Safelite Glass Corp.

views updated

Safelite Glass Corp.

P.O. Box 2000
Columbus, Ohio 43216
U.S.A.
(614) 842-3000
Fax: (614) 842-3395
Web site: http://www.safelite.com

Private Company
Founded: 1947 as Service Auto Glass
Employees: 4,000
Sales: $438.3 million (1996 est.)
SICs: 3211 Flat Glass; 7536 Automotive Glass Replacement Shops

With an estimated 14 percent share of the $2.4 billion market for replacement automotive windows, Safelite Glass Corp. and its employees have aptly been dubbed “Wizards of Windshields.” Safelite boasts nearly 500 company-owned stores across the country, two manufacturing plants, and a fleet of 1,000 “Glassmobile” vans for at-home service. Having endured several changes in corporate ownership over the course of its 50 years in business, the company was acquired by the Boston-based investment banking firm of Thomas H. Lee Co. late in 1996. The new owners have hinted that an initial public offering could come in the not-too-distant future.

Postwar Origins

The firm was founded as Service Auto Glass in 1947 in Wichita, Kansas, by the appropriately-named Bud Classman and his partner, Art Lankin. The duo did not limit themselves to replacement service for long. While not a primary focus of the business, the company started manufacturing laminated glass block for architectural applications and laminated flat glass for windshields in 1951 and continued to manufacture glass block for more than 40 years. Also in 1951, the firm adopted the Safelite name. The “safe” in Safelite refers to laminated glass, which incorporates a layer of plastic film between two sheets of glass. The plastic prevents shards of glass from flying free in case of impact. “Lite” is an automotive term for the windows in a car.

The proliferation of automobiles—and auto accidents—in the postwar era led inexorably to an increased need for wind-shield replacements. Safelight added a second installation center in 1964 and a windshield production plant three years later. The company’s vertical integration into manufacturing not only cut costs but also helped it ensure quality control.

Throughout its first two decades in business, Safelite’s growth was apparently limited to the greater Wichita area, but its 1968 acquisition by Royal Industries, Inc. launched a period of rapid expansion. Royal had been incorporated in 1949 as a defense contractor known as Century Engineers. The firm took the Royal moniker after merging with Royal Jet Inc. in 1957. Safelite was one of over 30 acquisitions made by Royal from 1969 to 1972. This three-year flurry of activity transformed Royal into an $80 million manufacturer and distributor of original and aftermarket automotive parts and accessories, nuclear and aerospace materials, and a diverse array of industrial and consumer goods made from rubber. Under its new parent, Safelite soon became the biggest component of Royal’s automotive segment. It established three new warehouses in 1971 (for a total of nine warehouses) and acquired 18 separate retail glass outlets in Dallas, Tulsa, and Oklahoma City. The company built a second windshield manufacturing plant in Enfield, North Carolina, on the East Coast in 1969 and acquired a Denver glass factory, Pennco Enterprises, Inc., in 1972. Royal augmented Safelite’s capacity to produce tempered safety glass in 1973 and doubled production capacity at its original factory a year later. Having the support of a much larger corporation also allowed Safelite to boost its advertising budget in the early 1970s as well.

Acquisition Opens New Chapter in 1976

Royal was itself acquired by Lear Siegler Inc. (later renamed Lear Seating Corporation), a $700 million conglomerate, in 1976. Now best-known for its automotive seats, Lear Siegler was then a widely diversified manufacturer with interests in everything from electronics to plastics. The acquisition was part of a reorganization that turned the parent into a $1 billion company by the end of the decade. Under Lear, Safelite consolidated its Colorado and Kansas lamination operations at a new facility in Wichita in 1978. Safelite thrived during the 1980s: by the latter years of the decade, it had manufacturing facilities in Wichita, Salt Lake City, and Enfield, North Carolina; 45 ware-houses nationwide; 550 retail shops across the country (this was later reduced to 495); 4,000 employees; and an estimated $400 million in annual sales.

Third Acquisition Marks Late 1980s

After nearly two decades as a subsidiary of public companies, Safelite was taken private as part of Forstmann, Little & Co.’s $2.1 billion leveraged buy out of Lear Siegler Inc. in 1987. Determined to capitalize on its investment, the new parent quickly spun off several of Lear’s operations. Safelite was one of the few components the investment bank kept for any length of time.

In 1989, the investment bankers hired Robert Morosky, former vice-chairman and chief financial officer of The Limited, Inc., as chairman and CEO of the windshield company. Over the course of his brief tenure, Morosky focused on marketing and unit growth, establishing a goal of 1,500 stores and $1 billion in sales. Although Safelite only had one Columbus outlet, Morosky also moved his new employer’s headquarters to Columbus, Ohio (where he not coincidentally maintained a home), in 1990. The new leader also oversaw the company’s implementation of the S AFENET intranet. This accounting and management system linked virtually all aspects of the business and would form the backbone of Safelite’s next key growth program.

New Management and Marketing Strategy for the 1990s

In 1991, Forstmann, Little elected to shift Safelite’s target market, and with it the company’s management roster. Morosky advanced to the part-time position of chairman emeritus, and the parent company installed Garen K. Staglin as chairman and CEO. Staglin’s previous experience as chairman of ADP Inc.’s Automotive Services Group shed light on his plan for Safelite. The executive had helped turn ADP into North America’s top provider of automotive services to the insurance industry.

Noting that administrative costs to insurers for replacing automotive glass were inordinately high in proportion to the work done—sometimes amounting to $100 on a $300 repair job—Safelite proposed to process the individual claims as well as service them. The windshield company added an automated claims processing system to its existing SAFENET network and sold 21 of America’s top 30 insurance companies—among them Aetna, Safeco, Travelers and State Farm—on its “Total Claims Solution” (now known as the “Total Customer Solution”). By linking its computer network with those of major auto insurers via electronic data interchange, Safelite was able to take on the windshield claims processing functions normally performed within the insurance company. Employees at Safelite’s new National Referral Phone Centers registered claims, assessed coverage, and scheduled repairs at one of the company’s retail outlets. This “one-stop service” often proved more convenient to insurance customers as well as to insurers. Staglin told the Columbus Dispatch that “Our goal is to be a business partner with our insurance companies, a claims processor instead of (only) a window replacer.” Launched in 1991, the program reduced participating insurance companies’ processing costs from as high as $100 per windshield claim to as little as $.25 per claim. Needless to say, the marketing program also benefitted Safelite’s bottom line; its market share grew by one-fifth, its inventory decreased by $23 million, and its net income (while rarely specified by this privately-held firm) was said to have increased fourfold.

Staglin also increased customer service, implementing two distinctive types of mobile service. Specially-equipped vans dubbed “Glassmobiles” provided at-home windshield repair and replacement at no additional cost. A Catastrophe Action Team (CAT) comprising about 100 members and their equipment, stood at the ready to provide emergency repairs and replacements in tandem with insurers. The CAT performed an estimated 4,000 windshield installations in the wake of 1992’s Hurricane Andrew. Safelite added another innovation to its roster in 1995. Its proprietary windshield duplicating device could measure the profile of a windshield and reproduce it without removing it from the vehicle. This technique added custom design to Safelite’s existing roster of more than 900 windshield styles.

Company Perspectives:

“Our Mission: Become the dominant, low-cost manufacturer, distributor and installer of quality replacement auto glass and related services in the U.S.A. Our Values: 1. Our customers come first. 2. Associates are our most valuable resource. 3. We constantly improve. 4. Every associate is empowered. 5. We recognize and reward results. 6. We win through teamwork. 7. Our business relationships reflect mutual respect, trust and integrity.”

Staglin oversaw the implementation of a new compensation plan based on an old idea—piecework—for hourly employees. Wary of the potential pitfalls, including deflated employee morale and declining output, the company installed a computerized system to monitor inventory and installation rates. Beginning in 1994, the firm phased in a changeover from the hourly pay rate to a piece rate. In order to satisfy its unionized employees (about 10 percent of the total work force), Safelite offered a guaranteed minimum wage of $11 per hour or $20 per unit installed over a given minimum. The system ensured quality by keeping track of who did what job: if an auto came back because of an installation defect, the worker who installed it had to redo the work without pay. The program received wide press coverage and praise. It increased average productivity per worker by 20 percent, hiked per employee earnings by 10 percent, and boosted overall output by 36 percent—a rate Business Week’s Gene Koretz called “eye-popping” in a February 1997 article. Furthermore, absenteeism, turnover, and paid sick leave declined dramatically, and Safelite’s already-high rate of customer satisfaction rose five percentage points to 95 percent.

New Ownership for the Late 1990s

In 1996, Boston’s Thomas H. Lee Co. acquired Safelite from Forstmann, Little for an undisclosed sum. Having made headlines—not to mention a $900 million profit—on the sale of Snapple Beverage Co. to Quaker Oats Co. in 1995, Lee possessed ready cash for the purchase. Although Lee told the Columbus Dispatch that “We have no plans to change any-thing,” in 1996, executives hinted that the new owner might take Safelite public.