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Industry Reacts to Platinum's Attempt to Terminate PPG Agreement; PPG Shares Continue to Drop in Value

Less than a week ago, Pittsburgh-based PPG Industries announced that Platinum Equity, the Beverly Hills, Calif.-based company that had agreed to purchase its auto glass businesses and services unit, had filed suit and was attempting to terminate the agreement. (CLICK HERE for related story.) In the aftermath, the industry is abuzz with varying opinions on the issue.

Russ Corsi, retired manager of technical services from PPG Industries' Automotive Replacement Glass business unit, suspects it all comes down to price.

"Just from a business perspective, I think Platinum wants a better deal," he told glassBYTEs.comô/AGRR magazine. The company had previously agreed to pay $500 million for the PPG's auto glass business and services unit.

He noted that from his review of the situation, the most pertinent facts in the suit seem to be the changes with the Harmon and Belron accounts mentioned. In the court documents, filed by Platinum on December 26, the company alleges that PPG presented Belron/Safelite as its largest customer in the auto glass replacement market and that projected sales to Belron/Safelite contributed to the original 2008 revenue and EBITDA forecasts, but that prior to the signing of the agreement, Belron/Safelite notified PPG that it would reduce its purchase volumes in 2008 by as much as $27 million. It is noted in the complaint that Belron/Safelite had made $58.5 million in purchases from PPG in 2006 and that its second largest customer, Harmon/Glass Doctor, purchased $23.8 million in aftermarket products from PPG in 2006. The complaint notes that Harmon/Glass Doctor also have notified PPG that they intend to reduce their purchase volume by $6.2 million in 2008.

Corsi also notes, though, that budget changes are common. "I see that they predicted different sales volumes and market figures, and everyone adjusts their budgets based on the current [market]," he adds.

Neil Duffy, owner of Auto Glass Menders in San Jose, Calif., also points to the current economy and market as a factor.

"One has to look at the money markets and the drying up of cheap loans due to the subprime mess as a major culprit," he says. "I'm sure Platinum wasn't pulling out its personal checkbook for the purchase price."

He also notes that, if Platinum is permitted to terminate the agreement, many questions will be left unanswered. "Will [the idea of] PPG try[ing] to sell the business off in pieces be revisited? Since PPG just bought a coatings company to underscore its new direction, it is not a leap of faith to opine that they may be more inclined to act more directly since a corporate decision to divest itself of auto glass has already been determined."

PPG's Marc Talbert sent an e-mail to its customers last week assuring them that business would continue as usual during this period of uncertainty.

"While we are disappointed by Platinum's actions, you can be assured that PPG Auto Glass,PPG and the [Auto Glass and Services] management team remain committed to continuing to provide you with the same high level of quality products and services as you have experienced with us historically," Talbert writes, in an e-mail dated Friday, December 28.

In other news at PPG, the company's stock is continuing to drop. The company reported a 1.26-percent drop this afternoon, with shares at $68.97. This is down from glassBYTEs.comô's report from last Thursday, December 27, when PPG stocks were valued at $69.86 (CLICK HERE for related story.)

CLICK HERE to read the full text of the e-mail from PPG.

CLICK HERE for the latest on PPG's stocks from the New York Stock Exchange.

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