencing an identical increase in energy costs at the exact same time as their competitors. Interesting, to say the least.

This past Friday I signed off on a check to our mirror supplier for a truckload of stock mirror. We’ve been buying truckloads of mirror from this manufacturer for about five years or so. They offer good quality, good service and the mirrors are produced in this country. But in the process of looking over their invoice, I couldn’t help but notice that the price per square foot had not changed in five years. The energy surcharge, however, is now running at almost five times what it was in 2003. So I guess all of their other costs have miraculously stayed the same while only natural gas and diesel costs have gone up. And would I be shocked if I were to learn that their competitors were experiencing the same remarkable cost control at their manufacturing facilities but were likewise getting hammered only by energy costs? Amazing!

In April of 2004 I wrote: “The negative feelings over the energy surcharge issue run deeper and are much stronger than I would have ever thought.” Later in that same article I stated: “And the people doing the calling and writing (to me, after this matter is mentioned in an article) are very vocal about their dislike … and distrust … of the suppliers that are hitting them with these surcharges.” There are a lot of bright, talented people in the glass industry. Sure, there are a few complete idiots as well, but most owners and managers understand the need for legitimate, fair, price increases and the absurdity of the way the energy surcharge issue was handled absolutely blew some of them away—myself included.

In December of 2006, in an article that provided “My Christmas List for the Glass Industry” I offered the following: “For our glass industry suppliers … (I wish for) the courage to break free from the frustrating and addictive drug known as the energy surcharge. The last couple of years should have been good for you … isn’t it now time to figure out what your costs really are and like other grown-up industries put out price schedules that are understandable and reliable? Or is the whole energy surcharge game an even bigger money maker than we realize?”

The lawsuits primarily target the manufacturers and their co-conspirators (which I assume is the secondary wholesalers and fabricators) for price fixing with a few other charges thrown in along the way. And while this may not put an end to the use of surcharges, it should put an end to alleged “signaling” that seems to take place by way of surcharge increase announcements. I mean, think about it, did anyone ever believe that a company in California’s energy costs were identical to a company in Ohio or Florida? Year after year? And that somehow, magically, they would all need the same increase at the same time to offset these identical energy cost increases? In fact, the one investigative lawyer with whom I spoke a couple of months ago told me that he is convinced that one of the manufacturers they researched put in for the identical natural gas surcharges at the same time their competitors did in spite of the fact that they didn’t use natural gas for their processing … they ran on electricity! You know, I used to think that it was the contract glaziers who were suicidal, now I realize that it’s the entire industry! 

Lyle Hill is president of MTH Industries of Chicago. Mr. Hill’s opinions are solely his own and not necessarily those of this magazine.

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