AGC Flat Glass North America to Close Three Plants, Makes Plans to Sell Fabrication Business

Beginning April 16 and continuing over the next six months, AGC Flat Glass North America (AFNA) will cease operations at three of its North American facilities: its float glass and coating plant in Victorville, Calif.; a coating facility in Hampton, Iowa; and a float glass plant in St. Augustine, Quebec. One production line at the Greenland, Tenn., manufacturing plant also will be closed. The move will reduce AFNA parent company Asahi Glass's glass production capacity in North America by about 40 percent. Approximately 800 employees will be affected by the closings.

"These are difficult decisions, and they in no way reflect the skills and capabilities of AGC's outstanding employees across its North American operations," says Brad Kitterman, president and chief executive officer of AFNA. "These decisions were made to minimize the impact of ongoing market trends, by eliminating glass overcapacity and non-core product segments. While difficult, the announcements we are making today will enable AGC Flat Glass North America to create a strong base for future growth—by focusing on the most strategically important and high-growth segments of our business."

According to a press release from the company, Asahi Glass will concentrate on producing glass for solar cells, sales of which are expected to grow by 40 percent annually on a global basis, as well as raw glass for automotive use and value-added building products.

In addition to these immediate closures, AFNA plans to divest its glass fabrication business by the end of 2008. This business segment—which focuses on tempering, laminating and insulating glass products—includes more than 30 locations throughout North America.

"We are confident that our fabrication business will be an attractive acquisition and will remain viable," Kitterman says. "However, this business unit falls outside our new strategic goals, which include focusing on glass production and coating technologies, not finishing operations."

As a result of these changes in its corporate structure and geographic footprint, AFNA also will make changes in its corporate staffing, as well as its research and development (R&D) staffing. The company's corporate services unit in Kingsport, Tenn., will be reduced and reconfigured. In addition, the company's research and development capabilities will be consolidated in Greenland and Abingdon, Va., which means closing an R&D facility in Petaluma, Calif.

In all, about 100 jobs will be eliminated in these two areas. These changes will take place through the end of 2008, as the new restructuring plan is implemented across the country.

According to a press release issued by Asahi Glass, the AFNA parent company has been working to improve profitability since 2006, when it overhauled management and shut down AFNA's Cinnaminson Plant. In addition, the continued decline in the North American housing market has created a serious oversupply situation for the company. The release states: "the earnings structure of AFNA excessively depends on clear float glass-general-purpose glass that is difficult to differentiate from products of competitors. This, combined with higher costs driven by a price surge in raw materials, has been squeezing Asahi Glass' profitability in the region." The release also noted that the decision to stop architectural sputter coating operations at AFNA's Victorville and Hampton, Iowa, plants, was due to an excessive output capacity compared with the size of that market. The company will concentrate production of its full commercial and residential product range at the Abingdon facility.
Five of AFNA's plants will be unaffected by the announcement and will continue their current operations. They include plants in Kingsport; Richmond, Ky.; Spring Hill, Kan.; Abingdon; and Jerry Run, W.Va.

"These five plants-along with the remaining production line at our Greenland plant—form the basis of our North American operations—and will continue to be of utmost importance to AGC in the future," Kitterman says.

He continues, "Because these decisions affect our people, their families and the communities in which we operate, we are approaching them with great sensitivity. Our focus will be on doing whatever we can to help our employees through this difficult time."

Kitterman also notes that the company will work with its customers to ensure that AGC Flat Glass North America continues to deliver the same high-quality products and services customers have come to expect. "For 30 years, this company has been a leader and innovator in the North American glass marketplace, and that will not change. In fact, by refocusing and re-energizing our business, we are striving to deliver even greater value, and more innovative products, to our customers in the solar, construction and automotive markets."

As a result of this restructuring program, Asahi Glass expects to incur an extraordinary loss of approximately $132 million USD (13.5 billion yen) in the second quarter of fiscal year 2008. There will be no change in the outlook for the fiscal year 2008, since the loss has already been factored in.

Need more info and analysis about the issues?
CLICK HERE to subscribe to DWM magazine.