More Insights on 2012

 

 

 

Scott Thomsen

 

Guardian Industries

 

Carleton, Mich.

 

As Window & Door prepared its annual forecast issue, industry executives shared their thoughts and predictions for the coming year in much more depth than could be gathered together in one article. In "More Insights on 2012," we present their detailed answers to questions about the coming year.

 

What do you think 2012 will look like?

We expect residential windows and doors to be flat year over year based on key economic indicators.  Given the current state of existing housing inventory, the backlog of foreclosures, and general sentiment in the market it is hard to envision much recovery in 2012.  We expect to see improvements by 2013 into 2014.

What are some of the biggest challenges for the industry in the coming year?

The biggest challenge for the industry will be generating enough cash to sustain and grow businesses. With the pending energy regulation changes, all members of the window and door supply chain will need to invest in technology, people, assets, and marketing to launch products that meet the codes. Another challenge will be how to lower the cost basis without long term damages to core competencies in a business. It will be a real balancing act for window and door producers in 2012.

If we break it down a bit, what do you anticipate in the new construction realm?

New construction appears to be flat year over year when reviewing market research data.

What about the retrofit market?

Replacement and remodeling (R&R) has historically seen a 6 percent compound annual growth rate (CAGR).  We are forecasting a 3 percent year-over-year change for our business.  History has shown that most significant upticks in the window and door R&R market come from energy-based incentives similar to the .30/.30 legislation. The challenge for R&R is that it has been typically funded by second mortgages or consumer lines of credit, which are extremely difficult to obtain in today’s credit market.  In a nutshell, there needs to be government incentives to drive the R&R market in the next two years.

What’s going to be happening with energy efficiency in the coming year? Is the industry focus on ramped-up Energy Star requirements? Are retail channels gaining traction with “whole home performance” efforts? Is the industry chasing triple panes and other means of better energy performance numbers?

Energy codes will continue to become more stringent in terms of U-value and the solar heat gain coefficient (SHGC). So companies will develop and offer a broader product offering including whole-home performance or zero-energy homes. This is good for the window and door industry as we have witnessed in Europe. However, Europe was not in a credit crisis situation when it entered the triple-glaze window and passive-house phases of market evolution. Companies typically migrate to competitive differentiation in difficult market conditions in order to gain leads, gain market share and generate cash. Therefore, we see more product innovation in the next two to three years than we have seen in the past two to three years.

On a (hopefully) positive note, do you see any particular product segments or geographic regions outperforming the industry as a whole?

We see growth in multi-family housing and R&R in the northern climatic regions.

How much of an impact does lending (or lack thereof) have on the business? The National Association of Home Builders is making financing-related discussions one of its top priorities this year—are they on the mark?

Commercial lending and credit availability have a significant impact on the window and door business—throughout the value chain, from consumer lending to a company’s working capital. In our opinion it is the number one issue that needs to be resolved in order to improve the health of the industry.

Is your company likely to be hiring, laying off, or maintaining the status quo in 2012?

Our company is hiring knowledge workers in the areas of innovation, marketing, sales, channel development and supply chain.  Being a global company with operations in 26 countries enables us to utilize our global cash generation to apply funds to markets where we need to change or refine our business models. 

Do you have anything else to add?

The residential window and door market has historically consumed 40 percent to 45 percent of the flat glass production in North America. This industry is very important to many component [suppliers], window and door manufacturers, distributors, etc., so it is vital that solutions to the credit situation be identified and implemented. The North America economy is very dependent on the construction industry performance and is fundamental to economic recovery. 
 

Window & Door's "More Insights on 2012" also features questions and answers about the coming year from the following people: