EPA-230/1-74-037
AUGUST, 1974
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE PRESSED AND
BLOWN GLASS INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
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EPA-230/1-74-037
ECONOMIC ANALYSIS OF PROPOSED
EFFLUENT GUIDELINES - THE PRESSED &
BLOWN GLASS INDUSTRY
August 1974
Contract No. 68-01-1541
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D.C. 20460
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This report has been reviewed by the Office
of Planning and Evaluation, EPA, and approved
for publication. Approval does not signify
that the contents necessarily reflect the
views and policies of the Environmental
Protection Agency, nor does mention of trade
names or commercial products constitute en-
dorsement or recommendation for use.
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PREFACE
The attached document is a contractor's study prepared for the Office
of Planning and Evaluation of the Environmental Protection Agency ("EPA").
The purpose of the study is to analyze the economic impact which could
result from the application of alternative effluent limitation guidelines
and standards of performance to be established under sections 304 (b)
and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document")
supporting the issuance of proposed regulations under sections 304(b)
and 306. The Development Document surveys existing and potential waste
treatment control methods and technology within particular industrial
source categories and supports proposal of certain effluent limitation
guidelines and standards of performance based upon an analysis of the
faasibility of these guidelines and standards in accordance with the
requirements of sections 304(b) and 306 of the Act. Presented in the
Development Document are the investment and operating costs associated
with various alternative control and treatment technologies. The attached
document supplements this analysis by estimating the broader economic
effects which might result from the required application of various control
methods and technologies. This study investigates the effect of alternative
approaches in terms of product price increases, effects upon employment
and the continued viability of affected plants, effects upon foreign
trade and other competitive effects.
The study has been prepared with the supervision and review of the Office
of Planning and Evaluation of EPA. This report was submitted in fulfillment
of Contract No. 68-01-1541, Task Order No. 19 by Arthur D. Little, Inc.
Work was completed as of August, 1974.
This report is being released and circulated at approximately the same
time as publication in the Federal Register of a notice of proposed
-rule making under sections 304(b) and 306 of the Act for the subject point
source category. The study if not an official EPA publication. It will
be considered along with the information contained in the Development
Document and any comments received by EPA on either document before or
during proposed rule making proceedings necessary to establish final
regulations. Prior to final promulgation of regulations, the. accompanying
study shall have standing in any EPA proceeding or court proceeding only
to the extent that it represents the views of the contractor who studied
the subject industry. It cannot be cited, referenced, or represented
in any respect in any such proceeding as a statement of EPA's views
regarding the subject industry.
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EXECUTIVE SUMMARY
A. Purpose
The purpose of this study is to analyze the economic impact of the cost
of pollution abatement requirements under the Federal water pollution
control amendments of 1972 for selected glass products included in SIC
codes 3221 and 3229. In particular the following subcategories were
initially selected for review:
Glass Containers SIC 3221
Machine-made Household Glassware SIC 322912
Handmade Household Glassware SIC 322913
Electric Lightbulb Blanks SIC 3229225
TV Tube Blanks SIC 3229235
B. Methodology
The initial portion of our study basically consisted of an in-house
analysis. To complete this part, we:
Initially reviewed our own background on the five
subcategories included above;
Collected and analyzed up-to-date government data such
as that published by the Bureau of the Census;
Reviewed appropriate directories and trade publications
which concerned themselves with these segments;
Studied annual reports and other financial information
which is available on those firms active in these
segments and;
Made a general literature search on the companies and
the appropriate industries.
To confirm and supplement this information, we personally contacted some
of the associations which represent the subcategories. We also received
and analyzed some printed information sent by these associations.
The one exception to this approach was the hand-pressed and blown glass-
wares subcategory. In this case, a review of published information, the
literature and company data did not reveal enough about the character,
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structure, and profitability of the industry. Therefore, we found it
necessary to conduct a series of interviews with firms active in this
business in order to obtain a realistic picture of its characteristics.
Since no company was willing to divulge private financial data, the
general character of the industry was obtained by synthesizing information
supplied by a number of producers.
Upon completion of the first portion of the study, we summarized the
results and analyzed the initial financial impact of pollution control
guidelines proposed by the Environmental Protection Agency. The investment
and cost information was supplied by the subcontractor, SVERDRUP & PARCEL
Associates (S&P). We compared the data prepared by S&P with our own
experience and believe it to be reasonably representative.
Upon the completion of the initial analysis, we selected two subcategories,
namely, hand-pressed and blown glassware and machine-pressed and blown
glassware, for further study. As these two potentially could be adversely
impacted by the proposed guidelines. In our subsequent work, we analyzed in
more detail the impact of the proposed pollution control guidelines on
these industries considering such factors as price effects, profitability,
capital availability. We estimated how changes in these could result
in potential plant closures and subsequent loss of employment, pause an
adverse impact on the community, contribute to an unfavorable tirade
balance and perhaps result in other adverse impacts.
To accomplish this, we discussed the financial analysis in detail with
important companies in these two segments and obtained from them concurrence
of our results. In some instances, we were supplied supplementary financial
information. An additional unpublished telephone survey covering the
hand-pressed and blown subcategory provided additional data on which to
base estimates of potential plant closings and resultant unemployment.
With this as the basis, we then determined, based on our own judgment
of profitability goals, market conditions and management philosophy;
what the ultimate impact will be when the proposed guidelines are put
into effect.
C. Summary ,
1. Results of the First Part of the Study.
Table 1 summarizes the results of the initial analysis. In that table,
the five industry subcategories are analyzed to determine the effect of
the proposed effluent guidelines based on the best practical technology
(BPT), and the best available technology (BAT). In this analysis, four
important factors were considered, including two financial ratios (the
amount of additional capital to meet these guidelines as a percent of
the replacement value of fixed assets and the operating costs as a per-
cent of annual sales) and two qualitative evaluations of the
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characteristics of the subcategories (the level of competition from other
materials or from imports, and the ability of the industry to raise capital).
Table 1 forms the basis for selecting subcategories for more detailed
study as to what may be the impact resulting from the implementing of the
proposed water effluent guidelines. In reviewing this table, it is apparent
that only the hand-pressed and blown glassware could be adversely affected
based on the two financial ratios described above. The amount of investment
needed for this industry to meet guidelines based on both BPT and BAT
represents a substantial portion of investment in equivalent new plant;
that is 19% and 24.7% respectively. In addition, this is a competitive
industry with limited possibilities of raising capital principally because
the firms are small and privately owned.
The selection of a second subcategory for inclusion in the final part of
this study presented more difficulty and required judgments based more
on qualitative factors. Considering the two financial ratios used in
the table, there is little to choose between the other four subcategories.
Capital requirements as a percent of plant investment ranges from 2.4%
for machine-pressed and blown glassware down to as low as 0.8% for TV
tube blanks. Operating costs as a percent of annual sales is even less
significant ranging from a high of 1% for incandescent lamps to as low
as 0.2% for TV tube blanks. Therefore, the choice of the second segment,
machine-made household glassware, was not based on the financial ratios
but on the characteristics of the industry as summarized in the
final two columns of Table 1. We believe that incandescent light bulb
blanks will not be impacted as this is a relatively non-competitive industry
and the possibility of substitution by other materials is very low. Capital
is readily available as these products are manufactured by large corporations
with ample capital. Glass containers caused some concern because it is
an extremely competitive market even though the segment has the capital
to make the necessary alterations in plant. However, after reviewing
the situation for other competitive materials particularly plastic, aluminum,
and steel, we concluded that those industries will be impacted as much or
perhaps considerably more than glass containers by new effluent guidelines
and by air pollution requirements. Therefore, we did not feel that glass
containers would suffer any disadvantage by the proposed effluent guideline
regulations.
The television picture tube blank industry, although not fully developed
in our initial work, is also shown in Table 1 for sake of comparison. For
this industry segment, capital and operating costs to meet .the proposed
BAT levels, are small in comparison to plant investment and sales, and
the relatively low level of market competition and good capital availability
also support the decision not to analyze this segment further at this time.
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TABLE I
ESTIMATED WATER POLLUTION' CONTROL IMPACT ON
Ul
SEGMENTS OF THE PRESSED AND BLOWS CLASS INDUSTRY
INDUSTRY
GLASS CONTAINERS
TELEVISION PICTURE TUBES
"
INCANDESCENT LAMPS
MACHINE PRESSED AND
BLOWN GLASSWARES
V
HAND PRESSED AND .
BLOWN GLASSWARES
TYPICAL
Day
Production
(tons)
500
250
175
100
5
, PLANT
Sales
$MM/₯R
18
35
30
15
3
DESCRIPTION
Investment
5 MM
18
30
35
9
1.5
POLLUTION CONTROL COSTS
Level
BAT
BPT
BAT
BPT
BAT
BPT
BAT
BPT
BAT
BPT
Capital
312
0
231
0
697
470
214
0
371
284
Annual Operating
THOUSAND $
67
0
68
0
300
240
53
0
72
55
POLLUTION CONTROL COSTS
Capital as I of Operating
Plant Investment
1.7
0
0.8
0
2.0
'1.3
2.4
0
24.7
19.0
of Annual
0.4
0
0.2
0
1.0
0.8
0.4
0
2.4
1.8
INDUSTRY CHARACTER
as I Market Capital
S«les Competition
HIGH
LOW
LOW
HIGH
HIGH
Availability
HIGH
HIGH
HIGH
MEDIUM
LOU
Source: Arthur D. Little, Inc., estimates. Pollution Control Costs determined by SVERDRUP & PARCEL ASSOCIATES*
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2. Conclusions of Phase II.
a. Machine-made Household Glassware
The proposed effluent guidelines at the BPT level have been estimated
by the guidelines contractor to involve no operating costs nor investment
for the typical plant in this segment. Therefore, no economic impact
is anticipated.
At the BAT level, the impact on this industry should be minor, and is
summarized as follows:
Price Effect; In order to maintain dollar profit levels by
offsetting the increased costs of water pollution control, price increases
of about 0.4% would be required. We anticipate this small increase could
be made without any loss of sales.
Financial Effect: The typical plant in this industry could
obtain the funds required to make the investment in water pollution control
equipment.
Plant Closures; None would be expected as a direct result
of the implementation of the recommended BPT or BAT guidelines.
Employment Effect; Slower employment growth than might
otherwise be expected, but no major unemployment problems are anticipated.
Community Effects; No effects.
Balance of Payments Effect; The implementation of these guide-
lines is not expected to have a significant impact on the balance of
payments of the United States.
b. Handmade Household Glassware
If the proposed effluent guidelines, either at the BPT or BAT level, are
imposed on this industry, we believe that a substantial impact will be
felt by the industry. This impact can be summarized as follows;
Plant Closures; 6-8 plants including 3-4 of the large
plants could be expected to close. This could reduce production capacity
by 15 - 20%.
Price Effect; Depending on plant size, increases of from
1.5 - 2.5% would be required to pass the annual operating cost of the
pollution control equipment necessary to meet the proposed BAT control
levels on to the consumer. These increases could probably be passed on
to consumers by the large companies (where the required increase is smaller),
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but could not be fully recovered by the smaller firms.
Price Effect: Depending on plant size, increases of from
1.5 - 2.5% would be required to pass the annual operating cost of the
pollution control equipment necessary to meet the proposed BAT control
levels on to the consumer. These increases could probably be passed on
to consumers by the large companies (where the required increase is
smaller), but could not be fully recovered by the smaller firms.
Financial Effect; The capital costs for meeting the proposed
guidelines would be extremely severe for the smaller firms in this segment.
These are largely privately owned and not accustomed to spending large
sums on expansion or modernization. We believe that if the industry
is required to make the projected investment, which could amount to
one year's cash flow for a large firm and nearly two years' cash flow
for a small firm in this industry segment, several firms would choose
to close down.
Employment Effect; Twenty percent of total persons employed
(approximately 1,200) could lose their jobs due to plant closures. 60 - 70%
of these people could probably find jobs of equal income within a reasonable
distance from their homes. Others, because of a rural location or because
of special skills, would have a difficult time.
Community Effect: Most of the unemployment would be taking
place in the northwestern part of West Virginia and the surrounding counties
of Ohio and Pennsylvania. This area is industrialized enough so that the
total employment within this region will not be substantially decreased.
Balance of Payments Effect! Because the industry is a small
one, U.S. balance of payments will be adversely affected by only about
$13 million annually.
Other Effects; The decline of this segment projected here
will seriously hurt the hand-blown glass industry, one of the more important
handicraft industries in the United States today.
D. Limits of Analysis
In order to place the conclusions in proper perspective, it is important
to recognize that a great many assumptions and approximations had to
be employed. While this causes a certain amount of error in the final
data, we believe that the order-of-magnitude difference are such that
the conclusions are fully valid. Our concern with limits of analysis
involve only the market, economic and total investment considerations.
We are not prepared to comment on the reliability of the pollution control
operating cost nor capital requirements except to say that some industry
spokesmen particularly in the machine pressed and blown glassware feel
that the estimates are below what will actually be experienced.
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We have assumed in glass containers that an average sales price of about
6(? per pound can be realized. This is typical of large volume container
applications such as soft drink and beer bottles in the early part of
1974. Based on some gross engineering work done for other purposes, we
believe that a sales to investment ratio or about 1:1 is typical of this
industry.
There is no appropriate way of obtaining sales figures for incandescent
lamp blanks at this time. Most of these represent interplant transfers
within the same corporation where an artificial transfer price may be
established. We have assumed that the price of incandescent lamp blanks
will be about 30% higher than television picture tubes on a per-pound
basis but that high investment in automatic equipment will result in a
sales to investment ratio of slightly below 1.
The sales and investment ratio for machine pressed and blown glassware
as seen in Table 1 are much more precise than in the above three cases.
This represents information especially prepared by important members
of the industry. We believe it is current and reflects the present
industry situation.
The information for hand-pressed and blown glassware was derived slightly
differently. The industry spokesmen indicate that a sales to investment
ratio of about 2:1 is typical particularly for a plant with considerable
decorating and etching. A plant which merely produces glass items with
little finishing would have a lower sales to investment ratio. It is
difficult to equate sales to tons in this industry as most companies do
not keep accurate records of production on a tonnage basis and the variation
can be very large depending on how much the glass item is decorated after
forming. Thus, there is some difficulty in applying work done by S&P
which was all based on a tonnage basis to our analysis which was done using
sales and investment ratios. Nevertheless, we believe that data presented
in Table 1 is a good approximation of the situation although the ratios
presented vary by as much as plus or minus 20%. Variations within this
range would not change the conclusions stated in this report.
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INDUSTRY ANALYSIS
Because of the large number of subgroups within the pressed and blown
segment of the glass manufacturing industry, an initial discussion was
held among the EPA representatives, the Guidelines Contractor, and the
Economic Impact Contractor to limit the Economic Impact study to five
subcategories. At that time, the Guidelines Contractor had not devel-
oped a significant amount of information as to the relative degree to
which water pollution problems exist in the various industry subgroups.
Consequently, the five categories initially selected were picked on the
basis of their size, particular business or financial problems believed
to exist, and pollution control problems anticipated from the then avail-
able knowledge of the various industries. The subcategories selected
for analysis were:
1. Glass Containers, SIC Codes 32210-1,2,3
2. Consumer Glasswares, Machinemade 322912
3. Hand Pressed and Blown Glasswares 322913
4. Electric Light Bulb Blanks 3229225
5. Television Tube Blanks 3229235
The principle criteria for selection varied considerably for each seg-
ment. Glass container manufacturing, although not believed to be a
major contribution to water pollution, is a large industry embracing
large and small companies. In addition, severe competition exists both
within the industry and from other materials. The machinemade consumer
glassware segment is also quite competitive, has a range of company sizes,
and was believed to have more serious potential pollution problems than
the container industry. The handmade glass segment was chosen on the
basis of its small average plant size and limited capability for raising
capital. The light bulb blank manufacturing industry was selected be-
cause of its extensive use of acids for etching; television tube blanks
because of potential pollution from chemicals used for secondary treat-
ment.
A. Glass Container Industry
1. Industry Size
The glass container industry in the United States is a large industry,
employing over 70,000 persons and producing products valued at over 2
billion dollars in 1972. Total employment is three times the size of
the flat glass industry, and value-of-shipments are nearly four times
the size of that industry. Industry shipments, exports, imports, and
apparent consumption are shown in Table 2.
In terms of unit shipments (which closely approximate industry production),
the glass container industry has exhibited modest growth in the past sev-
eral years, increasing from 253,198,000 gross in 1969 to 266,620 gross
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TABLE 2
SHIPMENTS. IMPORTS, EXPORTS AND APPARENT CONSUMPTION
Year
1969
1970
1971
1972
Change
from
(1969-72)
Total
Shipments
1,636,685
1,830,213
1,922,723
2,055,686
+25.6
Avg. Annual
Growth
Rate +7.9%
GLASS
Exports
16,292
15,079
15,173
14,982
-7.9
-3.0%
CONTAINERS
(000$)
Imports
5,853
5,631
6,700
9,274
+58.5
+16.6%
Apparent
Consumption
1,626,246
1,820,765
1,914,250
2,049,960
+26.1
8.0%
Imports , % of
Consumption
0.4
0.3
0.4
0.4
Source: United States Department of Commerce
10
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in 1972, for an average annual growth rate of 1.8 percent. The dollar
volume, however, has increased considerably more rapidly, as the value
per gross increased from $6.08 in 1969 to $7.71 in 1972. Total dollar-
value of shipments increased by 33.3 percent, or 10 percent per year
during this three year period. A trend toward larger containers helps
explain this change and is discussed below.
There are approximately 30 firms in the glass container manufacturing in-
dustry operating a total of about 130 plants. Of these, however, the
eight largest firms account for two-thirds of the plant locations, and
about 78 percent of total industry shipments.
The significant firms in this segment and the number of plants they have
are shown in Table 3.
Glass container manufacturing plants are spread throughout the country to
service the requirements of regional customers. While there are plants
in virtually every area, they tend to be concentrated in the East, North,
Central, Pacific, and Middle Atlantic states nearer population centers.
2. Products
The glass container industry produces a wide variety of products, ranging
from perfume bottles to five-gallon water bottles and large carboys.
Three types of glass containers, however, account for the bulk of those
produced. These three products are nonreturnable soft drink bottles,
non-returnable beer bottles, food bottles, and jars. Combined, these
represented almost 75 percent of all glass containers shipped in 1972.
A breakdown by markets for container shipments can be found in Table 4.
Change in shipments from 1967 to 1972 for each end use is summarized in
Table 5.
For the past several years, nonreturnable soft drink bottles have con-
stituted the fastest growing segment of the glass container industry,
growing at an average annual rate of nearly 30 percent in the last half
of the 1960's. This type of container grew from 4 percent of the total
of glass container shipments in 1965 (on a unit basis) to 23 percent in
1972. The rapid growth of this product, however, appears to be receeding
as the nonreturnable bottle has reached a mature stage in its life cycle.
Returnable beverage bottles, the main product displaced by the nonreturn-
ables, seem to have reached a point where further declines will be slow.
Metal cans, the other major packaging used for soft drinks, will probably
show small increases in market share. Today, nonreturnable glass bever-
age containers have about 28 percent of the market, cans have about 35
percent, and returnable bottles about 37 percent.
In beer packaging, metal cans have been growing rapidly at the expense
of glass. From a market share of 58 percent (including both returnable
and nonreturnable) in 1965, glass usage has dropped to about 40 percent
of total beer packaging requirements, and a further erosion is anticipated.
11
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TABLE 3
GLASS CONTAINER MANUFACTURERS
Cony any
Anchor Hocking
Arkansas Glass Container
Ball Corporation
Bartlett Collins Corp.
Brockway Glass Co.
Castle-Hanson
(Seneca Food Corp.)
Chattanooga Glass Co.
Columbia Glass Co.
Columbine Glass Co.
Diamond Glass
Gallo Glass Co.
Glass Container Corp.
Glenshaw Glass
Hillsboro Glass
Industrial Glass Co.
(Troplcana)
Kerr Glass Mfg. Co.
Latchford Glass
Indian Head
Liberty Glass
Lincoln Container Co.
Metro Glass Div.,
(Kraftco Corp.)
Midland Glass Co.
National Bottle Co.
National Can Co.
Owens-Illinois
Thatcher Glass
Underwood Glass
Wheaton Glass
Others not identified
Source: Arthur D. Little, Inc.
*
Estimate
No. of Plants
9
1
4
1
14
1
6
1
1
1
1
14
2
1
1
10
1
7
1
1
4
3
4
3
20
7
1
o*
Major Products
General line, also tableware
General line
General line
Private mold, also tableware
General line
Food containers
Beverage,food,cosmetics,beer
Cosmetic, chemical, drugs
Beer
Cosmetic, drugs
Wine bottles
General line
Jars, wide and narrow mouth
Liquor
Jars, narrow and wide mouth
General line
General line
General line, wine
Beverage, milk, juice
Beer, liquor, private mold
Flasks, jars, bottles
Beer,food,chemicals,preserves
Liquors, food, chemicals
General line
General line .
Flasks,jars,jugs,narrow and
wide mouth
Flasks,jars,jugs,beverage,
narrow and wide mouth
General line
12
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TABLE 4
DOMESTIC SHIPMENTS OF GLASS CONTAINERS, 1972
Type (OOP gross)
Food 82,574
Beverage, nonreturnable
Beer, nonreturnable
Medicinal & Health
Liquor
Beverage, returnable
Toiletries and Cosmetics
Wine
Household & Industrial
Beer, returnable
Dairy Products
60,954
52,705
20,620
13,873
10,099
9,272
8,552
4,283
1,699
238
Percent of
Total Units
(M)
31.2
23.0
20.0
7.8
5.2
3.8
3.5
3.2
1.6
0.6
0.1
Value
(000 $)
291,336
461,770
265,525
112,473
161,394
135,922
68,815
120,619
35,073
11,825
4,744
Percent of
Value
17.5
27.7
15.9
6.7
9.7
8.1
4.1
7.2
2.1
0.7
0.3
264,869
100.0 1,669,496 100.0
Source: U. S. Dept. of Commerce M32 G (72)-13
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' ' TABLE 5
GLASS CONTAINED SHIPMENTS BY TYPE
Type
Food
Beverages, nonr
Beer, nonreturnable
Medicinal and Health
Liquor
Beverages, returnable
Toiletries and Cc
Wine
Household and Inc
Beer, returnable
Dairy Products
1967 - 1972
(000 gross)
1972
82,574
irnable 60,954
e 52,705
.th 20,620
13,873
ible 10,099
imetics 9,272
8,552
istrial 4,283
1,699
238
1967
81,483
24,899
' i
40,169
22,603
13,752
13,282
15,913
5,707
'5,664
4,332
958 '
Percent
Change
+ 1.3
+144.8
+ 31.2
- 8.8 t
+ 0.1
- 24.0
- 41.7
+ 49.9
- 24.4
- 60.8
- 75.2
Source: U. S. Dept. of Commerce
TOTAL 264,869 228,766 +15.8
14
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This is due to consumer preference for the non-breakable cans and the
industry desire to take advantage or the ability of cans to be filled
more rapidly than bottles.
Glass food containers are the single largest category of glass containers,
and are expected to remain so in the foreseeable future. The steady rise
in food production, especially in prepared food products, will more than
offset anticipated inroads of plastic containers in the food industry.
Glass container use in the medicinal and health products, household and
industrial items, toiletries and cosmetics, liquor, and dairy products,
have been either stable or declining in recent years, as plastic con-
tainers, aerosols and paper have taken all the growth in these markets.
We therefore predict that total usage will remain stable.
The glass container industry, aware of its competition from other pack-
aging materials, has been highly concerned with product developments
involving product cost, utility, and safety. Significant recent develop-
ments have been the resealable twist-off cap for nonreturnable bottles,
the development of composite plastic-glass bottles, and the chemical
tempering of glass container surfaces for added strength. The resealable
bottle cap has prompted a significant shift to larger size bottles in
the soft drink market.
3. Manufacturing Process
The manufacture of container glass differs only in degree and detail from
other related glass products. Basically all glass manufacturing involves
the high temperature conversion of raw material into a homogeneous melt
and fabrication from that melt into useful articles. The basic raw
materials are glass, sand, soda ash, limestone, and feldspar with minor
additives for specific purposes such as coloring, etc.
The process can be considered to consist of four or five principal steps:
Raw material handling and mixing (batching)
Melting and fining
t Forming
Annealing
Inspection - packaging
Raw materials are usually received in bulk except for minor additives and
stored in segregated bins or silos until required.
Batch weighing and mixing are by and large automatic in the large opera-
tion of a container plant. Presently most weighing is done automatically
and the operator error in batch composition is reduced to a minimum.
15
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Large mixers, either rotary or double cove, of 1000-3000 Ib capacity are
used to insure uniform batch. In some cases up to 4 percent water is
added to the batch mix to reduce segregation and dusting. The mixer dis-
charges into unit containers from which the batch is automatically and
continuously charged into the furnace through screw or pusher type feeders.
In glass container manufacturing, continuous tanks are used to melt and
fine (remove bubbles) the glass. The high production volume requires very
high tonnage melting capacity. A glass tank that would have an output
of 10-150 tons/day might be 20-50 ft long, 10-25 ft wide, and have a
holding capacity of 50-300 tons of glass. The tank is divided into two
sections: the melting chamber, and the working or fining chamber.
Although temperature control of the molds is critical for producing uni-
fqrm ware that meet specifications, all cooling is carried out by use of
forced air rather than water.
There are no secondary finishing operations in container manufacture and
ware is inspected and packaged.
4. Marketing and Competition
The glass container business is highly competitive, not only within the
industry, but also between it and the manufacturers of containers from
other materials. Since these products are commodities and are sold to
businesses which are generally very price-conscious, price cutting is
commonplace and profit margins are generally low.
There are significant differences in the marketing characteristics for
the various end uses. In the beer market, the nonreturnable bottle has
become by far the most important glass container. Originally there was
an attempt to standardize the nonreturnable beer bottle, but as time went
on, beer producers insisted on containers which gave some measure of pro-
duct identification. This variety of bottles are now used. The beer
bottle market is highly concentrated with the major brewers increasing
their dominance of the business at the expense of the local brewers.
Metal cans have been increasing their market share in this segment of
the container business at the expense of glass, partly because of the
convenience and unbreakability of cans, partly because of the higher
filling rates possible with cans, and partly because of the move by some
brewers to install their own captive can-making facilities to save ship-
ping costs. There are no glass bottle producing facilities owned by beer
companies, probably because the investment required would be prohibitive.
Glass containers are sold on the basis of long-term contracts between
bottle producers and brewers, and bottles are shipped directly to the
breweries by the manufacturers. Pricing is extremely critical in ob-
taining contracts-, and there is no doubt that any increase in the prices
of glass containers relative to metal cans would have a significant im-
pact on this market over the long run.
16
-------
The soft drink market is like the beer market in many ways. Again, long
term contracts are the typical. Because of the franchise system of bot-
tlers , however, there are a much larger number of purchasers than in the
beer business. For a major national soft drink company, bottle design
and color will be specified from the corporate office, and certain bottle
producers will have their products approved for purchase by the local
bottlers of the particular brand.
There is still a very substantial returnable bottle volume in soft drinks
(see Tables 4 & 5), and it is concentrated in the more rural parts of the
country. Bottlers using returnables reportedly often have long and well
established relationships with certain glass bottle producers, and these
producers rely heavily upon this business for continual support.
The soft drink market for nonreturnable bottles has been the fastest grow-
ing single market in recent years growing at between 7 percent and 8 per-
cent annually, but has now leveled off. Future growth will probably be
closer to 3 percent per year - one might well expect that an increasing
amount of competition from metal cans will occur in this market as it has
in the beer market. Thus far, no metal can product has been developed to
compete with the large glass containers for soft drinks principally be-
cause large glass containers now can be resealed.
In food container business, glass bottles and jars are used primarily where
the product is believed to be attractive looking and enhanced by being
packed in a see-through container. Such items as fruits and fruit juices,
condiments, jams, jellies, pickles, baby foods, and a few specialty vege-
tables dominate the market. Most packers use sufficient quantities of
containers to be serviced directly by the manufacturers. There are also
wholesalers of glass containers which service small accounts. There are
several glass container manufacturers which are owned by food companies,
such as Metro Containers Division of Kraftco, Glass Containers Corporation
of Norton Simon (formerly Hunt Foods), Industrial Glass Company of Tropi-
cana Products, and Castle-Hanson Division of Seneca Foods.
In the wine and liquor markets, the glass bottle has less competition from
other materials than in virtually any other market. There are two glass
container plants affiliated with wine companies: Gallo Glass Company
and a joint venture between Indian Head and United Vintners called Madera
Glass Company. Virtually all glass container companies manufacture wine
or liquor bottles, and there is a high degree of competition within this
market.
The other major glass container markets, medicinal and health products,
household and industrial products, toiletries and cosmetics, and dairy
products have all been extremely hard hit by competition by plastics and
metals (especially aerosols) in the past five years, and shipments of
glass containers to htese markets have declined significantly. There are
a large number of consumers in these markets, and distributors play a
larger role than in the larger, more concentrated markets discussed above.
17
-------
5. Industry Structure and Major Participants
The glass container industry size in terms of companies (30-35) and num-
ber of plants (about 130) was mentioned earlier, and a list of producers
appeared in Table 3.
A total of 28 companies, excluding subsidiaries, with 122 plants have
been specifically identified. By size these are broken down as follows:
No. of Total
Companies Plants
Firms with one location 13 13
Firms with two locations 2 4
Firms with three locations 2 6
Firms with four locations 3 12
Firms with five or more lo-
cations 8 87
28 122
The other five to eight firms in this business produce small volumes of
specialty glass containers, in plants where other glass products provide
the bulk of the business.
Nine large firms dominate this business. Each is described briefly below:
Owens-Illinois
With total annual sales in 1972 of $1.6 billion, this company is a major
producer of glass containers, plastic and paper packaging, technical,
electronic and consumer glassware, and paper and plastic consumer products.
It operates 20 glass container plants in 14 states in the United States,
and participates in a number of overseas operations. Its packaging group,
of which the domestic glass container business is a part, provided the
company with 62 percent of its sales in 1972.
Brockway Glass Co.
This company is primarily a producer of glass containers, although it also
operates plastic container, paper box, and glass tableware plants. It had
total sales of 236 million dollars in 1972. It operates 14 glass container
plants in 11 states.
Anchor-Hocking
Glass containers constituted 66 percent of this firm's 1972 sales which
$340 million dollars, with glass and plastic tableware, making up the bal-
ance. It operates nine glass container plants in eight states.
Indian Head, Inc.
This former textile firm entered the glass container business in 1967
through acquisition, and proceeded to buy up three additional producers
18
-------
in the late 1960's, and also to enter two joint ventures. In 1972 glass
containers manufactured at its seven plants represented about 45 percent
of its total corporate sales of 513 million dollars, with specialty tex-
tiles and fabricated metals representing the balance. It operates glass
container plants in seven states.
Chattanooga Glass Co. (Subsidiary of Dorsey Corp.)
This firm operates six glass container plants in as many states. The
parent company had sales in 1972 of 114 million dollars. It also produces
highway trailers and plastic containers.
Glass Container Corp. (Subsidiary of Norton-Simon Corp.)
Operating a total of 14 glass container plants in nine states, the pack-
aging arm of this company accounted for about 13 percent of its 1972
sales of 1.168 billion dollars.
Kerr Glass Manufacturing Co.
This company operates ten plants in eight states. It is closely held and
does not report sales or earnings.
Thatcher Glass (Division, Dart Industries, Inc.)
The Thatcher Division was responsible for about 125 million dollars of
Dart's 1972 sales of 888 million dollars. It operates seven plants in
six states.
Metro Containers (Division, Kraftco)
Metro accounted for about 3 percent of Kraftco's 3 billion dollars in
sales in 1972. It operates four plants in three states. There has been
a significant expansion in the glass container industry in the past five
years, as several new plants have come on stream and numerous expansions
of existing plants have occurred. At the same time, a consolidation of
the industry into fewer larger firms has occurred. Acquisitions and Mer-
ger activity in this industry are shown in Table 6.
6. Financial Data
Sales, net profits after taxes, and total assets for the eleven publicly
owned companies in the glass container industry are shown in Table 7.
Also shown are after-tax profits as percents of net sales and total assets,
and the estimated share of total company sales attributable to the glass
container business. Table 8 shows the rates of return (after tax income)
on sales and assets for 1970 through 1972.
7. Industry Outlook
The glass container business is an extremely competitive, mature industry.
Growth in both volume and dollar value of shipments is expected to grow
at rates significantly lower than GNP growth.
From 1973 through 1980, glass container shipments of all types are expected
to grow at rates of about 1 percent per year. Dollar values will grow by
about 4 percent per year, partly due to shifts in product mix, and partly
due to higher prices.
19
-------
TABLE 6
GLASS CONTAINER CONSOLIDATIONS
Parent
Anchor-Hocki ng
Brockway Glass
Indian Head, Inc.
National Can Corp.
Chattanooga Glass
(Merged into Dorsey
Corp., 1963)
Glass Container Corp.
(Owned by Norton-
Simon Corp.)
Thatcher Glass
National Bottle Corp.
Action
Acquired Glass Grafters, Baltimore, Md.,
1965
Acquired Phoenix Glass, Monaca, Pa., 1970
Acquired Hazel-Atlas Glass Division from
Continental Can Corp. in 1964
Acquired Obear-Nestor Glass, 1967
Acquired Northwestern Glass, 1968 t
Acquired Pierce Glass, 1968
Acquired Laurens Glass, 1968
Merged with Foster-Forbes Glass, 1970
Acquired Maryland Glass, 1968
Acquired Gulfport Glass, 1968
Acquired Keyper Glass, 1971
Acquired Knox Glass, 1954
Acquired Fairmount Glass, 1967
Merged into Rexall Drug, 1966;
Rexall name changed to Dart Industries
Combination of Star City Glass,
Universal Glass Products, and
Gaynor Glass Co.
Sources: Moodys', Standard and Poor
20
-------
TABLE 7
GLASS CONTAINER MANUFACTURERS,
Company
Anchor-Hocking
Ball Corp.
Brockway
Dart Industries
(Thatcher Glass)
Dorsey Corp.
(Chattanooga Glass)
Indian Head, Inc.
Kraftco, Inc.
(Metro Containers)
Midland Glass
National Can
Norton-Simon, Inc.
(Glass Container Corp.)
Owens-Illinois
1972 Sales
$000
340,278
173,361
235,904
888,116
114,296
513,647
3,196,789
69,356
475,655
1,168,803
1,636,295
Net Profits
(After Tax)
$000
20,739
7,794
14,576
53,364
4,232
8,299
88,335
2,582
14,087
50,487
64,579
Total Assets
$000
236,159
122,987
181,164
975,800
76,754
311,601
1,245,193
29,389
298,205
899,817
1,497,914
of it (After
x) As % Of
iles Assets
6.1
4.5
6.2
6.0
3.7
1.6
2.8
3.7
3.0
4.3
8.8
6.3
8.0
5.5
5.5
2.7
7.1
8.8
4.7
5.6
rer tent
Shares of
Sales from
Containers
66
90
90
14
N.A.
45
< 3
100
N.A.
<10
3.9
4.3
40
Source: Moodys1
-------
TABLE 8
Company
Anchor-Hocki ng
Ball Corp.
Brpckway Glass
Dart Industries
Dorsey Corp.
Indian Head, Inc.
Kraftco
Midland Glass
National Can
Norton Simon
Owens-Illinois
FINANCIAL
RETURN BY
Net
Sales
6
4
6
6
3
1
2
3
3
4
3
.1
.5
.2
.0
.7
.6
.8
.7
.0
.3
.9
1970
Income
1972
GLASS
- 1972
(After
CONTAINER
Tax) as
1971
Assets Sales
8
6
8
5
5
2
7
8
4
5
4
.8
.3
.0
.5
.5
.7
.1
.8
.7
.6
.3
6
3
6
5
4
3
3
3
3
3
4
.1
.7
.4
.4
.5
.0
.1
.4
.0
.9
.0
FIRMS
% of Sales
and
Assets
1970
Assets
8
5
8
5
6
4
7
7
4
5
.8
.8
.6
.4
.7
.5
.8
.9
.7
.3
4.3
Sales
6.
N.
7.
5.
4.
3.
3.
3.
4.
3.
3.
5
A.
3
6
9
0
0
0
3
5
8
Assets
9
N
9
5
6
4
4
N
6
4
4
.5
.A.
.8
.4
.9
.1
.1
.A.
.5
.9
.0
Sources: Moodys1 and Arthur D. Little, Inc.
-------
The glass container industry in the 1970's will continue to face extremely
tough competition from other packaging media. In addition, competition
between companies in this subcategory will continue to be strong. Costs
of manufacture will be an extremely sensitive area for the producers in
this industry. The costs of producing containers from plastics, metal,
or paper will also be affected by upward pressures, including costs for
pollution control. However, one must recognize that should the costs of
manufacturing glass containers become out of line with cost of producing
containers of other materials, this subcategory will decline in size,
profitability, and employment.
8. Water Pollution Control Status
In the glass container manufacturing industry, both in-plant and end-of-
pipe method of water pollution control are currently employed. A number
of plants have achieved low effluent levels with only in-plant methods,
however, final treatment systems are not necessarily required.
It has been reported by the Guideline Contractor that 70 percent of the
40 plants in this industry for which data is available are presently
achieving effluent levels corresponding to those recommended as the
Best Practicable Control Technology Currently Available.
These effluent levels should be achievable by the remaining plants with
a minimum of in-plant modification or end-of-pipe treatment. These would
include improved spray collection of forming machine shop oil, or improved
cleanup procedures. Recycle of shear spray, collection of oily runoff
from forming machines, and use of non-liquid cleaners are steps which
could be utilized by plants to improve water pollution control where neces-
sary.
B. Machinemade Household Glassware
Consumer glassware covers products classified under SIC codes 322912 and
322913, the former specifically referring to machinemade products, and
the latter to handmade products. Together these products are manufactured
by approximately 60 companies in about 100 plants. Approximately ten
of these plants manufacture both handmade and machinemade glass consumer
items, and a significant number also produce specialty glass containers
and glass lighting parts such as shades, reflectors, globes, chimneys,
and other parts (not light bulbs or parts). While the handmade and
machinemade consumer glassware industries are discussed separately below,
the significant overlap between them should be kept in mind.
Competition from imports is not an important factor for the machinemade
consumer glassware industry even though imported glassware represents
severe competition for handmade glass manufacturers. Import statistics
do not separate imports of these products into handmade and machinemade
items. However, the United States Tariff Commission, in a 1968 study of
these industries, estimated that 95 percent of all consumer glassware im-
ports (by value) are handmade. We still believe this to be true.
/- 23
-------
Employment in the consumer glassware industry is also available only for
the total, not handmade or machinemade separately, and amounted to about
17,000 in 1967. Probably 10,000-11,000 are employed in the machinemade
subcategory. This number has been stable for the last six to seven years.
1. Industry Size
Consumer machinemade glassware, SIC code 322912, includes tumblers, stem-
ware, tableware, cookware, ovenware, kitchenware, and ornamental, decora-
tive, novelty glassware, and smoker's accessories. These diverse products
are made in a total of about 40-50 plants in the United States, many of
which make a variety of these items. In addition, some make other glass
products such as containers, lighting, and electronic glassware, or
scientific glass products.
Companies producing machinemade consumer glasswares are listed in Table-9.
The industry in 1972 had shipments valued at $380 million. Of the total
tableware and kitchen-type glassware accounted for $175 million or 46
percent, tumblers for $123 million or 32.3 percent, stemware for $33 mil-
lion or 8.7 percent, and the various decorative items $49 million or
12.9 percent.
The shipments and value of products of the machinemade consumer glassware
industry have shown significant growth in the past several years. Between
1967 and 1972, the value of shipments for all products increased from
$233 million to $380 million, or by 63 percent. This represents an annual
growth of 10.3 percent per year in this period. Industry statistics for
value of shipment, exports, imports, and apparent domestic consumption are
shown in Table 10.
2. Products
Shipments, value, and unit value of the subcategories of consumer glass-
ware products for 1967 through 1972 are shown in Table 11.
All of the products of this industry are items commonly used in homes
and wherever food and beverages are prepared and consumed. They vary
tremendously in size, shape, and color; but are generally similar in the
manufacturing processes used.
In tumblers and stemware, glass competes with plastics, pottery and paper.
In tableware and kitchenware, glass competes with china, plastics, paper,
metal, and wood in certain applications, while in ornamental and decora-
tive products many materials can be considered competitive with glass.
Within the major product breakdowns shown in Table 11, growth in recent
years has been quite uniform. The increases in value of products shipped
between 1967 and 1972 range from a low of 58.5 percent for tableware and
cookware to a high of 68.9 percent for tumblers. In all cases, the value
of shipments increased considerably faster than the quantity, as unit
24
-------
TABLE 9
MACHINEMADE CONSUMER GLASSWARE
Company
Anchor-Recking
Bartlett-Collins Co.
Brock Glass
Brockway Glass
E. 0. Brody Co.
Canton Glass Co.
Corning Glass Works
Elite Company
y
Federal Glass Co.
Fostoria Glass Co.
Gillander Brothers
Harvey Industries
Indiana Glass Co.
Jeannette Glass
Johnson Glass and Plastics
Owens-Illinois
Peltner Glass Co.
Ray-Lite Glass Co.
Shelby Glass Co.
Sinclair Glass Co.
Victory Glass Co.
Wheaton Glass Co.
Unidentified companies
No. of Plants
4
1
1
1
1
1
10
1
1
1
1
3
1
1
1
3
1
1
1
1
1
1
5
Comments
Major container company
Employs 400
Also handmade
Maj or container company
Also hand, employs 160
Many products, including
scientific
Employs 1,800
Also hand, employs 540
Employs 300
Also hand, employs 125
Also hand, employs 1,200
Employs 1,500
Also hand
Major container company
Also hand
Mainly containers, employs
5,000
25-
-------
TABLE 10
SHIPMENTS, EXPORTS IMPORTS, APPARENT CONSUMPTION
MACHINEMADE CONSUMER
Total
Year Shi pments
1969
1970
1971
1972
% Change
274,661
268,749
326,291
380,794
+ 38.6
Exports^
20,663
21 ,608
24,776
29,512
+ 42.5
(000$)
Imports*
2,319
2,576
2,625
(e) 4,148
+ 78.9
GLASSWARES
Apparent
Consumption
256,317
249,717
304,140
355,430
+ 38.7
Imports, as % of
Consumption
0.9
1.0
0.9
1.2
Avg.Annual
Growth
Rate +11.5
+ 12.4 + 21,0
11.5
Includes value of product at port of shipment, plus
calculated import duty into U.S.A.
Imports of machinemade product are assumed to be 5% of
total consumer glassware as per U.S. Tariff Commission
Report, TC Publication 257, 1968.
(e) Estimate
26
-------
TABLE 11
MACHINEMADE CONSUMER GLASSWARE
Product/Year
Tumblers
1967
1969
1971
1972
% Change, 1967-72
Stemware
1967
1969
1971
1972
% Change, 19672
Tableware
1967
1969
1971
1972
% Change, 1967-72
Ornamental and Other
1967
1969
1971
1972
% Change, 1967-72
PRODUCT
Shipments
(000 doz)
67,920
75,078
82,469
82,034
+ 20.8
8,125
9,443
9,191
10,274
+ 26.4
(000 pcs)
340,688
343,552
395,884
430,650
+ 26.4
N.A.
N.A.
N.A.
N.A.
ANALYSIS
Value
(oooTT
72,848
88,508
108,448
123,014
+ 68.9
20,208
24,122
27,171
33,529
+ 65.9
110,683
126,090
151,914
175,484
+ 58.5
29,715
35,941
38,758
48,767
+ 64.1
Unit
Value
~{ir
1.07
1.17
1.31
1.50
+ 40.2
2.49
2.55
2.96
3.26
+ 30.9
0,32
0.36
0.38
0.41
+ 28.1
N.A.
N.A.
N.A.
N.A.
No. of
Establishments
(1967)
21
8
30 - 40
23
Source: U.S. Dept. of Commerce MA-32-E Series
27
-------
prices increased by between 30 percent and 40 percent for the various
products of this industry in the five-year period.
3. Manufacturing Process
The manufacturing of machinemade glass tableware is quite similar to
the container process described in the last section. The tank output
for a machinemade ware plant may vary considerably from 2 to 100 tons
per day.
Tanks may be 6-50 ft long and 4-25 ft wide and have capacity from 3 to
250 tons. Production volumes are not as large as the container industry
and more downtime due to product mix are the rule. However, the tank
serves the same purpose of converting the raw material into a workable
melt of silica-based glass, free from homogeneities and bubbles.
The forming of tableware is basically a pressing or a press and blow
operation. Pressing is the operation of forming glassware by pressure
between a mold and a plunger. Limitations on size are the total pressure
available and the article depth to diameter ratio (1/2) and a diameter
to wall thickness ratio of 100/1. Most pressed ware is no greater than
12" diameter and weighs less than 35 Ibs. Pressing pressures are of the
order of 80-120 psi.
Hollow ware and stemware can be produced at high rates (10-60/min) on
press and blow machines normally used in the United States. The speed
of pressing is largely determined by the time required under pressure to
set up the glass. Most presses are simple table operations having 6, 8,
10, 12 or 16 stations.
In many pressing operations, mold dopes or lubricants are used to prevent
sticking of the glass to the cast iron mold. These lubricants are gener-
ally a mixture of graphite and hydrocarbons of some type. The lubricant
builds up a carbonaceous layer on the mold that prevents oxidation of the
metal and provides less glass adherence. Overspray and excess lubricant
may be the source of water pollution.
Glass tableware is processed through an annealing cycle to reduce and
prevent external strains due to the thermal gradient during forming.
Machinemade tableware does not generally receive any secondary finishing.
Special handling, such as grinding off sharp corners, etc., may be done
with limited production but normally the only operations after forming
is inspection and packing.
4. Marketing and Competition
Consumer glasswares are sold through various distribution channels to
households, restaurants, hotels, hospitals, and other end users. Sales
are often made directly to large purchasers, and household sales are
28
-------
primarily through department stores, gift shops, discount stores and
even drug stores. The larger manufacturers carry huge inventories of
finished products in company-owned warehouses.
In the institutional market, price competition between glass manufacturers
is very important, product design less so. In the household market, pro-
duct design and decoration are key factors in the competitive position
obtained by a manufacturer.
Machinemade glass consumer products face some competition from non-glass
products. However, this competition is not as intense as in the container
market. There is no material truly competitive to glass in the tumbler
and stemware markets in the institutional side of the business. While
plastic and paper cups are a factor in the household market, they are
generally considered as disposable products and not directly competitive
with glass. In the tableware and cookware markets, glass products com-
pete with non-glass products primarily on the basis of product design.
Small price changes for glass items, even relative to metal, pottery,
or other materials, are unlikely to severely impact consumption of these
glass products. The decorative glass products and smokers accessories
markets are ptoobably the least price-sensitive of any of those in the
industry segment, as these products generally do not face direct product-
for-product competition from items made from other materials; design and
consumer taste determine their sales levels.
5. Industry Structure and Major Participants
Of the thirty or so companies engaged in the manufacture of machinemade
consumer glassware, several of the more important are also major factors
in the glass container industry, and several others are sizeable companies
which are basically limited to glassware production. The balance of the
companies in this industry are quite small, with employment of 200 or
less, and are also involved in hand production.
The bulk of the production of machinemade glass consumer is by the large
firms, with Anchor-Hocking Corp., believed to be the leader. Libbey
Division of Owens-Illinois, Federal Glass Co., Division of Federal Paper-
board Co., Jeannette Glass Co., Brockway Corporation (since acquiring the
glassware operations of Continental Can Corporation in 1972) , and Corning
Glass Works, are the other leading companies in the machinemade consumer
glasswares industry.
6. Financial Data
Because this industry is basically made up of operating units of diversi-
fied glass and packaging firms, and smaller, non-publicly held companies,
financial details including the profitability and investment in this
business are not generally available from public sources. A financial
description of a typical plant has been developed, however, and is dis-
cussed in the section on Impact Analysis.
29
-------
Only one firm, which is primarily a manufacturer of machinemade glassware,
is publicly held, the Jeannette Corporation of Jeannette, Pennsylvania.
This company's earnings were at a record $1.2 million on sales of $26.3
million in 1970 and dropped sharply in 1971 to $473 thousand on sales of
$27.8 million. In 1972 the firm earned $521 thousand on sales of $33.5
million, and for 1973 expected to earn $1.1 million on sales of nearly
$0 million dollars.
While the glassware industry experienced a weak year in 1971, Jeannette"s
problems in 1972 were reportedly the result of internal problems which
caused low profits in spite of a strong market for its products. Comments
by Owens-Illinois and Anchor-Hocking, the two largest glassware companies,
indicated 1972 was an excellent year and 1973 was also strong. No finan-
cial details for these operations are provided separately, however.
The financial model of the typical 100 ton per day plant producing machine-
made pressed and blown wares shows a net profit (after tax) of 5.5 percent
of net sales, and 7 percent of total assets. This model was developed
through the assistance of one of the companies in this industry.
7. Industry Outlook
The outlook for machinemade consumer glassware is for continued growth in
shipments about in line with GNP growth, and a more rapid increase in
value as increasing costs of energy and labor are reflected in selling
prices. Due to the relatively low unit value of these products, the
adequate capacity existing in the United States and the bulkiness and
fragility they exhibit, imports are not expected to become a significant
factor in this business in the near future. While the industry has been
and will continue to be sensitive to general economic conditions and
strong intercompany competition, it is less susceptable to competition
from other materials (metals, plastics, paper) than is the container in-
dustry.
8. Water Pollution Control Status
Pollutants from a plant producing machinemade pressed and blown consumer
glassware are the same as in the glass container industry. The Guidelines
Contractor reports that the recommended Best Practicable Control Technology
Currently Available effluent guidelines for suspended solids are currently
being met by three of nine plants for which data are available and those
for oil are being met by four of six plants.
The BPT effluent levels reportedly can be met by the remaining plants
with a minimum of in-plant modifications or final treatment.
30
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C. Handmade Household Glassware
1. Industry Size
Handmade consumer glassware, covered by SIC code 333913, includes stem-
ware, tumblers, tableware, and ornamental and decorative-type glass items
made of glass manufactured in the same establishment.
The shipments of these products by domestic manufacturers amounted to
$87 million in 1972. A sizeable, but unidentifiable portion of this
figure, however, represents shipments of both handmade and machine-made
partially fabricated products. The three identifiable product categories,
handmade tumblers, stemware, and tableware, accounted for $36.8 million
of this total, with the remainder being a combination of lamp parts,
handmade novelty and decorative products and the internal shipments
mentioned above.
The total shipments, exports, imports, and apparent consumption of hand-
made glass items are shown in Table 12 for the years 1969 through 1972.
In the three-year period, the value of shipments grew by 40.4%, while
the value of imports grew by 78.7%, and the total domestic apparent
consumption increased 56.5%.
The handmade consumer glassware industry is made up of about 50 plants
employing 6000 - 7000 people. Many of the plants manufacture other products,
including machinemade glassware and handmade illuminating glassware such
as lamp globes and bases. Most plants are small and the industry is
heavily concentrated in western Pennsylvania, West Virginia, and Ohio.
A list of companies in this industry is shown in Table 13.
2. Products
The products of the handmade industry are quite similar to those of the
machine-made consumer glassware industry in basic form; with stemware,
tumblers, and tableware the most significant products although they generally
tend to be considerably more expensive than similar machinemade items.
The handmade industry has cultivated the image of quality, craftsman-
produced products.
Among the three major types of products, the growth in shipments and value
between 1967 and 1972 has varied considerably. Tumbler shipments in
units declined by 26.5%, while the value of shipments increased by 13.5%.
Stemware saw a 19.7% increase in unit volume and a 43.1% increase in
value. Tableware, while growing in units by 11.6%, showed an increase
in value of 13.4% in this five-year period. The shipments, value and
unit value are shown in Table 14.
31
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TABLE 12
1969
1970
1971
1972
SHIPMENTS, EXPORTS. IMPORTS, APPARENT CONSUMPTION
HANDMADE CONSUMER GLASSWARES
(000 $)
Total
Year Shipments
62,402
62,095
72,117
87,633
Avg.Annual
Growth
Rate +12.0
Exports
764
670
762
% Change ,+ 40.4 + 26.2
Imports
44,076
48,940
49,878
964 (e) 78,819
8.0
78.7
34.0
Apparent Imports, as % of
Consumption Consumption
105,714
110,365
121,233
165,488
+ 56.6
16.1
41.7
44.3
41.1
47.6
Import value includes value of product at port of shipment
plus calculated duty into U.S.A.
Imports of handmade consumer glassware are assumed to be 95%
of total consumer glasswares as per U.S. Tariff Commission
Report, TC Publication 257, 1968.
(e) Estimate
Source: U.S. Department of Commerce, ADL estimates.
32
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TABLE 13
HANDMADE CONSUMER GLASSWARE
Company
Beaumont Co.
Big Pine Key Glass Works
Blenko Glass Co.
Brock Glass Co.
Canton Glass Co.
Colonial Glass Co.
Corning Glass Co.
Crescent Glass Co.
Davis-Lynch Glass Co.
Elite Co.
Fenton Art Glass
Fostoria Glass Co.
Gentile Glass Co.
Gil lander Bros., Inc.
Guernsey Glass Co.
K.R. Haley Glassware
Hamon Handcrafted Glass
Harvey Industries
Imperial Glass Co.
Indiana Glass Co.
Johnson Glass and Plastics
Kanawha Glass Co.
Kemple Glass Works
Labi no Glass Laboratory
Lenox Crystal, Inc.
Lewis County Glass
Louie Glass Co.
Mid-Atlantic Glass Co.
Minners Glass Co.
No. of Plants
1
1
1
1
1
1
1
2
1
1
2
1
1
1
1
1
3
1
1
1
1
1
1
1
1
1
1
1
Comments
Employs 60
Also machine
Also machine, sales $Umillion
Mainly other products
Employs 200, sales $2 million
Also machine
.Employs 400
Also machine, employs 540
Employs 300
Also machine
Also machine, employs 125
Also machine, employs 1200
Also machine
Employs 1200
Employs 200, sales $1-3 million
33
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TABLE 13 (Cont.)
HANDMADE CONSUMER GLASSWARE
No. of Plants
Company
Pennsboro Glass Co. 1
Pilgrim Glass Corp. 1
Rainbow Art Glass 1
Reha Glass Co. 1
Rodefer-Gleason Glass 1
St. Clair Glass Works 1
Scandia Glass Works 1
Scott Depot Glass Co. 3
Seneca Glass Co. 1
Sinclair Glass Co. 1
Sloan Glass, Inc. 1
L. E. Smith Glass Co. 1
Super Glass 1
Viking Glass Co. 1
Westmoreland Glass Co. 1
West Virginia Glass Specialty Co. 1
Wheaton Glass Co. 1
Comments
Also machine
Employs 125
Employs 150
Also machine
Employs 110
Employs 350
Employs 520
Also machine, containers,
employs 5000
34
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TADLE 14
Product/Year
Tumblers
1967
1969
1971
1972
% Change 1967-72
Stemware
1967 .
1969
1971
1972
% Change 1967-72
Tableware
1967
1969
1971
1972
% Change 1967-72
HANDMADE CONSUMER GLASSWARE
PRODUCT
Shipments
(000 pcs)
13,408
12,161
9,768
9,859
- 26.5
(000 doz)
1,740
1,735
1,927
2,082
+ 19.7
(000 pcs)
7,771
7,469
7,421
8,674
+11.6
ANALYSIS
Value
(000 $)
5,600
5,724
5,344
6,354
+ 13.5
13,346
16,219
16,760
19,096
+ 43.1
10,014
9.991
10,473
11,357
+ 13.4
Unit
Value
($)
0.41
0.47
0.54
0.64
+ 56.1
($ doz)
7.67
9.35
8.70
9.17
+ 19.6
1.29
1.34
1.41
1.31
+ 1.-6
No. of
Establishments
20
25
14
Source: U.S. Dept. of Commerce; MA 32E Series
35
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3. Manufacturing Process
In the hand blown and pressed glass industry, the glass is first melted
in a pot (small furnaces with a common stack) or in a day furnace.
It is then "gathered" from the furnace and passed to the blower who
inserts the glass globule into a mold and blows it into shape. The glass
is then removed from the mold and in some cases additional parts are
attached (for example, in the manufacture of stemware). The item
is then placed into an annealing furnace or lehr to remove internal
stresses created in the blowing operation. Next it is trimmed of unwanted
glass and in some cases (e.g., lamp shades) cut into half and is ground
into final shape either by the dry method which merely removes ragged
edges or by the wet method where an exposed edge requires a finer finish.
Quality stemware and crystal is then often cut with the aid of nitric
and sulfuric acid to obtain its final form.
Prior to decoration, some items are etched in hydrofluoric acid to obtain
a "frosted" quality. Three forms of decoration are commonly used by this
industry including painting with a water-based paint, application of a
decal or adding a gold or lead paste, artificially shaped into various
forms. The first two procedures require a final thermal treatment to
insure a strong bond between the paint or decal and the glass. The final
step is to pack the glass items in cardboard containers for shipping.
Many of the factory buildings are old, some predating the Civil War;
others, however, have been rebuilt within the past five or six years.
The process is highly labor intensive with labor costs equaling 50% of
sales and with an annual sales per employee ratio of $14,000 - 16,000,
which is low. Labor rates are above average with a new, unskilled worker
earning about $3.00 per hour and a skilled blower averaging from $11,000
to $14,000 per year. The rates for the semi-skilled and skilled laborers
are competitive with the coal mines in the same geographical region.
There is little automation and much of the movement of goods through
the factory is done by hand. This is due, to the nature of the business
which generates an output of a great many sizes and shapes, most made
in relatively low volume, and requiring several colors and a large number
of decorating patterns. One manager confirmed this by saying that if
he rebuilt his 70-year-old factory today, he would not do it much differently
than it is now.
4. Marketing and Competition
A very high percentage of sales of hand blown or pressed glass is sold
through manufacturers' representatives. Sales of stemware are made
to the retail trade and are packaged ready to sell at the factory.
Sales of lamp parts are to OEM accounts. Most U.S. producers sell in
the domestic market only, but there are modest exports to Canada.
36
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The normal commission ranges from 6 to 15% and can go as high as 20%
for the first year of a new line. The lower end of the range (6 to 7-1/2%)
are virtually "overrides" which are effectively house accounts that are
serviced from the factory.
In the past, customers placed orders as needed and products were made
to these orders. Little inventory of semi-finished or finished goods
was maintained except to round out production schedules. Because the
industry experienced a surge in demand and some shortages of raw materials
in 1974, there is some trend presently toward annual contracts with
shipments made every two months.
Manufacturers of stemware usually own their molds and select their own
designs. Producers of lamp parts may own the mold or may process glass
in the molds of the customer; most of their output is on a custom basis.
Usually the customer selects any design or decoration and it is used
exclusively by him although often it is found that the selection is aided
by the advice and experience of the glass factory.
Delivery is usually made by trucks via common carrier, although some
companies have found it profitable to purchase their own trucks to cut
breakage and speed deliveries.
The pricing patterns of the industry are simple. Since labor represents
50% of the selling price, once the union agreement is ratified the
manufacturer has a strong basis for knowing how his costs will change.
Manufacturers thus revise their price lists once a year, usually on
January 1. Normally increases are necessary as there is little possibility
of offsetting higher wage rates with increased productivity. In 1973,
a 7% increase was typical for lamp parts. The 1974 increase was 5%.
Larger increases were made in stemware, partly to offset unsatisfactory
price levels of previous years caused by intense foreign competition.
The custom nature of some products means that a selling price must be
determined only after the design and specifications of the part are known.
The principal competitive thrust comes from imported items, although
the successive devaluation of the dollar against most Western Europe
countries in August 1971 and February 1973 greatly eased the problem.
Price of U.S. producers to domestic customers are now equal to or slightly
lower than imported items. Mexico still offers low cost competition
to the large California market, partly due to low cost freight rates
within Mexico. However, wider trade with Eastern Europe opens the
possibility of the importation of lower cost hand blown crystal and stemware,
Hand produced glassware is not in most cases directly competitive with
the machine blown and pressed process. The latter is a less costly
process at high output levels. The producer of hand blown items supplies
that portion of the market where the investment in machines and multiple
molds cannot be justified or where the craftsmanship is appreciated by
the consumer (e.g., stemware). However, as labor 'rates continue to rise
37
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the volume range open to the supplier of hand pressed and blown items
is reduced somewhat.
Concern with common problems such as imports, raw materials, and energy
availability has moderated competitive tendencies among domestic manu-
facturers; however, as sales are primarily made by independent manu-
facturers' representatives, competition at that level is more aggressive.
5. Industry Structure
This industry is characterized by a large number of private companies
owned by a small number of stockholders, usually having some family
connection. Many of the owners work or have members of their family
who work in the respective firms. Most companies operate only one plant.
There is little evidence that this industry has been a target for takeover
by larger diversified companies which would be a potential source of funds.
A typical company would have about 150-200 employees and annual sales
of $2.5-3.0 million. It would be owner-operated and be in only one
portion of the hand blown and pressed glass business, although with a
very wide number of products, sizes, colors, and decorative schemes.
Handmade glassware is made in about 50 - 60 plants most of which are
located in northwest West Virginia, eastern Ohio, and southwest Penn-
sylvania. Although about 15% of the plants also produce machinemade
glassware, most plants specialize in the production of handmade glassware.
The number of establishments making handmade glassware in the past four
years has not changed significantly; only two or three new companies,
have been established; and conversely, few plants have been forced to
close.
6. Financial Data
As most of the companies are private and closely held there is no public
financial information available. However, discussions with industry
participants indicate that a typical operating statement is represented
in Table 15. Profits tend to be higher when producing lamp parts as
opposed to stemware and glassware. In addition, they tend to be more
consistent with some respondents reporting profitable operations for
at least six or seven years. Some producers of stemware on the other
hand lost money in the late sixties and 1970 due to the competitive
pressure exerted by importers.
The cash flow of only 6-7% of sales in a relatively prosperous year
limits investT^nt to some extent. Few plants have extensively modernized
their equipment nor have they renovated or built new buildings. Most
have made modest investments to keep costs down. Local banks have been
quite willing to support these industries and this has minimized any
shortage of internally generated capital.
38
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TABLE 15
PRO FORMA OPERATING STATEMENT
BASIS - SALES EQUAL 100.0
Sales 100.0
Less:
Labor 50.0
Materials 4.0
Packaging 4.0
Fuel 4.5
Total 62.5
Gross Margin 37.5
Less:
Administration and
Sales 27.5
Depreciation 5.0
Profits (Before Tax) 5.0
-------
7. Industry Outlook
After stagnating or declining from 1965 to 1970, shipments by the hand
blown industry increased rapidly from 1970 to 1973 due to the reduction
in competition from imports. Much of this increase was due to higher
prices. The general outlook in novelties, lamp parts, etc., is for a
modest percent increase in units produced, probably close to the real
expansion in GNP. Growth in revenue will be much greater due to higher
costs and less severe foreign competition. The products in this category
are relatively free from direct competition from other materials because
of the optical properties and durability of glass. Newer materials such
as plastics offer indirect competition inasmuch as these open up more
possibilities for new designs of light fixtures, but the impact is
difficult to judge.
Imported products still offer the most serious competitive threat even
though this has lessened considerably. At the present time, prices from
Europe are in line with those of U.S. producers and thus styling and
quality are more important in the final choice. U.S. producers are optim-
istic that they can hold the line against foreign competition and thus
the latter will not gain market share as long as the dollar is not revalued
upward and the United States is not flooded with lower cost (but often
fine quality) imports from Eastern Europe.
8. Water Pollution Control Status
Very few handmade household glassware plants are presently treating
waste waters. Flows are small, but significant quantities of pollutants
may be discharged and could have a detrimental effect on a small receiving
stream. The most serious problem faced by the industry is removal of
hydrofluoric acid used in etching, where this is not practiced, costs
to treat effluent water will not normally be economically harmful.
A few plants have lime precipitation systems for fluoride and lead
removal; and many plants where grinding is performed collect this waste
water in trenches with small traps to catch the gross solids.
The typical or baseline level of treatment in the handmade industry may
be classified as no treatment.
B. Incandescent Light Bulb Blanks
1. Industry Size
Light bulb blanks (or envelopes) (SIC 3229225) for incandescent lighting
are a portion of the lighting and electronic glassware industry. U.S.
Department of Commerce Reports aggregate shipment and value statistics
for this industry together with industry 3229235, television tube blanks
and parts, and tubing, cane and other glass parts for electronic tubes
40
-------
and devices.. The total value of shipments for these combined industries
was $253 million in 1972. Of this total it is estimated that television
tube envelopes and parts accounted for about two-thirds, electronic tube
parts about one percent, and electric lamp envelopes the balance, or about
33%. Assuming this breakdown, the 1972 value of shipments for electric
light bulb blanks was about $84 million.
Electric light bulb envelopes are reported to be produced in 18 estab-
lishments in the United States. These are operated by five companies:
Corning Glass Works, Westinghouse, and General Electric producing the
vast bulk of general purpose bulb envelopes, and Lancaster Glass Co. and
!Owens-Illinois limiting manufacturing to specialty bulb products.
2. Products
The products of this industry are the glass bulbs which are subsequently
fitted with the appropriate electrical connections and filaments to form '
finished incandescent light bulbs of all types. The glass envelope is
necessary to contain the inert atmosphere in which the filament can produce
light without oxidizing.
Fluorescent lamps are generally fabricated from glass tubing and are not
included in this subcategory.
3. Manufacturing Process
Essentially all light bulb blanks are produced on the Corning ribbon
machine. This machine works completely continuously and surpasses all
other known glass machines in output. The glass is supplied to the machine
through a feeder in a continuous stream which flows from a 1-inch opening
and is passed between two counter-rotating water-cooled rollers. One
roller is smooth while the other has pocketlike recesses. The ribbon
(3" wide and 1/8" thick), formed by the rollers, is then redirected to
a horizontal flow and placed on a plate belt which runs at equal speed.
Every single plate has an opening through which the pill shaped glass
sags under the influence of gravity. The sag is aided by blow heads
and properly timed compressed air impulses. The blow heads are fastened
to a continuous rotating chain belt. They are placed from above on the
premolded glass in suitable fashion and move at the same speed as the
glass ribbon. After the glass has been premolded to a considerable extent,
it is enclosed by blow molds which are brought up from below and is then
blown out to finished bulbs through the blow heads. The blow molds are
pasted and rotate around their own axes to obtain seamless smooth
surfaces. The finished bulbs are then separated from the ribbon and
carried to the lehr. A light blow with a hammer device and a puff of
compressed air knocks each bulb off the ribbon which passes on as a
cullet to be remelted.
This machine operates at an extremely rapid rate - up to 2200 bulb blanks
per minute. Only 8-12 minutes pass from the exit of the glass from
41
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the feeder to the exit of the annealed bulbs from the lehr. Most of this
time is spent in the lehr. The production time proper is only 10 - 12
seconds. The production is so rapid that no attempt is made to inspect
each bulb as the stream of ware issues from the annealing lehr. A selected
few are critically examined and judgment is passed upon the general character
from the results obtained.
Most bulbs for interior lighting are now frosted inside before final
selection. The blank bulbs are set in a rack which holds about 100,
open end down. Jets of "white acid" (mixture of hydrofluoric acid and
ammonia hydrogen fluoride) are sprayed into the bulbs for a second or two.
This acid produces a rough or "matt" surface. The rack is then moved over
a second tank where a second set of nozzles spray water into the bulbs
to rinse out the acid and reaction products. Over a third tank the bulbs
receive jets of clear acid (hydrofluoric) which has the effect of rounding
the angularities of the tiny grooves formed by the action of the white
acid. The control and disposal of hydrofluoric acid solution probably
represents the most critical water effluent control problem for this
industry segment.
4. Marketing and Competition
Light bulb blanks are either made into finished products by the same
company (General Electric or Westinghouse) or sold to other lamp manufac-
turers such as Sylvania. The investment in the equipment and the economic
volume of production is so large that only General Electric and Westinghouse
find it cheaper to produce blanks than to buy them from Corning.
The capital investment in incandescent light bulb manufacturing is sub-
stantial (in 1970 new equipment and plant expenditures was about $30
million). Huge finished goods inventories are required which tie up
considerable capital.
The major sales of bulk manufacturers are the 40-100 watt bulbs which
account for 75% of all incandescent bulbs sold. Gross margins on the
products appear to be quite good and cost increases are generally passed
on as price increases. Price per se does not appear to be an important
factor. With the extremely limited number of producers this is not
believed to be a severely competitive business.
5. Industry Structure and Financial Data
The major producers of light bulb envelopes are very large, multiproduct
firms, for which these products are not the major business activity. No
financial data directly related to light bulb envelope production are
available.
42
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6. Industry Outlook
There is no material competitive with glass for this application, and
no source of lighting competitive with electricity. In spite of the
energy crisis, the production and consumption of electric light bulbs
will grow with the increasing population for the foreseeable future.
7. Water Pollution Control Status
Most of the treatment methods presently in use in the incandescent lamp
glass industry can be considered end-of-pipe methods. Gullet quench
waters are discharged untreated. However, some plants belt type oil skimmers
are used to skim free oil from pump or discharge sumps. Frosting waste
waters are treated in all cases using lime precipitation for fluoride
and suspended solids removal; however, this system is ineffective for
ammonia removal. Some ammonia discharge is eliminated by separate disposal
of the concentrated etching solution. At least one plant recovers the
salts from this solution by evaporating most of the water and then allowing
the sludge to air dry. Other plants truck the spent frosting solution
to permanent storage.
When the combined forming and frosting waste waters are considered, one
of the five plants for which data are available is presently achieving
the recommended (BPT) level for suspended solids and oil, two are achieving
the recommended level for fluoride, and no plant significantly reduces
ammonia.
43
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ECONOMIC IMPACT ANALYSIS
A. Introduction and Summary
A preliminary screening (Table 16) was made based on an analysis and the
industry and data from the Development Document to determine which sec-
tors will be most seriously impacted by the proposed clean-water standards.
This determination was based on the several factors including (a) the pro-
portion of incremental investment needed to install appropriate water pol-
lution control equipment compared to current plant investment; (b) the
ratio of pollution control equipment operating costs to total sales to
estimate the impact on price or profits; (c) a qualitative evaluation of
the sensitivity of each section to price increases and; (d) the avail-
ability of capital. Based on this analysis, we determined that the hand
blown and pressed industry is by far the most seriously impacted by the
new proposed pollution control guidelines. The machine pressed and blown
industry ranks second in the possible adverse effect that these new regu-
lations may have.
The selection of a second subcategory for further study required a much
more comprehensive comparison of financial and industry characteristics.
While Table 16 shows an insignificant difference in potential impact
between the machine pressed and blown and the glass container industry,
it is felt that the glass container industry was somewhat insulated by
the fact that the major competing products, i.e., aluminum and steel,
will be more seriously impacted by new pollution regulations than the
glass industry. The television tube and incandescent lamp blank sector
would be only marginally impacted by new regulations as these represent
divisions of major companies with very large capital resources. In addi-
tion, the modest increased costs of these items will have virtually no
influence on the cost of the finished product, e.g., color television
sets and incandescent lamp bulbs. On the other hand, the competitive
nature of the machine pressed and blown segment which results in profit
margins below those of alternative investment opportunities for some of
the multi-industry participants in this activity opened the possibility
that even modest requirements for water treatment would not be readily met.
Therefore, we restricted our more detailed analyses to the machine pressed
and blown industry and the hand pressed and blown subcategory. It is im-
portant to realize, however, that quantitative estimates of proportionate
plant investment and proportionate sales shown in the table are only rough
estimates. There is no public financial data to document the investment
in these particular industries except in a general way and it was beyond
the scope and resources of the study to prepare a detailed plant invest-
ment study for these products. Rather the estimate was based on field
interviews and our past background in such manufacturing activities.
44
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TABLE 16
ESTIMATED HATER POLLUTIOC CONTROL IMPACT ON
SEChCNTS OF THE PRESSED ASP BLOWS CLASS INDUSTRY
TYPICAL PLANT DESCRIPTION
POLLUTION COOTROL COSTS
POLLUTION CONTROL COSTS
INDUSTRY CHARACTER
Day
Capital aa I of Operating I Markac
Capital
iKDUSTHy Production. Salea Investoen
~ ' (tons) $MM/YR SHH
CLASS CONTAINERS 500 10 18
TELEVISION PICTURE TUBU 250 95 30
\
l.\CAXDESCENT LAMPS 173 30 35
MACHINE PRESSED AND 100 15-9
BLOWN GLASSWARES
v
HAND PRESSED AND . 3 3 1.5
BLOWN GLASSWARES
S ttvel
BAT
BPT
BAT
BPT
BAT
BPT
BAT
BPT
BAT
BPT
Capital Annual OperajiinK Plant Inveatawnt of Annual Sali
THOUSAND ^
312 6?
0 0
231
0
697
470
21*
0
371
284
68
0
300
240
53
0
72
S3
1.7
0
0.8
0
2.0
n.3
*
2.4
0
24.7
19.0
0.4
0
0.2
0
1.0
0.8
0.4
0
2.4
1.8
»«, ComMCltton Availability
HIGH , HIGH
LOW HIGH
LOW HIGH
HIGH tCDIUM
MICH LOW
Sourca: Arthur 0. Littla, Inc., aatiaataa. Pollution Control Costs datarainad by SVERORUP & PARCEL ASSOCIATES*
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1. Summary of Results
(a) Machinemade Household Glassware Sector
The machine pressed and blown glassware industry appears unlikely to
suffer significant short-term effects from the implementation of the pro-
posed Federal water pollution control standards. Over the longer term,
the impact of increased operating costs and investment requirements on
this segment could have a negative impact on its ability to achieve a
level of profitability sufficient to attract the capital necessary for
growth. The impact of pollution control and other (non-water pollution)
government-imposed costs on the major competing industries will be a
factor in determining the future price competitiveness of machinemade
pressed and blown glasswares in the marketplace. Those industries which
should be given prime consideration are those manufacturing kitchenware
and tableware products from plastics, metals, paper, and clay.
(b) Handmade Household Glassware Sector
There are approximately 60 plants producing hand pressed and blown glass
products. Most of these manufacture products exclusively within this
classification although some of the larger firms also manufacture machine
pressed and blown products. The principal products include tableware,
stemware, and lighting components.
Most of these companies are small with typical sales of 2-3 million dollars
annually. They are usually privately owned, often closely held. However,
the diversity of their production requires a large number of manufacturing
steps with the result that the cost and investment necessary to meet stand-
ards for clean water will be relatively high. The most serious problem
the industry faces is removal of flouride waste and lead contaminates.
Hfcrwever, as the latter usually is present with hydrofluoric acid, and is
treated in the same process it ceases to be an independent consideration.
This will cause hardship for many of the firms in the business. We esti-
mate that 3-5 of the plants, including some of the larger as these often
use acids for etching, will be hard pressed to continue operating should
the present guidelines be enforced as proposed. We also believe that about
three smaller firms with modest profits and capital reserves will find
the financial requirements of such magnitude that it may be a key factor
in causing the plant to close or close prematurely. However, the final
decision concerning this latter group would be substantially influenced
by other economic factors such as availability of labor, product line,
and general condition of production equipment. A summary of the analysis
which led to these conclusions is presented in Table 16. This impact
would have been greater except for the fact that 50-60 percent of all
plants in this subcategory discharge into municipal sewers. Thus should
municipal systems require pretreatment or larger use taxes, closings
could increase.
46
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B. Maehinemade Household Glassware
According to the material developed by the guidelines contractor, Sverdrup
& Parcel and Associates (S&P), a "typical" 100-ton-per-day plant engaged
in the manufacture of consumer, machine pressed and blown glassware would
require no incremental investment or operating expenses in order to meet
the proposed BPT guidelines. For some plants, improved oil and grease
removal will be necessary, and improved housekeeping requirements may
result in higher operating costs per unit of output.
In order to meet the BAT effluent standards, the "typical" plant will
require a total investment of $214,000 by 1983, and to incur increased
annual fixed and direct operating costs of $53,200.
The bulk of the output of this industry is produced in large plants, most
larger than the "typical" plant of 100 tons per day pulled. Several
moderate sized plants near the 100 tons per day size are also significant
factors in the industry. Plants smaller than this generally combine
hand and machine production and are described in the hand-made section
of this report. We believe the significant plants which will be covered
by the proposed machine pressed and blown wares effluent standard are
those shown in Table 17.
1. Financial Analysis
Based on composite financial data from companies in the machine pressed
and blown glassware industry, a financial profile of the so-called "typi-
cal" 100-ton-per-day plant has been formulated and appears below. While
there is no plant which precisely matches this description, we believe
it to be generally suitable for this study.
Plant Description
0 2 glass melting furnaces, capacity 100 tons/day
6 machines for manufacturing pressed and blown
glasswares
t Fixed asset value. - $9,000,000
Output Description
0 Total output - 7 million dozen per year at 80
percent utilization (allowing for holidays, fur-
nace rebuilds, maintanance, etc.)
! 0 Product Mix:
f
Blown tumblers and ornamental items 60%
Pressed tumblers, stemware and ornamental 30%
Blown stemware and other ornamentals 10Z
' Income Statement
, I
''..__ 0 Net Sales Revenues $15,000,000
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Company/Locati on
TABLE 17
Machine-Made Glass Tableware Plants **
Plant Employment
Anchor Hocking Corporation
Lancaster, Ohio
Lancaster, Ohio
Bartlett Collins Company
Sapulpa, Oklahoma
Brockway Glass Company
Clarksburg, West Virginia
Corning Glass Works
several
Federal Glass Division
Columbus, Ohio
Fostoria Glass Company
Moundsville, West Virginia
Indiana Glass Company
Dunkirk, Indiana
Jeannette Glass Company
Jeannette, Pennsylvania
Owens-Illinois, Libby Division
Toledo, Ohio
City of Industry, California
>1000
>1000
.100-499
>1000
100-499 range
>1000
500-999*
500-999
>1000
>1000
100-499
Estimated
Tons /day
300+
300+
100
250
100 each
250+
40*
200
250
300
100
* Substantial hand work also performed
** Includes tumblers, stemware, tableware and ornamental glassware
Source: Arthur D. Little, Inc., estimates.
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Cost of Products Sold $11,615,000
Selling and Administrative Expenses 1,335,000
t Depreciation 400,000
t Net Profit Before Taxes 1,650,000
Taxes, at 50% 825,000
t Net Profit After Taxes 825,000
Sources and Uses of Funds
t Sources of Funds
Net Profits $ 825,000
Depreciation 400,000
$ 1,225,000
Uses of Funds
Capital Spending $ 530,000
Increase in Working Capital 400,000
Debt and Divided Payments 295.000
$1,225,000
Assets
I Net Current Assets $ 2,750,000
t Gross Fixed Assets 9,000.000
$11,750,000
Ratios
After Tax Profits to Sales 5.5%
After Tax Profits to Assets 7.0%
2. Price Impact of Meeting Proposed Standards
Assuming the S&P costs of $214,000 investment and $53,200 per year for
operations for the "typical" plant to meet the proposed BAT water pol-
lution control standards, maintenance of dollar profit levels average
price increases of approximately 0.4% would be required. This would
not include the costs of special studies, engineering, administration,
and so on which would perhaps increase this to 0.5%.
Clearly the impact of this cost increase to consumers would be very
small, and looking at the industry as a whole, the cost is minor. How-
ever, the impact on individual plants could be significant in light of
the very competitive nature of this business. The ability of a given
firm to pass the increased costs along in price increases will depend
on the costs of competing products from other industries (plastics, china,
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earthenware, etc.) and the cost position of the firm in question rela-
tive to others in its own industry. A high cost plant may have to absorb
more of the pollution control costs, unless the lower cost manufacturer
is inclined to increase prices and margins. Since this is an intensely
price competitive industry it is very possible that the added costs of
meeting the recommended standards for 1983 will have to be partly absorbed
by most industry members, and will be only partially passed on to the
consumer.
3. Financial Impact
According to the guideline contractor, the typical plant in this industry
will incur no costs to meet the proposed BPT standards. The financial
impact of meeting the proposed effluent guidelines for BAT is closely
related to the ability of the firms in the industry to raise prices to
cover the added costs. It is perhaps useful to examine the worst case
from the standpoint of our "typical" firm. The added operating costs
of $53,200 per year, if it could not be passed on, would mean a reduction
in net profits of about $27,000. This would then result in a decline in
rate of return on sales from 5.5% to 5.3%.
From a return on investment standpoint, there is the additional investment
of $214,000 to be considered in addition to the annual operating cost of
$53,200. The net result of increasing capital and reducing income would
he a reduction in return on assets from 7% to 6.7%.
The use of the required capital-for installation of pollution control
equipment is likely to have some effect on the availability of money
for other uses by the firms in this industry. If the capital is raised
and spent over several years, however, this impact will not be large on
the major firms in the industry. While it is not possible to state with
certainty that all firms in this industry will be easily able to obtain
the funds necessary for the required expenditure, it would appear from
the pro forma financial statement that unless this business falls on
extremely bad times or is required to make considerably higher expendi-
tures for other government-imposed programs (air pollution, OSHA), the
required capital should be available.
A. Employment and Community Impact
From the price and financial impacts estimated, it would appear that
the implementation of the 1983 BAT guidelines will have little impact on
the ability of the companies in this industry to produce quantities of
glass product sufficient to satisfy consumer demands. We would not fore-
see any plant closings or employee layoffs resulting primarily from the
economic impact of these pollution control guidelines on the companies
in this industry. On the other hand, growth could be hindered in certain
plants due to the financing requirements for the equipment. This could
be significant in areas where other industries may be declining.
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5. Sensitivity of Pollution Control Costs to Plant Size
Within the machinemade glass housewares industry, the size range of
producers is fairly narrow, ranging from something less than 100 to
perhaps 300 tons per day. We believe that there are some economics of
scale in the treatment facilities for plants producing at higher levels
than the 100 ton per day "typical" plant. Theoretically the main concern
would be for plants considerably smaller than the "typical" plant. Since
the "typical" plant chosen in this case represents the lower end of the
size scale, it would not appear that this is a serious problem.
6. Balance of Payments Impact
Imports of machinemade glass housewares currently amount to about 1% of
domestic consumption, but have exhibited some growth from 1970 to 1972.
Exports have grown much more substantially in absolute terms. It would
seem rather doubtful that the kinds of possible price increases required
to offset the cost of meeting the proposed effluent guidelines would have
a significant impact on the United States balance of payments.
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C. Handmade Household Glassware
We have assumed that data presented by S&P, Inc., was for a plant with
annual sales in the range of $3 - $4 million. This would make it a large
but not one of the largest plants in the industry. We believe that
plants below $1 million who are employing acid etching have virtually
no chance of continuing to operate given the projected costs and invest-
ments and, on the other hand, the very limited number of larger plants
could most easily survive these additional expenses. A list of those
plants where sales probably exceed $1 million is found in Table 18.
We have thus assumed that for a large plant the operating costs would
be about $60,000 annually including all fixed and direct charges. Using
the 0.6 rule for investment and in addition assuming that operating
costs are directly related to investment costs, we estimate operating
costs to be $39,000 for a $2 million sales per year company and $26,000
for a $1 million per year company. This is summarized in Table 19.
1. Price Impact of Meeting Alternative C Standards
Using the general financial data for the industry as expressed in Phase I
of this study, we also show on the same table after-cash profits, depreciation
and cash flow. We then compared the operating costs to total sales
to determine what changes in price are necessary to pass on the additional
costs. We also determined the ratio of operating costs to profits after
taxes and operating costs to cash flow to see what influences the increase
would have on these factors assuming prices could not be increased. As
seen by the table, the sales price has to be increased only a modest
amount; that is, from 1 1/2% in the case of the large company to a little
over 2 1/2% in the case of the small company to cover the additional
operating costs. Although this is a very competitive industry with
imports affecting all components of the business, these increases are
only one fourth to one thrid typical increases demanded by this industry
to meet other operating costs such as higher labor rates; thus we feel
there is a good chance that these costs can be easily passed on to the
consumer. Should this not be the case, the impact on the financial
statement becomes severe. For example, the additional operating costs
range from anywhere from 30 - 52% of company profits and from 10 - 17%
of cash flow. These levels would be crippling to this business.
We therefore conclude that the operating costs probably will not seriously
jeopardize the health of this business, even though it probably will harm
the smaller companies. For example, while it is reasonable to expect
that a 1.5% increase in prices can be passed to the consumers, it is
risky to assume that the smaller companies can pass on a greater increase
merely because the impact is greater. Therefore, if we assume that the
1.5% increase represents the limit, some of the increased operating costs
will have to be absorbed by the profits of the smaller companies. In
the case of the average company, 10% of the profits after taxes are
consumed by operating costs necessitated by operating pollution control
facilities while in the case of the below average company 20% of the
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TABLE 18
MAJOR HAND-MADE GLASS TABLEWAKK PLANTS (ovor 50 employcus!
NAME
Beaumont Co.
Big Pine Key Glass Works
Blenko Glass Co.
Colonial Glass Co.
Crescent Glass Co.
Davis-Lynch Glass Co.
Fenton Art Glass Co.
Harvey Industries
Imperial Glass Co.
Kanawha Glass Co.
Lenox Crystal
Louis Glass Co.
Mid-Atlantic Glass Co.
Minncrs Glass Co.
Pennsboro Glass Co.
Pilgrim Glass Co.
Rainbow Art Glass
Rodefer-Gleason Glass
Seneca Glass Co.
Sloan Glass Co.
L.E. Smith Glass Co.
Viking Glass Co.
Westmoreland Glass Co.
West Virginia Glass
Specialty Co.
LOCATION
Morgentown, W. Va.
Marathon, Fla.
Milton, W. Va.
Weston, W. Va.
Wellsburg, W. Va.
Morgentown, W. Va.
Williamstown, W. Va.
Clarksburg, W. Va.
Bellaire, Ohio
Dunbar, W. Va.
Mt. Pleasant, Pa.
Weston, W. Va.
Ellenboro, W. Va.
Salem, W. Va.
Pennsboro, W. Va.
Ceredo, W. Va.
Huntington, W. Va.
Bellaire, Ohio
Hartford City, Ind.
Cullodcn, W. Va.
Mt. Pleasant, Pa.
Moundsville, W. Va.
Grapeville, Pa.
Weston, W. Va.
EMPLOYEES
100-499
50-99
100-499
100-499
100-499
100-499
100-499
50-99
100-499
50-99
100-499
100-499
100-499
100-499
50-99
100-499
50-99
100-499
100-499
50-99
100-499
100-499
100-499
100-499
Source: Arthur D. Little, Inc. estimates.
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TABLE 19
SUMMARY OF IMPACT FOR HAM) PRESSED AND BLOWN MANUFACTURING
FINANCIAL DATA
Annual Sales (MM$)
Profit after Taxes (M$)
Depreciation (M$)
Cash Flow (M$)
Large
Company
4.0
100
200
300
Average
Company
2.0
50
100
150
Below Average
Company
1.0
25
50
75
GROSS INVESTMENT (MM$)
2.0
1.0
0,5
POLLUTION CONTROL
Investment (M$)
Operating Costs (M$/yr.)
300
60
195
39
130
26
ANALYSIS
Operating Costs/sales [price] % 1.5
Operating Costs/profit b.t. % 30
Reduction of Cash Flow* % 10
2.0
39
13
2.6
52
16
Investment/Gross investment (%) 15
Investment/annual cash flow (%) 100
Years cash flow 1.0
20
130
26
175
1.75
*Credit given for tax savings as a result of higher operating costs.
Source: Arthur D. Little, Inc., estimates.
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profits are so lost.
2. Financial Impact
We believe that the impact caused by the need to make a relatively large
capital outlay is a much more serious problem for this industry than
the increased operating costs.
We have estimated'that should a new plant producing hand pressed and
blown glassware were built today, the gross investment would be
approximately 50% of annual sales. In the case of the larger company,
investment to meet proper water standards represents about 15% of the
gross investment of the plant. It would require about one year of the
estimated annual cash flow. On the other extreme, construction of the
necessary equipment for a below average in size company would require
about one quarter additional gross investment and would consume the
annual cash flow for one and three quarter years. While this may be
regarded as an inconvenience and may delay some desired expansion
plans or other plant modifications, it probably can be handled without
crippling effects by a larger company. A smaller company, however,
would have more difficulty in absorbing this investment as it would
require almost two years of cash flow. In addition, the smaller company
would be more apt to experience erratic profits and thus the reliability
of at least a portion of the cash flow is less.
Another cause for concern is the fact that this segment is not accustomed
to placing large amounts of capital either to expand the business or
even to modernize it as it traditionally has not had the money available.
In addition, the small sizes and closely held control of the companies
in this industry make them less attractive from a lender's viewpoint.
We believe that should the industry be required to make the projected
investment, a large number would choose to close down rather than comply
with the new requirements.
3. Employment and Community Impact
While this is by all standards a small industry with a low number of total
employment, it is concentrated in the northwestern part of' West Virginia
and, therefore, could have a serious impact on the welfare of that part
of the country. Table 3 lists 23 manufacturers of hand blown and pressed
tableware. 17 of these are in West Virginia, others are in neighboring
Ohio and southwest Pennsylvania. The West Virginian plants lie mainly
in the western part of the state with the eastern and southern line
roughly being drawn from Morgentown through Charleston to Huntington.
A large portion of the laborers in these plants are basically unskilled
although there is a considerable number of those who have developed a
highly specialized but yet skillful trade1. An example of this is the
glass blowers. The unskilled laborers in time can find comparable
income in other manufacturing industries, for example, the coal mines.
. 55 '.'"
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However, those with a specialized skill probably will find it extremely
difficult to find comparable work or meet present income levels as there
is little demand for these specialized talents outside of the hand pressed
and blown glass manufacturing segment.
4. Balance of Payments Impact
The U.S. production of hand pressed and blown tableware and glassware
was about $35 million in 1972 (See Phase I report). To this should
be added approximately another $45 - 50 million of lamp parts and
miscellaneous for a total industry output of $80 - 85 million. Should
the present guidelines prevail, as much as 20% or $16 million of the
potential production could be closed. This will mainly be replaced by
foreign imports than with other materials, e.g., plastics being much
less significant. If we assume that 80% of this lost production is
replaced by imports, the balance of payments is only adversely affected
by about $13 million, inconsequential in the total U.S. trade picture.
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