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Sudden closure of Trainor Glass likely to cause ripple effect across industry

Post Time:Feb 28,2012Classify:Industry NewsView:82

The news of Trainor Glass Co.'s sudden closure last week was met with mixed reaction across the glass industry―from surprise and sadness, to fear and uncertainty. Officials from the contract glazier notified employees by Feb. 21 that the company was immediately closing all locations and laying off all staff. At the time, Trainor employed about 500 people in 14 states.

"We are saddened to learn of Trainor's closure, as we have partnered with them for decades on many projects," says Garret Henson, vice president of sales, Viracon Inc. "We have great respect for the Trainor family, and we have become close to many of their employees over the years. The silver lining in this is that if they do not emerge from this closure, many talented people will be available to companies throughout the U.S. It is imperative that our industry retains this talent."

"We are saddened and troubled by these recent developments," says Mic Patterson, director of strategic development for Enclos Corp. "We at Enclos recognize Trainor as a good company and a good competitor. ... We are especially concerned for the employees, vendors and material suppliers who may get caught in the fallout."

Many people expressed surprise at the complete shutdown of the company, rather than the closure of individual locations or divisions. "My initial reaction was one of shock," says John Heinaman, chairman and CEO of Heinaman Contract Glazing. "I had the highest respect for Bob Trainor and his team."

"Most people in the industry knew about their closing offices and consolidating," says Pete Chojnacki, president of FabTech LLC. "However, it is always a shock when such a large and long-surviving glazier ceases operations. You never want to see that happen."

The news certainly came as a surprise to one former Trainor employee, who said the Modular Wall Division was gaining momentum and “selling a lot of jobs.”

“We knew the glass side was having some issues; some job bids had gone wrong and were going south. But, we were doing well,” the employee says.

Warning signsAccording to several industry representatives, there may have been warning signs that Trainor was in trouble, including unprofitable expansions to the West and Southwest, one source says. "They expanded too quickly," he says.

The company also rapidly expanded into several other businesses, including solar. "At a time when the economy is not robust, glazing subcontractors should stick to what they do best and manage it," says Jeff Haber, managing partner, W&W Glass. "There are numerous examples of companies that have grown too big too fast, and gotten away from their core."

Considering the state of the construction market, the news of another closure in the glazing industry is not entirely surprising, Patterson says. "There has been widespread industry speculation that the prolonged adverse market conditions might ultimately result in this kind of damage. Some express surprise that it has taken this long. We have recently seen disruptions to ASI Ltd., and now Trainor. The market has improved in certain regions but remains under widespread duress. If these conditions continue, there is likely to be further damage," he says.

Paul Main, U.S. division manager for Border Glass & Aluminum, agrees. "For the industry, it looks like consolidation and downsizing will continue for contract glaziers and material suppliers. Recovery for the construction industry will be a long, slow process," he says.

The ripple effectThe closure of the large glazing contractor―which had annual sales of between $150 and $175 million in 2010―could cause a ripple effect across the industry, posing challenges to suppliers and other contract glaziers, according to several sources. "This is a hit. Ultimately, of course, the industry will rebound, but this is not good for any of us," Patterson says.

"The extent of the damage remains to be seen," he continues. "At worst, building developers lose a fa?ade provider serving widespread regions. But, there is also the impact to the supply chain providing upstream materials and services, and the probability of a ripple effect that can be anywhere from annoying to devastating for these companies. Then there is the tendency for the market to tighten in reaction—developers get edgy about implementing new projects, bonding and insurance gets tougher, [and] there is a general increase in caution and scrutiny that just makes an already tough market tougher."

Haber agrees. "Every bonding company is going to start tightening the leash. They are going to start raising the capital requirements, and general contractors are going to be more selective as to who gets work," he says. "This will be painful in the short term. ... It might expose a few more [contract glaziers] that are in bad shape."

According to one supplier representative, there were 176 Trainor projects in play at the time of the closure. "In at least one case, a general contractor in Washington, D.C., has temporarily hired former Trainor employees to finish the job they were working on,” the rep says.

Similarly, the Dallas Morning News is reporting that contractor Austin Commercial has already hired a number of former Trainor employees to finish the 42-story Museum Tower project that Trainor Glass was working on before it closed.

"It is likely Trainor is involved in projects that are going to need to be completed,” Patterson says. “The banks or surety companies may step in to shore up Trainor, at least until these projects can be finished. ... Still, none of this is good for the industry."

As for suppliers, "I would imagine many will not be paid in full, and this will make the credit terms stricter for the rest of us," Heinaman says. "Banks who lend to contract glazing companies will be more restrictive in their terms, and sureties will require higher levels of collateral."

Chojnacki agrees that some suppliers will be negatively affected. "As a supplier, I hate to see others get burned for product and services they provided in good faith. Unfortunately, some good people and companies will suffer financial loss without any fault of their own," he says.

United Architectural Metals is one of the glass industry suppliers owed. “The project we were working on is bonded, so we are going to get paid,” says Scott Clymire, vice president. “We are very lucky. It is a lot of paperwork. We have to prove we supplied the product by providing purchase order back-ups, proof of delivery, stored material still at our facility, etc.”

Clymire says many construction managers are now requiring contractors to carry bonds. “Since the ASI and Trainer closures, we’re seeing bonded work only,” he says. Additionally, United Architectural Metals is seeking further protection by asking for joint pay from the construction manager, or requesting down payments on orders. Clymire adds that United Architectural Metals’ suppliers are also tightening up. “We were seeing 60- to 90-day payment terms. Now, we’re going back to 30-day terms, and vendors are asking for deposits before they will ship materials” he says.

Chojnacki adds that he hopes Trainor's closure won't affect innovation at other glaziers. "I hope it does not impact ... the willingness to look at new methods and products," he says. FabTech was in discussions with Trainor Glass prior to its closure about developing preglazed storefront and other new approaches to glazing. "We never got to partner on these innovations with Trainor. Others are moving forward with these methods, but it would be a shame if innovative thinking at glazing companies suffered," he says.

The news serves as a wake-up call to the industry, Haber says. "Trainor was one of the top 10 glazing companies in the country. If they can go out of business with no notice in the span of a year, it can happen to anybody," he says. Companies should take this opportunity to reevaluate their own operations and contracts. "Owners should ensure they have sufficient capital reserves," he says.

In terms of contracts, owners should make certain they have good margins, and that payment terms and bidding terms are fair. "At some point, you have to make a profit. To just take work for the sake of taking work is a mistake and cannot lead to long-term success," Haber says.

Heinaman agrees. "This could make other contract companies realize that we are in a high risk business and we must earn a profit on a consistent basis to assure we have reserves for non-profitable projects," he says. Additionally, "we are part of a real 'hands-on' business that requires constant, close management."

To share your thoughts on Trainor's closure and how it might affect the industry, email kdevlin@glass.org.

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