Positive article from the Cin. Enquirer:
Play no dirge for Baldwin
New CEO confident of turnaround
By Mike Boyer
The Cincinnati Enquirer
Although he didn't work for Baldwin Piano & Organ Co. until three months ago, Bob Jones was always intrigued by the 140-year-old Cincinnati-based piano manufacturing company.
"The music business is a small industry," said Mr. Jones, 60, a former executive with Korean-owned Samick Music Co. and Steinway and Sons Co. "We watch what's going on, not only with our own company but with our competitors. It's really more like a fraternity than an industry."
Bob Jones, named Baldwin CEO in May, says he is more optimistic about the company now than he was a month ago.
Now, Mr. Jones, who was named Baldwin's CEO in May, succeeding the controversial Karen Hendricks, is faced with leading the company out of Chapter 11 bankruptcy reorganization and back to profitability.
That task got more complicated this week, when the company revealed that it was already in technical default on its bankruptcy financing from GE Capital Corp. GE is Baldwin's largest creditor and is owed about $40 million.
Attorneys for the company and GE Capital resumed negotiations this week on financing to keep the company afloat until its restructuring plans can take effect.
Baldwin started as a Cincinnati music store by D.H. Baldwin in 1862. It stopped producing pianos here years ago but still employs about 40 at its Deerfield Township headquarters.The company produces its Baldwin brand pianos in two plants in Arkansas.
Baldwin officials argue that despite the company's current cash squeeze and the sluggish state of the piano market, the company is still viable and can be reorganized successfully. The company listed assets of $86 million and liabilities of $55.8 million when it filed for protection from its creditors May 31.
But the quality of those assets remains in question and just how long GE Capital will be willing to extend Baldwin additional financing before it seeks to collect on its debts is not certain, industry observers say.
"The question is what is GE going to do," said Brian Majeski, editor of New Jersey-based Music Trade, an industry trade publication.
Reduce inventory
Although Baldwin sells about 20,000 pianos annually, about 20 percent of the total U.S. market, about half its business usually occurs in the last four months of the year. Mr. Jones says the biggest challenge facing the company is reducing about $40 million in inventory — about twice what a company Baldwin's size would carry — that it can't immediately sell and can't borrow against.
HIGH AND LOW NOTES
A look at the almost-140-year history of the Baldwin Piano & Organ Co:
• 1862: Music teacher Dwight H. Baldwin opens a piano store in Cincinnati.
Gilbert Avenue plant
• 1891: After deciding to produce "the best piano that could be built," the company offers its first vertical piano designed by technician and inventor John Warren Macy and buys a brick building on Gilbert Avenue as its manufacturing plant and headquarters.
• 1900: A year after D.H. Baldwin dies, a Baldwin grand piano is awarded the Grand Prix at the Paris Exhibition, joining a limited number of manufacturers supplying concert grands to performing artists.
• 1935: Baldwin experiments with electronic musical tones, which leads to development of the Baldwin electronic church organ.
• 1942: During World War II, Baldwin plants produce military aircraft parts. Expertise in building wooden aircraft wings is ultimately applied to the company's piano assembly.
• 1952: President Truman plays a Baldwin piano during the first televised tour of the White House.
• 1962: Two American space flights employ electronic encoders developed by Baldwin researchers. The company also opens a 600,000-square-foot plant in Greenwood, Miss., to build piano and organ cabinets.
1 millionth vertical piano
• 1973: Baldwin builds its 1 millionth vertical piano, and the New York Stock Exchange begins trading the company's stock.
• 1986: Two years after being acquired by senior management and taken private, the company makes a public stock offering and the stock is listed on the Nasdaq market.
• 1994: Karen Hendricks, a former Dial Corp. and Procter & Gamble Co. executive, is named president and CEO. Company employs about 1,500.
• 2000: Company closes Greenwood, Miss., woodworking plant. (The company operates two plants in Arkansas.)
• 2001: In March, Baldwin sells its financing division to Deutsche Financial Services. In April, Ms. Hendricks retires and Bob Jones is named CEO. May 31, the company files for Chapter 11 bankruptcy. Company now employs about 400.
Source: Baldwin Piano; Enquirer research
The inventory consists of pianos that were damaged in transit or during production, returned by dealers or were cannibalized for parts.
"The challenge is to get that (inventory) turned back into cash, and then to continue to manage it reasonably so it doesn't build up again," he said.
The Baldwin name is probably the company's most valuable asset and will undoubtedly continue whether the company is successful in its attempts to reorganize and repay its debts or ends up being sold to satisfy creditors.
But Baldwin's status as an American icon — the largest and last American piano maker could be lost, industry observers and former employees say.
"This company has a 140-year history of building really fine pianos," Mr. Jones said.
Covered 2 markets
Unlike competitors such as Steinway, which specializes in high-end concert pianos: "Baldwin was unique in that it covered the mid-priced and premium piano market," Mr. Jones said. "As a result, dealers sold a lot more Baldwin pianos than Steinway or the others did."
The company also had an unusual corporate culture, former employees say, which extended its network of more than 300 dealers.
"We all felt we were part of a family," said Ken Edgington, former vice president of sales who retired in 1998.
Frank Seta, a former marketing executive who left Baldwin after 20 years just before the bankruptcy filing, said employees had a passion for their work.
"People at Baldwin brought happiness into people's homes," he said. "That's what kept people committed to their work."
Mr. Jones agreed: "People take a lot of pride in building a piano. They are interesting devices. They have a voice. ... There aren't many things that have their own voice. Pianists can sit down and play it, and it has a way of speaking to you."
Mr. Edgington, a native of Blanchester who now raises cherry trees in Montana, was typical of many Baldwin employees. He graduated from Ohio State University with a music degree and spent 28 years at Baldwin.
"The feeling was never that you worked for someone (in the company) but that you worked with them," he said.
That extended to Baldwin's dealer network. The company consigned pianos to dealers through its now-sold Keyboard Acceptance Corp. Because the company owned the pianos until the dealer sold them, it worked closely with dealers to help them sell the units.
"We always took calls from dealers and socialized with them at trade shows," Mr. Edgington said. "Baldwin never had the feeling of being a large company."
Revolving door
That close relationship between dealers and the managers suffered under the leadership of Karen Hendricks, a former P&G and Dial Corp. executive who was Baldwin's CEO from 1994 until retiring this year, industry watchers say.
There was a revolving door in the company's management ranks during her tenure that weakened the relationship built up over the years between the company and its dealers, says Mr. Majeski.
"A lot of the new people who came in from outside were used to working in large corporations," Mr. Edgington said. "The high turnover among the management people was something Baldwin never had in the past."
Hendricks
Ms. Hendricks didn't respond to a request for an interview last week but recently told The Associated Press that she devoted almost seven years to making Baldwin more efficient.
She oversaw the sale of Baldwin's financing operation and electronic components division and cut the work force from 1,500 to about 600.
"We were executing a strategic plan that would clearly have Baldwin land on its feet and be healthy," she said. "The industry as a whole has been under pressure."
Some of Baldwin's dealers twice wrote to the company's board seeking Ms. Hendricks' ouster, blaming her for the company's increasing problems.
Bill Dollarhide, a Pensacola, Fla., dealer for Baldwin, who signed both letters, said he didn't think Ms. Hendricks understood the music business, but blames the company's board of directors for not acting sooner.
He and other dealers say they remain hopeful that the company will survive.
"It's early, but I remain optimistic," he said. "The sense I get from other dealers is that they're cautiously optimistic and are supportive."
Expanding line
John Biasco, whose Biasco Musical Instrument Co., acquired Baldwin's 11-store retail chain including its two Cincinnati area stores, says, "I believe Bob Jones, given the chance, can turn the company around."
Mr. Jones said beyond cutting about $4 million from the company's operating costs and reducing its excess inventory, the company is planning to increase imports of lower priced pianos this fall to give it a broader product mix.
The company has renamed Korean American Musical Instrument Corp., its long-time import partnership with Samick Music, as Baldwin International and will begin importing lower-priced vertical and grand pianos made in Indonesia under the Wurlitzer name this fall.
"It expands our product offerings to include the traditional good-better-best lines," Mr. Jones said. "The good will be the Wurlitzers from Indonesia and China. The better will be our Chickering pianos from Korea, and best would be the hand-made, American-made Baldwin brand pianos made in our plants in Arkansas."
Baldwin thinks the Wurlitzer trademark will give it an advantage over other importers without a U.S. heritage behind them.
Mr. Jones, who started in the music business as a gospel singer and still performs as part of the Songfellows gospel quartet, said he underestimated the scope of Baldwin's problem when he joined the company but remains optimistic about the company's chances.
"They say nothing is 100 percent, but I believe we're certainly in the high 90s. I'm more optimistic now than a month ago," he said.
enquirer.com
Watching it, they have a great brand name. |
