View From The Trenches

I’ve been writing this blog for more than a year now. Sometimes it can be difficult to get the creative juices stirred up every week and find an appropriate topic to hold the interest of its readers. I’ll admit no problem this time, despite the fact that I’ve just completed a four-day cross-country turnaround flight.

I would like to honor two people who have no connection to the auto glass industry. Subjects such as urethane, deceptive referrals were foreign to them, and ask them the name of any auto glass installation firm (save one) and they could not answer. In fact, in their entire life span, neither ever had a windshield nor a tempered piece of auto glass replaced. If they did, they never spoke to me about it. Hopefully they would have since I am their middle son.

I used to think that nothing would last forever. I’ve been convinced and those convictions reinforced over the past week or so that there is such a thing as eternal love and devotion. The second revelation was that my siblings and I are direct products of our upbringing and we should be forever grateful for that quirk of fate.

My parents’ 61 years of marriage ended last week when my mother, who had suffered from Alzheimer’s for eight years, passed away at the age of 92. It was a blessing for both of them as it bled both life and finances from the both of them. My father, who tried to nurse his wife on his own for more than four years, spent the last three and half years faithfully coming daily to her nursing home, spending the four hours at midday, feeding and tending to her needs. The only time he ever missed visiting was when his health forced him into a hospital for a week and a single weekend to attend the out of town wedding of his granddaughter.

My two brothers and I never heard a word of complaint ever from my parents. My father never said a word when he sold his townhouse and moved into a three room 700-square-foot flat in order to finance his wife’s long-term care. Their stoicism had roots in their own beginnings.

My mother never knew what a stable home was. She lost her mother before her first birthday and was passed around to relatives, as her father worked on a railroad. He died when she was 12, just before the Depression hit and was given to her married half-sister to be cared after. My father was the youngest of eight of a hardscrabble tenant farmer in upstate New York. The stories of deprivations that he suffered through I heard came from other relatives but never from my dad. These two people met and married in 1947 and started a family almost immediately. The three sons they bore came three years apart.

My mother was an elementary teacher by profession, a drill sergeant by avocation and a folk philosopher by hobby. Our daily lives were filled with one-line aphorisms like:
“If you can’t say something nice about someone, don’t say anything at all.” (Sarcastic remarks, however, were a gray area.) “Don’t use a word if you can’t spell it” and my favorite (and I hope my most adhered-to) saying: “If you can’t do something right, don’t do it at all.”

Self-pity or excuses never existed in our household. I had medical obstacles to overcome early in life and all I ever received was positive reinforcement and the desire for them to provide me with the best opportunities to thrive and to succeed. Mom was a she-wolf in acquiring those objectives yet she never allowed me to wallow or to dwell on the negatives. “Work hard and you will succeed” was a phrase that echoed constantly inside the walls of our home.

We were a family that ate together and prayed together. We were taught that the concept of family was more than just a word. I learned to watch out for my younger brother as my older brother was assigned to be vigilant over me. Yet those bonds were forged early and apparently permanently as we near our sixth decade. We have maintained contact and fraternal love despite being separated by large distances. My younger brother has achieved significant fame in my parents’ region and my mother was often praised in the nursing home for having bore him. She had a standard one-line response for such occasions even as reality and communication slipped away. She would always say, “I have three sons,” just to remind that person of her two other boys’ equality in her heart and mind. Furthermore, despite the wide-ranging cultural revolution that has occurred, by example and by any means possible, that quality of fabricating and replicating family bonds have been passed on to our children and hopefully more future generations of our family.

It has been said, correctly I believe, that a person truly does not reach adulthood until he or she loses his parents. Until that time, if they were lucky or blessed, there would have always would have had a natural support system available to them. I was lucky to have lived this long to have gone untouched by that sort of death.

If one looks or cares enough, you can easily find my parents’ philosophy of life in these blogs of mine. If I could wish for anything in this industry, it is the desire for a quality product to be installed correctly and never ever do anything to dishonor one’s name or to harm a customer or their property. That is the least we could do and it is frustrating at best to see that simple concept lost through the haze of doing business. We have to do better in this industry and equal blame for the decline of quality and craftsmanship has to be shared as well by all.

Let me pass on a story concerning consumer decision-making that occurred this weekend. For the obvious reasons, this was a stressful weekend for all the family. As Murphy’s Law would dictate, more chaos would occur at the worst possible time. My brother’s two-year old refrigerator stopped working early Friday morning and a repairman had to be chosen immediately. He opens the Yellow Pages and selects a company who bears the name of its owner. In the process, he ignores several large regional repair companies with large ads promoting their 24-hour services. His logic? He stated he implicitly trusted a man who was proud enough to put his own name on his business.

My brother’s reasoning proved to be correct. This “kid” in his 30s went the extra mile in getting the fridge to work for the weekend. The fan motor had burned out and the correct part was not available anywhere due to the relative newness and model rarity. He returned early on Saturday morning, on a weekend he was moving out of his own house and jerry-rigged another model fan motor to operate, saving hundreds of dollars of food from spoiling until the proper part could be acquired from the manufacturer. For his yeoman efforts, he refused to charge anything extra. A class act in my book. No doubt he was made from good stock. His parents should be proud.

I just love listening to the talking heads describe the current events occurring on Wall Street and other world financial centers. The script tagline of the Oliver Stone’s movie of the same name echoes in irony within my ears of “Greed is good.” That basic human emotion unleashed in one of the most fertile places on this planet for it to flourish has caused massive damage to most of us.

Osama bin Laden and his attack on the World Trade Center had the goal of harming the American economy. The truth is, Bear Stearns with its invention and sale of mortgage derivatives, along with the atmosphere of wholesale greed that permeates Wall Street, has caused a far more crippling and long-term effect than that callous terrorist act ever would have. Instead of being labeled world criminals, CEOs of these companies are handed millions of dollars of compensation while they exit the ruins of those financial companies as they crash down around them.

Does anyone realize the magnitude of harm that the current chaos in our financial securities markets has created? This “meltdown” buzzword that the media is so fond of using graphically describes the state of affairs that is occurring on Wall Street itself and has spread to many other financial institutions throughout our country. Damage control in the form of government bailouts is being applied in order to limit and therefore preserve our national credit rating and reputation as a debtor nation.

The current price of $700 billion, which is being bantered about just in trying to repair the damage of sub-prime mortgage securities, does catch one’s eye but large numbers tend to be lost on the common man. Don’t forget to add up the sums of money that already had been guaranteed to prop up Fannie Mae and Freddie Mac and the insurance giant AIG. And, we are talking about numbers that seldom are heard in polite society—trillions. Now we are talking! As Everett Dirksen, a famous Illinois senator of the 60s once said, “A billion here, a billion there, pretty soon you are talking about some real money.” He may be spinning in his grave at the news of this debacle; perhaps we could use him as an alternative energy source.

How will this affect us? First of all, expect easy credit not to exist. Home loans and even second mortgages will be harder to qualify for and to get, and most likely will be more costly. The prime interest rate is mostly likely to rise just due to the fact that there is less money to lend and that will affect credit card rates and auto loans. Fallout from this has already occurred. The Big Three automakers have suspended leasing programs to dealers due to the fact that residual car values have dropped so fast making that act financially untenable for them. Foreign car manufacturers are likely to follow suit, which, of course, will have the effect of fewer sales being made to the public. In a trickle-down effect that I expect, diminishing car sales may have a positive effect on some auto glass replacement figures. People will mostly likely keep their cars longer, making maintenance and repair a higher priority. On the downside, if gas prices remain high, lower miles driven will counterbalance the need for those services, an effect we as an industry currently are seeing and from which we are suffering.

Corporations will have a harder time funding expansions and takeovers. Timing is everything. It’s possible that Belron could not have been able to secure a credit line for the Diamond purchase if that auction took place this past week. Other purchases it may make should not rival that one in size. I suspect PPG Auto Glass lost its first purchaser, Platinum Equity, because that private equity firm quickly realized that it could not secure enough independent funding cheap enough to make its planned short-term ownership feasible. Kohlberg is expected to soon take over control only because the newly constituted PGW’s old parent company (PPG) has remained a large minority partner, minimizing risk to the slash-and-burn corporate raider. Kohlberg may very well find it hard to sell off or divest itself of parts of PGW in the near future just due to the world credit market and the economic slump that is occurring. On the other hand, the falling value of the American dollar against other world currencies makes shopping for U.S. companies a bargain for the rest of the world. Expect an international flavor as corporations come from overseas to sniff and paw over the bargains that will exist for takeovers.

Let me remind the reader that boom-and-bust cycles are commonplace. Within the past 20 years, this is the third one (and largest) of note. We had the savings and loan scandals along with the Milken junk bond debacles. In 1981, home mortgage rates exceeded 12 percent while car loans topped out the usury laws at 21 percent. Like high gas prices, those sorts of rates had a very chilling effect on the economy. The horrific crash of 1929 took more than a decade to recover from and ironically the reforms of separating banks from investment firms enacted at that time were reversed just under ten years ago in the GLBA act of 1999 which paved the way for this current scandal. Let no political party cast the first stone on allowing that law to be passed; the margin of passage was 92 yeas and 8 nays.

As small businesses and corporations, we do not have the luxury of government bail-outs. If we fail, we drop off the face of the economic map with no tears shed for our departure. However, the smaller we are, the more flexible and maneuverable we should become and try to weather or navigate the rough weather ahead. Many of us can and will survive. My best advice is for any company to reach out for long-term gains. This is not a sprint but a marathon. Those who search for the quick dollar or band-aid fix are most likely doomed to failure especially in treacherous times like these.

However, the best business model seems to be to grow into an institution of such size, self importance, greed and political power that it proves irresistible to failure. One would just need the phone number of the U.S. Treasury and a corporate address so that the bailout checks would arrive. In the bastion of free enterprise that Wall Street proclaims itself to be, it seems extremely ironic that it has set a new record for corporate welfare.

Let me give you folks a science lesson. Back in the late 1800s, a British naturalist named Charles Darwin outlined in a book called “The Origin of The Species” his theory of how life came to be on this planet. One central point to his thesis was that either plants or animals adapted to changing conditions in their environment or they perished. They either evolved or they were forever rendered extinct on this planet. It is known as “the survival of the fittest.” I’m sure, as you well know, that applies in our industry as it does in all businesses. Adapt or die.

I’ve owned a business for 28 years. That is a fairly long life cycle in the auto glass industry since failures in the first few years are the most common outcome. I have had to evolve my business model twice in that time in order to survive. The third time may not be the charm. It has gotten very tough out there in my world and my options have shrunk, along with my bottom line.

I’ve tried to do quality work in a world that only a few clients appreciate and almost no corporate account does. As some of you may remember, I’m over 55. I don’t work fast anymore. I can do four to five good mobile installs a day and I’m ready for an easy chair. Since my largest customer base is auto dealerships, I have used a cost-plus model for pricing, always trying to find the middle ground between the hacks in my area and those who really don’t want to do dealership glass work. I’ve had liability insurance and carried the proper licenses for all of my company’s requirements since inception.

What I am seeing out in my area is a “Perfect Storm” of sorts due to this economy. People are driving less and have less money to spend. Housing out here in California is about as high as it is anywhere. So there are many folks faced with unpleasant choices as mortgages and rents rise just as fast as the price of gasoline they commute with does. Nowhere is the sub-species of the automotive culture so apparent as it is in California.

Dealerships are closing monthly. My home county does not have a resident GM dealer anymore. All three have closed or turned back its franchise. San Jose lost its main flagship GM dealer and there are rumblings that the largest and long-time Chevrolet dealer has already issued 60-day closure notices to its employees. Toyota is not immune. Despite having market ready hybrids, sales dropped 10 percent nationally last month and in my area it’s closer to 25 percent. Most service departments have complained that their sales are off 30 percent or more. When most of these people are faced with adversity, they look for extreme short term “solutions.” They tend to use sledgehammers as fly swatters because they know no better.

Last week, a representative of my largest account, a Toyota dealership, told me that in the future it will be using an unlicensed mobile shop in the service department simply because the dealership is trying to cut expenses. This is a family dealership I have had for 28 years and with whom I have never had a problem in regard to quality or pricing.

Less than two years ago, I lost a used car account to this “company” due to hiring of a new used car manager. The service department had been ordered to use this particular business in the case of used car service work and the door was opened for other uses. An example: A tech broke a Prius windshield doing a recall repair. These folks came in and installed an FW2602 for $179, re-installed a moulding that they broke and stuffed the shield down the cowl as I watched. The company’s techs are simply hacks in the worst way. The owner of this business was a car detailer when he bought the business from his cousin two years ago.

Tagging along just behind them is a statewide auto glass chain. This particular “award-winning” shop has made it a point to market itself to dealerships. I will formally applaud this particular corporation for its use of very good and dependable salespeople. At no time in my almost three decades have I met or seen such professionalism when it comes to contact sales. In my part of Northern California, they are very good. In fact they far outstrip the installers they hire. I have lost two dealerships over the years to this shop, through osmosis. A service manager who has used them in the past is hired and I get shown the door without recourse. While I have seen many instances of horrible installs by their techs, they have been able to hang on to accounts more through guile, pricing and salesmanship than any other apparent reason. With this downturn in the economy and their reputed loss of business to Belron from insurance accounts, their sales staffs are turning up the heat on dealerships and dropping install prices along with glass in order to keep from going under. Try to combat that kind of daily pressure as a one-man shop.

I will be going today to meet with my Toyota service manger to see what, if anything, can be salvaged. In any case, I’m convinced I will be forced to lower my prices and, sadly, I will have to comply.

Think about this, I have only increased my prices two times in my 28 years. I’m no virgin in this marketplace, but as weak as many of us are, it is very difficult to stand by and even lose one to three months worth of income as these places experiment with new vendors. From my standpoint, I have been limited in getting new clients due to the demands of the existing ones; so losing such a large account is even more deadly.

I can blame Belron for dropping prices and stretching out claim payments in the insurance sector, but they are not the problem in this instance. My worst nightmare is the same for all independents. I’ve tried different distributors in order to lower glass prices.

I’ve survived worse and time will tell if I think it is worth it to pick myself up, dust myself off and keep fighting. Many of you are in the same pickle I’m in. I feel your pain as customers get swayed or steered elsewhere by pricing and not by quality. I hate to lose in anything. It makes sense for me to think about doing something else, just based on my increased age. However, I’m enough of a grump not to accept someone else telling me when to quit.

What is the most dangerous situation in this industry is that as prices and profits drop, the chance for permanent damage occurs in us all. No business can withstand losses forever and the saddest part is that this industry is addicted to price discounts to combat declining sales, when in fact that action alone puts us all on a very slippery slope for failure.

This is not the tire industry where installation is not overly difficult and the merchandise becomes the price point. This is still a craft of sorts, no matter how much of an attempt of many to make it not one.

Whether I survive is not the question or the problem, it is what this industry wants to evolve into. Many just don’t care and can’t and won’t see beyond their own corporate or personal noses. To me, that is the saddest part of this morass in which we have put ourselves. I’m not whining or asking for sympathy in my situation Regulations won’t help, neither will any trade organization. Something still has to be done to prevent this slide into oblivion.