W&D Weekly - January 30, 2008 | Vol 3, Num 5
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Manufacturers Facing Tougher Markets, Tougher Performance Criteria

Numerous challenges facing the industry were front and center at the Window & Door Manufacturers Association’s annual conference, concluding today...

Palm Beach Gardens, Fla.—Numerous challenges facing the industry were front and center at the Window & Door Manufacturers Association’s annual conference, concluding here today. Members heard predictions for lower window and door sales this year, proposals for more stringent criteria for the Energy Star program and warnings that class action suits against manufacturers are on the rise.

Following a year of “catastrophic decline,” the residential market is likely to slip further in 2008, reported Scott Shober of Ducker Worldwide, which conducts annual market research on behalf of WDMA and the American Architectural Manufacturers Association. The news in the nonresidential market has been better, he noted. It hit a new peak in 2007, up 25 percent from 2006, but it too is likely to slip somewhat in 2008.

Ducker’s Scott Shober offered WDMA members a sobering forecast for window and door sales.


Discussing the residential market, he noted that single-family starts were down nearly 30 percent in 2007. Pointing to a large inventory of unsold homes out on the market, Shober expects another 22 percent drop this year, adding “We have a long way to go here.”

Adding to the sober outlook for residential window and door sales is the fact that remodeling activity is also down. Shober estimated that residential improvement expenditures were down 1.7 percent in 2007, and predicted a 3.5 percent decline for 2008.

DECLINING SALES
Stressing the fact that Ducker is still in the midst of research for its annual market study, and that the numbers offered are only preliminary, Shober suggested that the decline in residential markets translated to about a 16 percent drop in demand for residential windows and doors last year. Right now, Ducker is predicting another 12 percent drop for 2008.

Coming off a peak of about 70 million units in 2005, residential window sales may dip below 50 million units in 2008, according to Shober. Similar percentage declines can be seen in residential doors and skylights. “We’re looking at volumes we haven’t seen in over a decade,” he said.

One other trend Shober noted on the residential side is that wood products seem to be holding up better than vinyl and other types of products. Noting that the high end of the housing market is seeing less of a downturn than those hit by the mortgage crisis, he suggested that wood products may actually gain market share versus other materials. Another winner in the market is fiberglass entry doors, he noted, which continue to take share from steel doors.

Looking at the nonresidential segment, Shober suggested 2007 was a “watershed year” as far as growth. Ducker doesn’t foresee the market dropping drastically despite the anticipated declines, pointing to some segments that will continue to grow.

His nonresidential forecast was echoed somewhat by Cliff Brewis of McGraw Hill Construction, who offered a closer look at numerous segments of the construction market. While the outlook may not be bright, he suggested it might not be that bleak either. Looking back at the past three construction cycles, he pointed out that in real terms, there’s still more construction spending than at the heights of the previous two cycles.

Like Shober, Brewis raised the possibility of the U.S. economy being in recession right now, adding that, “these are certainly challenging times” -- whether there’s a recession or not. What may be important to watch now, he said, is employment. Unlike what happened in previous economic cycles, it didn’t come back strongly after the last recession, because companies have become very disciplined about expanding. “As we exit this challenging period, the key to how long it lasts may be whether or not employment comes back.”

Brewis is not predicting huge declines overall in nonresidential construction, pointing to a number of segments, such as educational building and health care, that should continue to perform fairly well. He also noted a recent trend in the retail segment of smaller swings than in previous construction cycles.

ENERGY STAR REVISIONS
Manufacturers may have to lower not only their sales goals, but also their performance numbers, if they hope to keep an Energy Star label on their products in 2009. Richard Karney, Energy Star program manager for the Department of Energy, updated WDMA members on the new criteria it is considering at this point, but he noted also that DOE is waiting to see what happens at the February International Code Council hearings before issuing its final plans. An important goal for Energy Star is to be “better than code,” he explained, and right now, it is still uncertain how stringent revisions to the 2009 International Codes will be for windows, doors and skylights.

DOE’s Richard Karney updated WDMA members on plans to strengthen performance requirements to carry an Energy Star label.


Among the changes Karney reviewed are substantially lower maximum U-values in the Northern zones—as low as .30 versus the current .35—and substantially lower solar heat gain coefficients in the Southern zones—as low as .25 versus the current maximum 0.40. Other possibilities include SHGC requirements in Northern climates that would encourage greater capture of winter solar gain. DOE is also considering expanding the use of alternative performance criteria, specifically SHGC/U-value trade-off options now only in place in the Southernmost climate zones.

Other major changes outlined include a change from four to five climate zones. In addition to aligning better with International Energy Conservation Code climate maps, Karney said the new Energy Star map would also divide the current Northern zone into two separate zones. Also under under consideration are separate criteria for (opaque) entry doors, requirements for certified insulating glass units and inclusion of air leakage resistance minimums.

Click here to download a PDF of DOE's 2nd official update on the Energy Star revision process.

Karney emphasized that DOE sees the Energy Star program as a driver of technology, and, as a result, it is not only looking not issue new criteria to go in effect in 2009, but also more stringent criteria for 2012 and 2015. Window and door manufacturers, he expected, will be able to meet 2009 criteria using existing technology; but more advanced technologies such as electrochromic glazing might be needed to hit the 2015 numbers.

Right now, DOE plans to issue its revised Energy Star criteria for windows, doors and skylights by the first week of March, following the February ICC hearings. DOE has scheduled a stakeholder meeting for March 26 in Washington to allow feedback, with the final criteria expected to be determined in May, Karney said. After the final numbers are determined, window and door manufacturers will be given at least nine months before the new Energy Star criteria take effect, he also assured the audience.

The audience offered Karney a number of comments on the changes. Pointing to the Northern climate zones, and the possible U-factor and SHGC requirements that could be part of the new criteria, one attendee said, “If you pick certain numbers in those ranges, there will be a lot of manufacturers with problems.” Also discussing the Northern zone, another questioned a lower U-factor in light of the fact that utilities face the biggest challenges delivering power in summer—and that lower U-factors could exacerbate that problem.

These issues are still be weighed by DOE, Karney noted. Just about all the feedback and questions DOE has received to date, he added, have concerned its requirements in the Northern zones.

Another issue raised by manufacturers at the meeting was the fact that Energy Star may be equivalent to code in the new construction market, but Energy Star products certainly represent a significant upgrade in energy performance in the existing home market where millions of houses are still equipped with single-pane glass. More stringent criteria in this market could affect the basic affordability of Energy Star windows, it was noted. DOE has heard proposals for a two-tier Energy Star program, and is exploring the possibility of separate Energy Star new construction and replacement window programs to help address the situation, Karney reported. It is also looking at other ways—including working with utilities—to create homeowner incentives for replacing older windows.

CLASS ACTION SUITS
Adding to the challenges facing window manufacturers is the fact they are now seen as targets for class action suits by plaintiffs’ attorneys, according to Dan Smith, a partner with Bowman and Brooke. Although building product manufacturers have long faced the prospect of construction defect litigation, these types of suits were usually considered as individual cases because of the thousands of components and many entities involved tended to make each unique. However, in a 2000 California court case, a product used in numerous homes was determined to be inherently defective and therefore was certified as a class action. This encouraged plaintiffs’ attorneys to find more “common problems” in construction, including windows.

Attorney Dan Smith told attendees that class action suits against window manufacturers are on the rise.


Smith outlined some of the common elements in window cases to date, noting that they typically concern moisture intrusion and insulation claims. Some of the common elements and strategies in these cases, he continued, have developed because the attorneys that bring these type of suits talk and learn from each other. Smith suggested that window manufacturers should do the same. “In litigation arena, you as a group are not competitors,” he stated. “If a window manufacturer wins a class action case, it benefits the industry as a whole,” and, conversely, when a manufacturer loses, it can only encourage more suits.

WDMA BUSINESS
In association business, Rick Kon of Masonite Corp. was elected as WDMA’s new chair at the Florida meeting. Outgoing chair Dave Beeken of Eagle Window & Door noted that the organization is facing its own challenges in the current market, which still has its sights on the goal of industry leadership even while facing financial constraints at a time of consolidation. “The board of directors has been very busy,” he reported, and continues to work hard to find ways to “add value without adding cost.” He promised members they would see some new plans to address current conditions and WDMA’s long term strategic goals within the next few weeks. JGS

Vinylmax Settles Into New Plant

Coming off a 2007 that outperformed 2006 by about 20 percent and expecting the same or a greater increase for 2008, Vinylmax has transitioned to its new facility in
Hamilton, Ohio...

Coming off a 2007 that outperformed 2006 by about 20 percent and expecting the same or a greater increase for 2008, Vinylmax has transitioned to its new facility in Hamilton, Ohio. The move adds more than 60,000 square feet of production space.

 A move three years in the making, Vinylmax took occupancy of its new Hamilton, Ohio, production facility Jan. 2.


The company retained all of its employees during the 12-mile move from its former facility in Cincinnati. Officials are planning a Feb. 20 grand opening to celebrate the completion of the 150,000-square-foot plant.

“We’ve never been as excited about a year as we are right now,” says Vinylmax’s Laura Doerger-Roberts.

The move, which was three years in the making, took place over the Christmas holiday. Vinylmax’s customers were prepared for the one-week disruption and the manufacturer was up and running by January 2—at which point the company’s standard three-day lead times were instantly resumed. “Our first set of trucks went out full and on time,” Doerger-Roberts says. “It took an amazing amount of time
and effort.”

The new state-of-the-art facility is designed to accommodate an expanded product line that includes a new line of economy replacement windows, a full DP 50 program and additional product options such as clay- and bronze-colored exteriors. The company is also adding casements, awnings and sliding glass doors to its Sherwood wood replacement product line and incorporating Veka’s Timberview technology.

Vinylmax offers three-day lead times to its distributor customers from the East Coast to the Rockies. “Our lead time is for everyone within that geographic range, not just for the customers that are close by,” Doerger-Roberts says.

The company is also undertaking in 2008 the development of an Internet-based order management system and will launch a multi-media marketing program. Vinylmax is a Window & Door Top 100 manufacturer in the $30 million to $40 million in annual sales range.

SNE Continues Scale Back

Shortly after announcing the closure of its West Virginia and Georgia plants, SNE Enterprises is sending nearly half of its Wisconsin workforce home to wait out the winter...

Just weeks after announcing the closure of its West Virginia plant and months after announcing the closure of its Georgia plant, SNE Enterprises is sending nearly half of its Wisconsin workforce home to wait out the winter. The Mosinee, Wis., manufacturer of Crestline and Vetter windows and doors, will temporarily lay off 300 workers until the depressed housing market picks up in warmer months, according to a report in the Wausau Daily Herald.

“We just don't know how long it will take this year to bounce back,” spokesperson Amy Lewis told the local newspaper.

SNE, part of The Peachtree Cos. owned by the Schield family—founders of Weather Shield Windows & Doors—typically calls for voluntary layoffs when construction slows during colder months. This year, 300 of the plant’s 672 workers will be affected.

The layoffs could last anywhere from two weeks to three months. “However long it takes for our order volume to pick up,” Lewis said. “Generally, they are voluntary layoffs, and this time around, just because the housing market is so depressed right now, there are more jobs involved.”

SNE manufactures wood and vinyl window frames and doors, and the layoffs will affect workers on its wood products line. The company is hiring to fill 100 positions on its vinyl products line, though that line has a lower pay scale, and workers typically wait for their jobs to reopen, Lewis said.

The employees will retain their seniority and pay raise schedule when they return to work, Lewis said.

Michigan Manufacturer Grows

Genesee Valley Windows Inc., a direct sales manufacturer serving the Flint, Mich., region, will relocate in February to expand its operations, company officials announced...

Genesee Valley Windows Inc., a direct sales manufacturer serving the Flint, Mich., region, will relocate in February to expand its operations, company officials announced.

The company, a subsidiary of Paramount Improvements Inc., will move from its current facility in Burton, Mich., to a 70,000-square-foot site in Flint. Officials expect to hire 70 additional workers by the end of 2009, according to a report in the Flint Journal.

“We've outgrown it,” CEO Tom Panek said of Genesee Valley Windows’ current facility. “The building we've purchased is roughly three times the size of our existing location.”

Panek said the company plans to transfer 36 workers from Burton and hire 20 new assembly line or delivery workers this spring for the Flint plant. He also expects to hire 50 more workers by the end of 2009. The company will retain its current site to serve as a staging installation and storage area, he said.

Panek founded Paramount Improvements in 1990 as a one-person operation. Since then, the company has grown to 96 employees in Flint and has completed about 24,000 remodeling jobs. In addition to making and installing windows, the business offers vinyl siding, decks, sunrooms, roofs and kitchen remodeling.

In 2007, the company had sales of about $11 million. Panek said projections show sales could exceed $20 million this year and $30 million by 2009.

“The Michigan economy is a little bit down, but there's still a lot of work out there for our type of business,” he said. “We just have to be aggressive and seek the work out, and also we get a lot of referrals.”

Canadian Manufacturer Expands Workforce

Atlantic All-Weather Windows Ltd., one of the largest window and door manufacturers in Eastern Canada, will create about 200 jobs at its new plant in Amherst, Nova Scotia...

Atlantic All-Weather Windows Ltd., one of the largest window and door manufacturers in Eastern Canada, will create about 200 jobs at its new plant in Amherst, Nova Scotia. With the help of a business promotion agency, the Port Elgin, N.B.-based company will receive up to $1.2 million during the next five years for meeting
hiring targets.

Atlantic Windows, founded in 1983, already has strong market share in Nova Scotia and exports are growing into Quebec, Ontario, Bermuda, the Caribbean, Iceland and Spain.

The company is also developing markets for its hurricane-related products.

An investment attraction arm for the provincial government, Nova Scotia Business Inc. encourages companies to expand or establish locations in the area through its payroll rebate program.

...

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