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Gentex Corporation Business Information, Profile, and History

mirrors mirror company electrochromic

600 N. Centennial St.
Zeeland, Michigan 49464
U.S.A.

Company Perspectives:

Founded in 1974, Gentex Corporation develops, manufactures and markets proprietary electro-optical products. The Company is the recognized world leader in the manufacture of electrochromic, automatic-dimming mirrors for the auto industry, selling to nearly every automotive manufacturer worldwide. The Company also maintains an extensive line of commercial fire protection products for the North American market.

Gentex's corporate mission is to be a smarter organization; a world-class manufacturer with superior products and service driven by a supportive work culture that encourages people to innovate, excel and continually improve every aspect of the business.

History of Gentex Corporation

Gentex Corporation is a recognized world leader in the manufacture of auto-dimming mirrors for the automobile industry. Its mirrors employ electrochromic technology, the process of reversibly darkening materials by applying electricity. Gentex's Automotive Products Group, which sells the mirrors to nearly every automobile manufacturer worldwide, accounts for 90 percent of the company's sales. The other 10 percent comes from the company's Fire Protection Products Group. Gentex's extensive line of commercial fire protection products includes a variety of smoke detectors and audible/visual signalling devices. Like the company's auto-dimming mirrors, its fire protection products employ photoelectric sensing devices with related electronic circuitry.

Gentex Corporation was founded in Zeeland, Michigan, by Fred Bauer in 1974 to make fire protection products. Bauer had launched Simicon Co., a manufacturer of electronic furnace-control units, in the late 1960s when he was 23 years old. When a Fortune 500 company bought Simicon in the early 1970s, Bauer used the capital to start Gentex.

The company began by making intrusion alarms and smoke detectors for mobile homes. It became known as a manufacturer of high-quality fire-protection products. The company's smoke detectors and signalling devices utilized electro-optics--photoelectric sensing devices combined with related electronic circuitry--which enabled the smoke detectors to "see" smoke and signal an alarm. The photoelectric fire detector was co-invented by Bauer. It is less prone to false alarms and quickly detects smoldering fires.

The company's expertise in electro-optics led to the solution of a problem that had been plaguing the automobile industry for 20 years: how to find a way to eliminate glare from rearview mirrors and make nighttime driving safer. The company's first automatically dimming rearview mirrors were electromechanical, or motorized.

Introduced World's First Automatically Dimming Mirror, 1982

In 1982 Gentex introduced the world's first electromechanical (motorized) dimming mirror. The technology for the motorized mirror was developed by a joint venture in which Bauer had participated. The company's first generation of glare-controlling rearview mirrors were used primarily on American luxury cars. They utilized a pair of electronic "eyes" to sense headlight glare. The electronic sensors were connected electronically to a small motor that adjusted the angle of the mirror for night driving. Gentex made about 1.1 million units of its first-generation mirrors between 1982 and 1991.

After becoming a public company in December 1981 to finance its motorized mirror production, Gentex did not show a profit until 1985. In 1983 it reported a net loss of $250,000 on sales of $2.6 million, followed by a net loss of $527,000 on sales of $5.3 million in 1984.

The following year, 1985, marked the company's first year of profitability, as it reported net income of $570,000 on sales of $9 million. It was the beginning of a fairly consistent record of sales and earnings growth. With the exception of a fallback in sales in 1990, sales increased steadily for the rest of the 1980s and 1990s. Net income peaked at $2.1 million in 1989, and after falling back in 1990 net income rose steadily through 1997. In 1987 mirrors accounted for nearly $9 million in sales, compared to about $5 million in sales generated by the company's fire protection products. To enhance its glass-working skills, Gentex acquired Zeeland-based Vanguard Glass Fabricators in 1986.

Introduced Second Generation of Auto-Dimming Mirrors, 1987

Sales of the motorized mirrors peaked in 1987 at 203,000 units. In the first half of 1988 sales of the motorized mirrors took a downturn. Company officials noted that the mirror's popularity had reached a plateau, and they expected lower sales as the automakers changed over to Gentex's new electrochromic mirrors for the 1988 model year. Some drivers had complained about the noise the motorized mirror made when it changed positions, and others found the movement distracting. Other factors influencing mirror sales included a lack of promotion of the option by the automobile manufacturers.

In 1987 Gentex's second generation of automatically dimming mirrors, called electrochromic mirrors, were introduced as an option on the 1988 Lincoln Continental and then on eight General Motors models in 1989. The electrochromic mirror, which Gentex developed in 1986, eliminated glare by automatically darkening when headlight glare was detected. The electrochromic mirrors were an improvement over the electromechanical mirrors, mainly because they dimmed to an infinite number of levels to eliminate glare while maintaining the driver's rear vision. They also remained stationary and did not move or make noise when adjusting to headlight glare. Gentex hoped that some automakers would make the electrochromic mirrors standard equipment on some models.

A company spokesperson told the Grand Rapids Business Journal, "The history of other successful options has been that they all start out very slowly as a specialized item on luxury cars, then they become standard equipment on certain luxury cars and an option for intermediately priced cars." Some of the automakers were including the mirrors as part of a "value package" of options that were sold at a discount to customers. As a stand-alone option, the electrochromic mirrors cost between $80 and $100. The motorized mirror continued to be offered by car makers at about 20 percent less than the electrochromic mirror.

When Gentex first announced the electrochromic mirror in 1986, it was hailed as a technological breakthrough. Gentex officials noted that it was the first time a practical product had been made out of electrochromic technology, which had been around for about 40 years. The mirrors contained a thin gel sandwiched between two pieces of glass. When the gel is electrically charged, it darkens. When the electrical charge is turned off, the gel clears.

Research on the electrochromic mirror began in 1983, when Harlan Byker, a chemist at Battelle Laboratories, and his father, Gary Byker, visited Gentex. Harlan Byker told company officials he knew how to apply electrochromic technology to Gentex's motorized mirrors. Gentex decided to fund Byker's research on electrochromics at Battelle. Byker then joined Gentex to head its research and development team after he completed his research at Battelle.

As the interior electrochromic rearview mirrors became available on cars in 1988, Gentex expected its mirror sales to double to more than 400,000 units in 1989. The company forecast it would be making one million electrochromic mirrors a year by 1990, primarily for the automotive market. It also continued to produce the motorized mirrors.

In the fall of 1988 the company began constructing a $3.5 million, 70,000-square-foot addition to the former Vanguard Glass building for completion in fall 1989. The company had just completed a $1.5 million expansion at the Vanguard plant that had doubled its capacity to produce mirrors. The expansion was financed by industrial revenue bonds issued through the City of Zeeland.

Once the expansion was completed, the Vanguard plant would be devoted to mirror production. The company's original plant, located on Chicago Drive in Zeeland, would be used to manufacture the company's line of fire protection products. At the time, Gentex had about 230 employees and planned to add another 70 to 90 employees during 1989.

Sales for 1989 increased dramatically to $23.8 million, up from $14.7 million in 1988. During the year sales of the company's electrochromic rearview mirrors reached 234,000 units. Sales of the motorized mirrors were declining, and the product would be phased out after 1991. In 1989 the company also began to cultivate international markets. It entered into a distribution agreement with Tokyo-based Ichikoh Industries Ltd., whereby each company could distribute the other's products. Ichikoh would begin distributing Gentex's electrochromic mirrors to Japanese automakers and their transplants in the United States. Gentex could distribute Ichikoh's manually operated interior mirrors to American car manufacturers. No technology transfer was involved in the agreement. Gentex also issued 300,000 new shares of common stock, which were purchased by Ichikoh. The proceeds would be used to help fund the company's plant expansion.

"Mirror Wars" Began in May 1990

Noting Gentex's success with electrochromic mirrors in 1989, Donnelly Corporation, a mirror manufacturer based in nearby Holland, Michigan, announced that it would begin offering interior and exterior solution-phase electrochromic mirrors. Gentex was suspicious and after investigating further, believed that Donnelly's product was simply a copy of the Gentex mirror that was introduced in 1987. Gentex sued Donnelly in May 1990 for patent infringement, claiming that Donnelly's recent products were infringing on its patents for electrochromic mirrors. Gentex had chemical patents covering its gel technology, which produced the mirror-dimming effect, and an electronics patent on its mirror system, which combined exterior and interior mirrors. Gentex's position was that its mirror system patent protected the idea of bringing exterior and interior mirrors under one system, regardless of what technology was used in the mirrors.

Donnelly, aware that Gentex was going to sue, countersued on the same day but named a patent which Gentex had not included in its original suit. Donnelly countered that its products did not infringe on Gentex's patent, and that the patent covering gel technology was invalid and unenforceable. While Donnelly made both solid state and liquid-based electrochromic mirrors, the only Donnelly mirrors that were the subject of litigation were its liquid or gel-based mirrors. At the time Gentex was supplying electrochromic mirrors to Ford, General Motors, and Chrysler, and had recently won a contract with BMW in Germany. About 3.36 percent of new 1989 cars carried the optional mirrors.

In September 1990 Gentex and Donnelly announced they would settle their patent dispute by becoming partners. However, by November negotiations to form a partnership were in shambles, and the patent litigation initiated in May 1990 resumed in the U.S. District Court in Grand Rapids, Michigan.

Gentex continued to work on developing an exterior electrochromic mirror to complement its interior electrochromic rearview mirror. While the interior mirrors used ultraviolet radiation (UV) stabilizers, exterior mirrors were exposed to 1,000 times as much UV radiation and required more work. Gentex was able to develop electrochromic materials that were inherently more stable when subject to UV, and in 1991 Gentex introduced the world's first continuously variable exterior electrochromic mirror for the automobile industry.

Adopted Shareholder Rights Protection Plan, 1991

At its 1991 annual meeting, Gentex adopted a shareholder rights protection plan, or poison pill, to deter a potentially hostile takeover. Under the plan, whenever a shareholder acquired more than 15 percent of the company's outstanding shares, all other shareholders would receive an extra share for every share they already owned. That would reduce the 15 percent share to only 8.1 percent. At the time the plan was adopted, Gentex's largest shareholder was founder, chairman, and CEO Fred Bauer, who owned just over 11 percent of the outstanding shares. Bauer, along with other major shareholders, had formed a voting agreement in 1981 when the company went public. That agreement expired upon the adoption of the shareholder protection plan.

Gentex began using the trademark Night Vision Safety (NVS) to describe its electrochromic mirrors. During 1992 Gentex's automatically dimming NVS mirrors were used on more than 52 domestic and foreign models, including 15 new models that were added at the beginning of the 1993 model year in August 1992. In 1992 Gentex received the highest quality awards granted by domestic automakers: Ford's Total Quality Excellence (TQE), General Motors' Mark of Excellence, and Chrysler's Pentastar.

After sales of $21.2 million in 1990 and $26.9 million in 1991, Gentex achieved record sales of $45.1 million with net income of $5.1 million in 1992. It was the start of six consecutive years of record-setting sales as Gentex's electrochromic mirrors became more widely used by automobile manufacturers. By 1997 sales topped $186.3 million--nearly 200 percent more than 1992 sales--with mirrors accounting for 90 percent of the company's sales.

Foreign sales made a strong contribution toward 1992's increase in sales, as the company expanded into Germany, Japan, Italy, Mexico, Canada, Korea, and Brazil. Sales to non-domestic automakers increased from $513,000 in 1990 to $5.3 million in 1992.

The Fire Protection Products Group also posted strong sales for 1992, as the company introduced several new audible/visual signaling devices that were developed to meet the requirements of the Americans with Disabilities Act. These products included a strobe warning light for the hearing impaired, a four-inch primary evacuation horn, and a speaker evacuation device for public-use facilities. During 1992 employment at Gentex increased from 375 employees at the beginning of the year to 541 at year-end.

Began Adding Options to Mirrors, 1993

In 1993 Gentex introduced the NVS Compass Mirror, an interior electrochromic mirror that had a compass attached to it. The compass technology was developed and patented by Prince Corporation of Holland, Michigan, which later became Johnson Controls, Inc. The Compass Mirrors would be made available on 1994 luxury vehicles.

In an effort to increase sales of its mirrors in Japan, Gentex entered into a non-exclusive distribution agreement with Continental Far East, Inc. (CFE), whereby CFE would act as Gentex's sales agent in Japan. The agreement did not affect the distribution agreement already in place with Ichikoh, which had the exclusive rights to sell Gentex's mirrors to Nissan.

In September 1993 Gentex introduced the first convex mirror, which is used for the passenger-side exterior mirror in the United States, with full-range (gray scale) dimming. The convex mirrors used curved glass to increase the driver's field of view and helped eliminate blind spots. The addition of the exterior curved mirror enabled Gentex to offer a three-mirror electrochromic system with full-range dimming. The new system would debut on the 1995 BMW 700 series and was worth about $3 million in annual revenue to Gentex.

By 1993 Gentex had brought suits charging that Donnelly's products infringed on three other Gentex patents. During that time Donnelly developed alternative electrochromic solutions it contended did not infringe on Gentex patents, but in March 1993 the court found that three of the solutions did infringe and issued an injunction prohibiting further infringement. In April 1993 Gentex was awarded $2.2 million in damages by an eight-member jury that found that some of Donnelly's solutions did infringe on another Gentex patent. That award was followed by another injunction against Donnelly. In May 1993 Donnelly and Gentex settled some issues remaining from an earlier trial, and Donnelly paid Gentex $1.2 million as part of that settlement. In apparent retaliation, Donnelly brought another suit against Gentex for alleged infringement of four Donnelly patents, three of which concerned rearview mirrors with lights and one regarding rearview mirrors with a color-matched or dark seal. Gentex was granted a motion for summary judgment of invalidity on the lighted mirror patents in 1995, and in April 1996 the two companies reached a settlement of all remaining litigation between the two parties.

Continued to Introduce New Mirror Products, 1996-98

In 1996 Gentex expanded its exterior mirror product line with the introduction of the world's first variable reflectance aspheric, or wide-angle, exterior mirror. By 1997 the company was making high-volume shipments of this difficult-to-manufacture product along with a new thin-glass exterior mirror introduced in 1997. In 1996 Gentex also introduced the first automatic-dimming rearview mirror with remote keyless entry. This patented invention utilized the electrically conductive coatings on the mirror glass and their electrical connections as the receiver for the radio frequency signal produced by the key fob. Integrating the two features made it possible for automakers to offer these two options to their customers cheaper than if they had been purchased from two separate sources.

Three significant new products were introduced in 1997-98: 1) a thin glass exterior electrochromic mirror, 2) an interior electrochromic mirror with compass and external-temperature displays, and 3) an interior electrochromic mirror with LED map lamps. The auto-dimming mirror with new map-lamp technology that utilized light emitting diodes (LEDs) would first appear on the 1998 Intrigue, a new sedan by Oldsmobile. The Intrigue mirror would also feature the PathPoint Compass System by Johnson Controls. Among the new products in the works in 1998 was an electrochromic mirror with a cellular telephone in it, a product that was developed by Gentex and two other companies.

During the year the company made its first direct sales to Toyota when it began shipping its base automatic-dimming mirrors for Toyota's new mid-sized sport coupe, the Camry Solara, which went on sale in August 1998. It also marked the first time that a Gentex mirror would appear on a vehicle in the heart of the mid-sized, mid-priced segment of the market.

In other international developments, Gentex opened a sales and engineering office in Japan. The newly formed Gentex Japan, Inc., located in Nagoya, included sales and engineering operations that would serve Gentex's automotive customers in Japan and throughout the Asia/Pacific region. Gentex first entered the Japanese market in 1991, selling its mirrors through third parties.

In May 1998 Gentex also established a warehouse facility in Weinsberg, Germany, to provide logistics for local parts distribution. It was made necessary by the company's rapidly growing European business. Gentex planned to ship mirrors directly from its Zeeland facilities to the Weinsberg warehouse, where they would be packaged, labeled, sorted, and shipped to customers in Europe. At the same time, Gentex announced that its sales and engineering office in Neckarsulm, Germany, would be moving to the Weinsberg location. The company's most popular mirror in Europe was its exterior aspheric (wide angle) mirror.

In 1997, NVS unit shipments to offshore customers increased by 50 percent over 1996 levels and represented 32 percent of all units shipped in 1997. Approximately 20 percent of Gentex's revenues came from European customers, with about six percent from the Asia/Pacific region.

In May 1998 Gentex began offering NVS Mirrors directly to consumers. Previously, all of the company's mirrors had been sold to automakers, who then made them available on their models. Through an agreement with MITO Corporation of Elkhart, Indiana, Gentex would make its automatic dimming mirrors available to the automotive aftermarket. The base NVS mirror would sell for $99, while the premium version with a compass and temperature display sold for $249. MITO, a distributor of quality electronic products and accessories, would warehouse the mirrors and ship orders within 24 hours of receipt.

Gentex announced a two-for-one stock split at its annual meeting in 1998. It was the third time in five years that Gentex had issued a 100 percent common stock dividend. The company was in excellent financial shape. It had been free of long-term debt since 1992 and thus reported no interest expense. Net income had increased every year since 1990, reaching $35.2 million in 1997.

Awards and Recognition, 1997-98

In 1997 Fred Bauer received Michigan's Ernst & Young Master Entrepreneur of the Year Award. The award recognized individuals who have sustained management excellence over a substantial period of time. In 1998 Gentex was designated as a 1997 Supplier of the Year by General Motors. Gentex was one of 182 companies selected by General Motors for the award from its supplier base of more than 30,000 companies. Gentex also became the only company to win the Automotive News PACE Award three times. The 1998 award was given to Gentex for its auto-dimming aspheric mirror. The mirror solved two automotive safety issues: glare and blind spots. Gentex was also named to Forbes magazine's list of "200 Best Small Companies in America," first in 1994 and then three years in a row from 1996 to 1998. Of all the companies on the list, Gentex was ranked 25th in profits in 1997 and 10th in profits in 1998.

With an excellent earnings record, a healthy balance sheet, and a dominant market share in auto-dimming automobile mirrors, Gentex was on track to enjoy substantial growth in the years ahead. Mirror shipments, which accounted for 90 percent of Gentex's revenues, were expected to reach five million units in 1998, and the company had the capacity to produce seven million mirrors annually. While Gentex mirrors were found on the majority of vehicles offering auto-dimming mirrors, that represented only six percent of the light vehicles produced annually in the world. Thus, the industry as well as Gentex had incredible room for growth.

Principal Subsidiaries: Gentex Japan Inc.; Gentex GmbH (Germany).

Principal Operating Units: Automotive Products Group; Fire Protection Products Group.

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