American Weatherseal, a major vinyl window manufacturer located in Orrville, Ohio, shut down operations this week. Things were looking bright only several years ago that they decided to build a new plant, which they moved into last year. I remember visiting the new plant just after it opened in 2007, and I was amazed at how this company seemed to be modernizing and expanding operations. I remembered the days when it was owned by Louisiana Pacific and the main focus was wood windows. Eventually, the company transitioned to vinyl windows to meet changing market demands, and it seemed to be doing quite well. It seems they didn’t see the pending “economic storm,” however, and when it arrived, it hit like a freight train!

Another window plant that has suffered a similar fate reently is Jordan Company’s door and window plant in Memphis, Tenn. Jordan is another example of a company that has done well over the years by adapting to changing market conditions. Initially involved in the millwork business, it eventually transitioned to aluminum doors and windows in the early 1960s and later transitioned to vinyl windows in the mid 1990s.

As dynamic and adaptive as they were, however, neither of these two manufacturing plants could survive the recent downturn brought on by the crisis in our financial markets. It happened so fast that there was little time to react. It seems that easy credit had been “falsely” fueling the market boom like an illegal drug. When too many easy loans are given to borrowers who should not truly qualify for such loans, something bad is bound to happen. Someone or something in our system was looking the other way because it just felt so good to see our economy expanding so fast. But, we were overleveraging. Eventually, the foreclosures started coming and the flood of foreclosed homes on the market led to a devaluation of housing prices. This started the demise of the housing industry and so here we are. It doesn’t seem that anyone saw this coming.

Everything seemed to be going so great. Who wants to argue with success, right? The problem is that not only did this easy money hurt the housing industry but it has also severely hurt the financial markets that are not being repaid on the bad debt. And the financial markets are what we rely upon to help fix the housing market. So, the car is broken and the auto mechanic is sick!
Financial experts say that to solve this crisis, the financial institutions need to go through a process called “deleveraging.” They need to write down or sell off the distressed assets they bought with borrowed money and heal themselves by building up their capital reserves. But, it is not as easy as it sounds, because selling a lot of distressed assets pushes down the asset values even more. It can turn into sort of a “two for the price of one” sale. This drives the finance company’s stock price down, which in turn makes it harder to raise new capital and shore up the cash reserves. So, when will it all turn around?

Well, just like recovering from a bad cold, it just takes time. Some economists caution that we have not hit bottom yet, so we must weather the storm and run our businesses as wisely as we can. We must constantly be analyzing the market dynamics and be ready to capitalize on any and every opportunity where our company can leverage a strategic advantage. Companies with keen marketing strategies and sharp sales reflexes will not only survive, they will prevail!