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In the flat glass business in North America, Asahi Glass has been working on a profitability improving project since 2006 that included an overhaul of management and the shutdown of the Cinnaminson Plant of subsidiary AGC Flat Glass North America, Inc. (AFNA). However, the continued decline in the housing market in North America, where residential glass occupies a greater share, has created a serious oversupply situation. The earnings structure of AFNA excessively depends on clear float glass, which is general-purpose glass that is difficult to differentiate from the 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.
Meanwhile, with growing concern about the global environment and energy issues, the solar cell market is projected to grow rapidly by 40% annually on a global basis. In North America, demand for glass for solar cells is expected to expand, while demand for raw glass for automotive use and value-added building products is expected to remain stable.
Under these circumstances, Asahi Glass has decided to stop operations of float glass at the Victorville Plant (California), the St. Augustine Plant (Quebec, Canada) and Line No. 1 at the Greenland Plant (Tennessee) of AFNA, hoping to improve the supply-demand balance of glass and raise the utilization rate of other production facilities. By these measures, Asahi Glass will decrease its glass production capacity in North America by about 40%.
As for architectural sputter coating lines, which have an excessive output capacity compared with the size of the market, Asahi Glass has decided to stop operations at the Victorville Plant and Hampton Plant (Iowa) of AFNA and concentrate production of its full commercial and residential product range at the Abingdon Plant. Moreover, it has decided to sell the glass fabrication business to focus on core glass production and coating technologies.
With this new structure, Asahi Glass projects that AFNA will be better able to focus resources and management attention to driving product innovation and improving cost to better serve customers’ needs. Asahi Glass will continue to leverage its group resources and production technologies to introduce leading-edge, high-performance products into the North American flat glass market.
As a result of this restructuring program, Asahi Glass expects to incur an extraordinary loss of 13.5 billion yen (~ $132 million) in the second quarter of fiscal year 2008. However, there will be no change in the outlook for the fiscal year, since the loss has already been factored in.
For additional information, call (81) 33218-5509, e-mail email@example.com or visit www.agc.co.jp.