BIFMA's Reardon Discusses Economy's Impact On Office Furniture Sales.

THE OFFICE FURNITURE industry has taken a hard hit from the softened economy. Several of the leading manufacturing companies have laid off workers in the wake of declining demand for their products. Grand Rapids, MI-based Steelcase, Inc., the world's largest office furniture manufacturer announced in Mid-April that it was considering laying off up to 1,000 additional hourly workers if business does not perk up.

In light of these developments, Wood & Wood Products spoke with Tom Reardon, executive director of the Business and Institutional Furniture Manufacturers Assn. Reardon noted the slowdown but also discussed the potential for improvement created by the Federal Reserve Board's most recent round of interest rate cuts. He also ad dressed the prospects for continued growth of the small office/home office (SOHO) segment that many BIFMA members are pursuing.

Orders Down, Yet Shipments Up

Reardon said that January and February orders of office furniture were down 4 percent as compared to the first two months of 2000, but shipments were up 3 percent. "That's a little misleading because manufacturers are working off the backlog of orders from late last year," Reardon said. "We are pretty much through the backlog, and from here the monthly numbers should reflect the incoming orders."

Reardon said that the overall impression he garnered from anecdotal conversation with BIFMA members is "that things are still soft." He attributed this sense of softness to a variety of factors. "When you talk about the general economy, we are seeing a slowdown in most manufacturing businesses and not just manufacturing of office furniture, but anybody who manufactures some kind of capital goods. They have seen a reduction in their order rates that, coupled with higher energy prices, has put the squeeze on profits. Our industry is sensitive to corporate profitability. When businesses have excess profits and capital they tend to reinvest it in their business. Whether that's hiring more people or upgrading their offices, our members benefit. If a business, whatever it is, is not experiencing strong profits, it will put any expansion and renovation plans on hold. Also, if you are not hiring more people, then office furniture is certainly a discretionary expense," Reardon said.

Signs of Improvement

Optimistic signs exist for improvement, Reardon said, due to the recent lowering of interest rates by the Federal Reserve. The latest half-point interest rate drop occurred on April 18, surprising many in the industry since the Federal Reserve was not set to meet until May. The drop in interest rates was the fourth of the year. The Fed had cut rates twice in January and again on March 20.

"From an economic policy standpoint we are headed in the right direction," said Reardon. "It's just a matter of time before we see the interest rate reductions take effect. The Fed has been very aggressive in the first three months of the year in cutting interest rates. Conventional wisdom says it usually takes about six months for the affect of any Fed action cuts. We are confident that we will see stronger corporate profitability in the second half of the year and that will translate into improved business conditions for office furniture manufacturers."

Asked about the impact of the energy crisis to the industry, Reardon said the biggest impact is that everyone is paying more for energy, whether it is fuel increases in transportation costs or energy to run facilities. He noted that it affects everyone's profitability, including furniture manufacturers and their customers.

Reardon said there has been an erosion of confidence, both among consumers and businesses. "CEO confidence stems from what we see and feel as a result of the stock market. The stock market responds to corporate profitability. When projections for corporate profitability are strong, that reflects positively on rising stock prices and a rising stock market. When corporate profitability is a little more dismal it has a negative impact on stock prices. We saw that late last year and also in the first quarter of 2001. I think the Fed's action will send us in a positive direction. We saw a little response to the most recent surprise interest rate cut by the market's rallying. I think we are poised for things to improve."

The Battle for SOHO Market Share

Reardon said the home office market is viewed as a growth market by many traditional office furniture makers.

"The small office, home office is a lot of different things. We have seen traditional commercial office manufacturers adjust their marketing strategies to get into that market either through the acquisition of companies doing that kind of product and already in that distribution channel or the internal development of products to meet that market niche.

"Likewise, we see residential furniture manufacturers adapt their product lines to develop more office type of products as opposed to the more traditional offerings of bedroom, dining room and living room furniture. It remains to be seen who is better poised to serve the small office/ home office market. The residential furniture manufacturer may have a slight advantage just because they are in the distribution channel."

Reardon added, however, that commercial furniture manufacturers are better poised distribution-wise for serving the small office market. "I believe it is a small segment for our industry in that you are talking about selling one or two items as opposed to landing a 50- to 100-workstation job. But when you look at the growth rate of the market, it is impressive."

Steelcase Inc.

In February, Steelcase announced the closing of its Wigand custom milling and woodworking unit in Colorado Springs, CO, because the facility was not meeting profit expectations. The company also announced that it would relocate production of the Clestra Hauserman line of architectural interior wall products from Solon, OH, to existing company facilities in Markham, ONT. The company said the line had outgrown the Solon facility and that the Markham location had greater capacity and a lower cost environment. The company will close the Solon plant by December this year.

Steelcase began reducing workforce last December. The company plans to eliminate almost all temporary positions, reduce hourly workforce by 10%, and cut salaried workforce by 200 to 300 jobs.

HON Industries

HON announced that it will close its Williamsport, PA, facility and consolidate wood office furniture production from that plant into other manufacturing locations during the second and third quarters of 2001. The company anticipates $4 mil lion in savings annually from the move.

Earlier this year, HON authorized $100 million for a share repurchase program. The company had spent nearly all of the $70 million authorized for share repurchasing in 1998.

HON's Hearth Products segment won several Vesta Awards at the Hearth Products Association show, including most creative overall new product. The Vesta Awards recognize new products within the hearth industry.

Herman Miller 

Herman Miller launched the Herman Miller RED line, which targets the furniture needs of small, new-economy companies. The new line of office furniture systems is designed for quick-ship, quick-assemble and to be lower priced. It can be delivered via UPS and requires minimal time for assembly and setup. No interlocking panels, no stationary file cabinets and easily movable desks are features of the line.

The line is produced through just-in-time component-assembly techniques. The line has a separate, dedicated Web site and online store front, www.hermanmillerred.com. According to the company it can be picked, packed and shipped within 36 hours.

The company also authorized a $100 million share repurchase plan.

Haworth Industries

Haworth will close its Kent, WA, plant effective June 29, ac cording to the Seattle Post-Intelligencer. Earlier this year, the company had scaled the plant back from two shifts to one. The actions will eliminate a combined 260 jobs. A spokesper son for the company said Haworth closed the plant due to the economic slowdown and because the company has production capacity available at other plants.

Haworth launched "if," an online, interactive space design tool for pre-configured furniture pieces. It is available at Haworth's Web site, www.haworth.com. The company also now offers the S-CON seating line in North America.

Kimball International 

Kimball International consolidated its Greensburg (KY) Manufacturing and Lafayette (TN) Manufacturing operations into a single business unit, known as Vista Wood Products.

Vista produces dimension lumber, door assemblies and glued-up panels for the furniture and kitchen cabinet markets. It is headquartered at the former Greensburg plant, but both facilities are still operating and no layoffs are anticipated, the company said.

Kimball appointed Brent Elliott as executive vice president of Kimball International and president of Furniture Manufacturing Services. The company also authorized the repurchase of 2 million shares of Class B common stock.

Knoll Inc.

Knoll introduced Currents Upstart, a line of tables designed for rapidly expanding, computer-based startup companies. Upstart tables can be used as stand-alone worksurfaces or combine with other systems furniture. The tables are available in rectangle, "Y" and "M" shapes.

Knoll also relocated its Los Angeles showroom to a 15,000-square-foot space in Santa Monica.

Teknion Corp.

Teknion reported record sales in 2000. In March 2001, Teknion's principal shareholders sold 5.5 million subordinate voting shares to a syndicate led by CIBC World Markets Inc.

The company also opened a 2,370-square-foot showroom in Akasaka, Tokyo, Japan, to expand its international presence.

KI (Kreuger International)

KI won two Gold and one Silver awards at the 11th annual Best of NeoCon awards program at the NeoCon 2000 World's Trade Fair held in Chicago in June. KI's Torsion on the Go! flex-back office chair and KI division Spacesaver's Power Pro electrical mobile storage system won Gold awards, while KI's Einstein line of classroom furniture won a Silver award.

The ADD Sleep Chair and the Perth Motion Patient Chair, by Kl divisions ADD Specialized Support Technology and AGI respectively, won Nightingale Awards in December. The Nightingales recognize excellence in health care product design.

Falcon Products

In June, Falcon Products completed an agreement to establish Epic Furniture Group. Epic targets the high-end, high-design contract furniture market in the United States and Canada.

The company named David L. Morley as president and COO in December.

Virco Manufacturing

Virco Mfg. launched several product lines. Plateau, designed by award-winning designer Peter Glass, is a new table system designed so the top appears visually separate from the structures beneath it. The Mojave Office Solutions system provides a full range of workstation configurations and can be equipped for technology-based applications. Vespers is a new chair designed for places of worship that is stackable but can be configured in the shape of a traditional pew.

Winsloew Furniture Inc.

In February, Winsloew Furniture formed a new division to cover corporate and hospitality furnishings that will provide strategic guidance, market focus and coordinated product development for this rapidly growing business segment. Companies owned by Winsloew that are included in this division will include Loewenstein in Pompano Beach, FL; Charter in El Monte, CA; and Stuart Clark and Lodging by Loewenstein in Liberty, NC. These companies provide product for architect and design community, office furnishings, store planning, stadium, GSA, hospitality and lodging markets.

In March, Winsloew acquired The Woodsmiths Co. of Pompano Beach, FL, which manufactures and distributes furniture for the contract, hospitality and healthcare markets. Woodsmiths will become part of Winsloew's contract and hospitality furnishings division.

Irwin Seating Co.

Irwin Seating introduced the E-Link System for its Uni-Lecta and 900 Series Strip Table lines of classroom furniture. E-Link manages wires underneath the tabletop to enable network connectivity in the classroom.

Inscape Corp.

In January, Inscape acquired the Dowcraft Corp. of Falconer, NY. Dowcraft is a 30-year-old, 100-employee manufacturer of floor-to-ceiling moveable partition systems distributed throughout the United States and Canada. The acquisition follows the company's purchase of a majority interest in Workmachine Inc. in September Workmachine develops and distributes modular interior architectural walls.

Trendway Corp.

Trendway named Mark L. Groulx as its new president and chief operating officer Groulx took on the position on April 9th, replacing Don Heeringa, Trendway's owner, who will become chairman and chief executive officer.

In April, Trendway opened a new showroom and training center in Los Angeles, CA. The 6,500 square-foot showroom will also serve as the head quarters for Trendway's Western Region.

La-Z-Boy Contract

In March, Michael P. Haley was appointed president of La-Z-Boy Contract Furniture Group.

In April, the La-Z-Boy Contract Furniture Group announced plans to refocus its manufacturing and marketing strategy to place a greater emphasis on office and commercial seating, the company's traditional strength. The company will accelerate the development and introduction of new seating lines. The company also announced a new partnership with a Grand Rapids, MI, manufacturer to market, produce, distribute and service the company's RJ Plus line of modular case goods products. As part of this new direction, the company will discontinue production of freestanding case goods at its Lincolnton, NC, facility. The Lincolnton facility will continue to manufacture upholstered furniture for La-Z-Boy's residential division.

Mayline Group

The Mayline Group closed one branch plant and consolidated operations at its Minnesota facility. The company plans a number of new product introductions in 2001.

Mayline's Tiffany Industries division introduced the Conclave line of training tables (shown) in November 2000.

In February, Mayline signed an exclusive licensing agreement with SOHO Computer Furniture. Under the agreement, Mayline will have the rights to manufacture and distribute SOHO's line of small office and home office adjustable computer workstations.

In March, the company introduced VariTask Reflex, a line of counterforce, height-adjustable tables. Mayline division Kwik-File introduced Stack-it, a stackable shelving line for high-density color-coded filing.

Hussey Seating

Hussey Seating Co. offers a new design of gymnasium seating, MAXAM. It has reengineered its line of telescopic gymnasium seating. It has a new emphasis on safety with features such as end enclosures, aisle closures and top deck covers.

MTS Seating

In July, MTS Seating collaborated with GN Burgess, a furniture manufacturer in England, to form MTS Burgess LLC, which is co-owned by stockholders of both companies. MTS Burgess manufactures GN's line of banquet seating for the North and South American markets, and MTS Seating serves as the marketing arm for the new company.

In 2000, MTS Seating introduced its largest new product additions ever, including Guest Select upholstered furniture for hotel guest rooms. The line allows MTS to serve its core lodging customers in a new area. The company also received a number of design patents, including the MTS Leg Reinforcement Bar on stacking banquet chairs. Joseph F. Restivo was named MTS Seating's chief financial officer in December.

This year, MTS introduced the new Regency collection of stack chairs for banquet seating, which feature elegant decorative back styles. The company also introduced the Comfortflex Stack Chair with a moving back, and the Bistro Series line of tables, barstools, and chairs with and without arms.

Indiana Furniture Industries

In November, Indiana Furniture Industries completed the implementation of a $5 million case goods facility. It is the company's third case goods plant, and its fifth facility overall.

Miller Desk Inc.

Miller Desk closed one of its plants and consolidated its operations into other fa- cilities.