Volume 13, Issue 3 - May/June 2009

Despite the Times
Commonwealth Hits the Afterburners
by Drew Vass

It’s November 2008. The stock market is stuck in a downward spiral, with the real estate market right down there with it, and window film dealers across the nation have begun to feel the effects of this economy. Despite the news, many have made the journey from all over the world to participate in the annual SEMA Show in Las Vegas. Manufacturers begin to combine the words “window film” and “recession.”

A number of manufacturers have opted to hold dealer appreciation events in conjunction with the event. At these events, adorned with open bars, food and often times entertainment, one can hardly tell that a recession is in motion. Such is the mood at Commonwealth Laminating and Coating’s event, when a microphone clicks on and the company’s chief executive officer, Steve Phillips, takes the stand.

Moments later, hundreds of Commonwealth’s SunTek dealers sit down their drinks and erupt into cheers and applause. Though Phillips is known for an abundance of personality, it isn’t his performance that evokes this reaction; rather, it is a single statement. In the heart of an economic downturn, he announces that there will be no price increase in 2009. Glasses are raised and drinks begin to flow.

The number 15 million makes this story a bit more intriguing. In 2008 alone, in the heart of an economic recession, that is the number of dollars Commonwealth spent on manufacturing and facility improvements.

“In 2008 alone we spent $15 million total investments in Martinsville [Va.],” Phillips explains.

Amid an economic recession and slow times for the window film industry, why would Commonwealth spend $15 million on improvements? Why not simply wait until the economy and window film market rebound? The answer might surprise you.

The Dilemma
“A little over a year ago, there were two general suppliers of dyed film: CPFilms, which is vertically integrated—they made dyed film, as well as other intermediary products for their own use, plus they sold to the industry—and a company called ATI,” Phillips says. “So, if you’re a company like us, a company like Johnson [Window Films], or a company like Solamatrix, you had two places to buy dyed film. In particular, you had two places to buy 48-gauge dyed film.” Phillips says 48-gauge dyed film is a critical raw material needed to make window films.

In November of 2007, Solutia Inc., owner of Martinsville, Va.-based CPFilms, announced it had acquired the customer list, patents, production equipment and certain other assets of Acquired Technology Inc. (ATI) for $6.95 million. In a press release, the company reported that this move immediately added sales volume in the dyed window film components segment to its business. ATI, which was based in Alpharetta, Ga., was formed in 1991 and has manufactured dyed films exclusively since its inception. Phillips says his company’s ability to negotiate price and quality ended with the acquisition.

“First we talked to CPFilms,” Phillips says. “That didn’t work. Then we, in parallel, immediately began designing our own dying operation and developing our own dying process and formulation.”

Developing its own dyed films line boosted Commonwealth’s total investments to $15 million for the year.

Problem Solved
Acquiring dyed film is no longer an issue for Phillips’ company. He is now the proud owner of a brand new Black Clawson machinery line and a new facility to house it. In addition to being able to produce dyed films for its own SunTek products, Phillips says Commonwealth may eventually be able to serve as an additional provider for the industry, though he says this is merely an option and unlikely in the near future. While expanding its lineup, the company also seized the opportunity to improve its existing production equipment.

“We’re expecting to get a general quality improvement, a general efficiency improvement in manufacturing, which will result in cost improvements, but very specifically we’ve already demonstrated stepped improvements in the level of clarity and distortion in our pressure sensitive adhesives,” Phillips says. “That’s important in domestic markets. In some markets of the world, such as Asia in general and China in particular, where a lot of our films and other people’s films are used on front windshields, there’s nobody in the industry, including us, that we believe fully satisfies what the market really wants.” Phillips says with products designed to adhere to front windscreens there, distortion is of particular importance. “This new machine, we feel, with some of the proprietary changes to precision, will offer the market a stepped improvement in distortion,” he says. “Our initial focus will be on front windshield films, but within a few months, ultimately all of our films.”

He says the company’s new capabilities will also help push its low cost mantra even further.

“There’s only one way to stay in business and that’s to make money,” he explains. “And in times like these, there are two ways; sell more, or lower your costs. Unfortunately in this market, regardless of which segment you’re talking about, demand has gone down … the only thing that’s going to substantially help is a lower cost product. That’s what the $15 million is partly about. There are two components: price and quality. We believe you can improve both at the same time.”

New Ship—New Captain
Of course, equipment isn’t everything. Commonwealth also needed an engineer with dyed films expertise to drive the process. And the company didn’t have to look far in order to find one—he was already in Martinsville.

“We are also pleased to say that CPFilms’ ex-operations manager for its dying operation is now working for us,” Phillips says, speaking of Jerry Draper. Draper has approximately 15 years of experience in dyed films manufacturing, ten of which he spent at CPFilms. He left CP and joined Commonwealth in April 2008, but, as of press time, Draper hadn’t put his hands on the new equipment yet, according to Phillips, who says Draper has a non-compete agreement with CPFilms that lasts through May of 2009.

“It’s our plan once [Draper’s] non-compete [agreement] is up in May, for him to run our dye operation, among other things,” Phillips says. “He has been working for the last several months as our overall assistant plant operations manager. In May, we plan for him to continue in that capacity, but to also manage our dye operations.”

A Swift Kick in Bad Timing
Would Commonwealth have moved forward with the construction of a dyed films line had CP not acquired ATI? Eventually, Phillips says. “I never want to say never,” he says. “Would we have done it eventually? Yes. We have bought and invested in this business and we will continue to. That said, would we have done it in 2008-2009? Probably not. Until the acquisition, we were very happy with the quality in both ATI and CPFilms’ products.”

Whatever the cause may be, Commonwealth’s investments exhibit a high level of confidence in the future of the window film industry, which is something every dealer, SunTek or not, can appreciate. Phillips adds a bit of conventional wisdom to the news of his company’s expansion: “Rarely in the history of anything have half measures made much of a difference,” he says. “If we were doing the normal things, we would expect normal results.”

The Breakdown:

In 2008 alone, Commonwealth Laminating and Coating made the following improvements to its Martinsville, Va.-based manufacturing facility:
• Added a dyed films manufacturing line including a new housing facility.
• Several capital equipment changes on both its U60 and U72 equipment lines to improve web cleanliness on both sides and to reduce static, both intended to improve final product clarity and cleanliness, and to lower contamination. This includes web contact cleaning, web noncontact cleaning, room environmental controls and static elimination equipment.
• Large capital improvements made in coating technologies to broaden operational windows, improve distortion and tighten coatings distribution consistency.
• Several retrofits made on both its U60 and U72 lines to enhance the cleanliness of wet coating, safety and air quality of operation, and capture efficiency of thermal oxidation equipment. 

Points of Contention

CPFilms’ acquisition of Acquired Technology Inc. sparked controversy with Commonwealth Laminating and Coating (CLC).

“Suddenly, we were in a situation where we were, for lack of better words, at their mercy—on price, on quality and on service,” Steve Phillips, Commonwealth’s chief executive officer says. Phillips also says that he didn’t see it coming and alleges that Solutia made its acquisition in a very quiet manner

.Melissa Hammonds, a CPFilms’ spokesperson, says the company issued a press release the very same day its acquisition of ATI was completed. The company also reports that all of ATI’s customers were contacted immediately to discuss the transaction and business integration plan. As to whether the acquisition made CP the sole provider of 48-gauge dyed films, Hammonds responds: “No. There are numerous sources of dyed film components and alternative film coloration technologies. CPFilms supplies components, including dyed film, to window film manufacturers worldwide.”

The alleged monopoly led the two to court. In October 2008, Commonwealth filed an anti-trust complaint against CPFilms associated with its acquisition of ATI.

“Only the courts can decide if it was a monopoly or not,” Phillips said in February. But the courts did not have that opportunity. The two manufacturers settled.

“The lawsuit was voluntarily dismissed with prejudice on March 6, 2009, at the mutual request of the parties … ,” Hammonds says. A Commonwealth representative confirms that the case has been settled to the satisfaction of both parties.

“There is no question that having ATI in the market allowed us and other manufacturers of window film to better negotiate price, service and quality—period,” Phillips says. “So, use your imagination. We had and continue to have very strong feelings about what [CPFilms] did.”

Man in the Middle

Commonwealth’s hiring of Jerry Draper, CPFilms’ ex-dyed films manager, created an additional point of contention between the two Martinsville-based manufacturers. Simultaneous to filing an anti-trust complaint against CPFilms, Commonwealth filed a request for a declaratory judgment associated with Draper’s right to work for CLC. “Both areas of litigation have been resolved and/or settled in a manner that is satisfactory to Commonwealth Laminating and Coating,” says Jennifer Shorr, Commonwealth’s vice president of sales and marketing, domestic. “There is no current or pending legal action between the two companies.”Draper currently works for Commonwealth Laminating and Coating. wf

Drew Vass is the editor of Window Film magazine.

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