Sour Note

Wurlitzer 's fight to survive

For more than a century, the name Wurlitzer has been a household synonym for high-quality musical instruments, from grand pianos to the imposing wood and gold-leaf scroll organs that boomed across sports stadiums and carnival midways. Although the 8,000-pipe "Mighty Wurlitzer" at Manhattan's Radio City Music Hall is still in operation, the company that built it is struggling for its life, victimized by foreign competition, high interest rates and a weak economy. Together, these pressures have flattened sales of pianos and organs alike.

During the past year, business for the De Kalb, Ill., firm has slumped by nearly 11%, to $84.4 million in sales, and prospects look grim. Says George Howell, a former executive vice president of International Minerals & Chemical Corp., who took over last spring as Wurlitzer's president and chief executive officer: "The demand for our products has dropped like a rock, and our market has just about disappeared."

High interest rates have been the company's biggest headache. With consumer demand weak, and unsold Wurlitzers gathering dust in warehouses, the company has had to borrow heavily to finance its inventories, driving up total debt to a current level of $24.5 million. Last autumn, the firm defaulted on a restructuring agreement involving $30 million worth of debt obligations with its major creditor, the First National Bank of Chicago. Meanwhile, Wurlitzer's net worth has shriveled to about $20.7 million, and bankers worry whether there would be very much to recover if the company were to default again.

In a desperate cost-cutting struggle to survive, Wurlitzer has reduced its production schedule, and one of its three remaining U.S. plants has been put on the auction block. Since March the firm has closed half its 42 company-owned retail outlets around the country, and it is seeking to sell or close the remaining ones. In addition, the firm's worldwide work force has been slashed by more than 20%, to about 1,400.

Pay for Wurlitzer employees has also been shaved. Hourly workers get 12% less than they did a year ago, and the salaries of top management have been cut by one-third. Says Howell gamely: "In the face of the economic consequences, our only response had to be retrenchment. But if I had to bet, I'd bet we'll survive. We're now prepared for anything the economy dishes out."

One problem Wurlitzer will face no matter what the economy does is growing competition from low-cost, high-quality foreign imports. Japanese-made pianos and organs from such manufacturers as Yamaha and Kawai have already captured 25% of the U.S. market, and industry experts expect the share to keep growing.

To fight back, the company has introduced a new lower-cost model called the Rudolph Wurlitzer. The piano, which has a less intricate and expensive mechanism than the traditional Wurlitzer, retails for below $2,000, in contrast to $3,960 for the company's standard models. In June, the company contracted with a Korean piano manufacturer, Young Chang, to design and build grand pianos, which are now for sale in the U.S. under the Wurlitzer label. One bright spot is the company's European division, which primarily markets coin-operated jukeboxes and vending machines. Revenues have climbed from $7.2 million in 1975 to $13.7 million this year.

Despite such measures, the company's long-term prospects are anything but secure. Unless sales snap back soon, the name Wurlitzer may be fated to start fading from memory, like such once famous brands as the Hudson Hornet and the Atwater-Kent radio.

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