Consolidation Coming to Window Industry?

The hangover from the housing bubble lingers on.

At Door and Window Manufacturer Magazine, author Kevin Confidential (Disclosure: I think he works at Serious) has posted some interesting, and somewhat ominous, stats for the building industry.

New housing starts this year will come to around 500,000, a 75 percent drop from the 2.2 million started in 2006. Retrofits are also down 20 to 50 percent this year compared to last year.

As a result, there's too much capacity in the building trades. The residential window business has enough bandwidth to support $12 billion in sales. JELD-WEN, one of the more respected manufacturers, recently got absorbed by a private equity firm. 

The industry may ultimately have to shed 50 percent of its capacity before dealers, manufacturers and installers can start to claw back much-needed margins. 

No one likes to cut. But sometimes it is the only solution. Semiconductor manufacturers went through painful retractions in the late 80s and early 2000s. Some factories never even opened. Nonetheless, mothballing proved to be crucial to that industry's recovery.

Construction will likely face a tougher road back to profitability. The one silver lining might be energy efficiency. Let's face it--a lot of buildings leak energy like a sieve. Windows pay for themselves. Homeowners know that. As energy bills climb, the argument for retrofits will only grow. 

Another silver lining: windows weigh a lot. It doesn't makes sense to ship them across oceans. Building materials still largely get made in the U.S. Higher energy prices and a rebound in retrofits could well lead to new manufacturing jobs.