Harmon AutoGlass makes plans to grow

Scott Leiferman would much rather talk about the future of Harmon AutoGlass, the 53-year-old company he bought in March, than about the wild and woolly history of the auto-glass replacement industry in Minnesota.

That colorful history has been characterized by red ink, steak giveaways and other controversial marketing ploys that have led to laws against rebates for windshield repairs.

Leiferman, 32, a Mankato native, predicts profits for the state's largest glass-replacement company, even though he wouldn't own Harmon if its former owner, Apogee Enterprises, had been able to make money replacing windshields.

Apogee, which had 2003 sales of about $547 million, now concentrates on making windows for commercial buildings even though it started out in the windshield market more than half a century ago.

Despite the controversial nature of the industry and Apogee's financial losses in the auto-glass business, Harmon's new owner says he'll succeed with his new venture, as he has with past ventures.

A nimble, private entrepreneur, Leiferman believes, sometimes is better equipped to thrive in a fiercely competitive industry than a large corporation beholden to shareholders and securities analysts.

Industry observers, including one of Harmon's best-known competitors, agree that a little guy might have a better chance than a big guy in the low-margin business of replacing and repairing cracked windshields in Minnesota.

"The difference with a sole operator is he'll have day-to-day hands-on management, whereas Apogee was a large, national, publicly held company," said Chul Kwak, vice president of Glass Service Co., which became famous for TV commercials that offered free steaks with glass replacement.

Eric Martinuzzi, senior research analyst with the Craig-Hallum securities firm in Minneapolis, agrees. "Believe it or not, the little guy might have an advantage," said Martinuzzi, who follows Apogee for Craig-Hallum. "If you're a private company, you can take a smaller margin because he's not beholden to shareholders. There are certain businesses that have yet to demonstrate that they can be made into nationwide chains."

One of those, he said, is auto-glass replacement, an industry dominated by small, independent operators who have historically competed for customers with promotional gimmicks. That is especially true in Minnesota, because of a peculiarity in state insurance law: Minnesota is one of a few states that requires auto insurers to offer glass coverage with no deductible. That means normal price competition doesn't exist because the insurance company covers the bill.

That situation led companies such as Glass Service, under its former owner, George Corporaal, to offer everything from turkeys to steak to cash as rebates for choosing one auto-glass firm over another. The gimmicks were dramatically reduced when the 2002 Legislature prohibited companies from using rebates for windshield replacement covered by insurance, on the ground that they were driving up costs for insurance companies, which had to cover the charges. Kwak said Glass Service still offers steaks and cash as an inducement to customers who are paying for the repairs themselves because they've opted out of no-deductible comprehensive coverage. But he said the company, which employees bought from Corporaal 15 months ago, has decided to compete on quality and customer service rather than "be known as the rebate company."

600450 Harmon AutoGlass makes plans to grow glassonweb.com
Date: 10 May 2004
Source: Startribune.com

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