Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 7, 1991 TAG: 9102070442
SECTION: BUSINESS PAGE: B-7 EDITION: EVENING
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: BASSETT LENGTH: Medium
Retailers he saw on a recent trip to Chicago told him that when the Persian Gulf war started on Jan. 15, "it was like pulling down a shade" for the furniture business, Spilman said.
In more than 40 years in the home-furnishings industry, Spilman said, "I've never seen business like it is today."
His report was the first from furniture companies this year. Many makers have cut work schedules in response to slow sales.
Spilman cited as primary factors the decline in housing starts, rising unemployment, the unhealthy financial condition of many debt-ridden customers, a decline in consumer confidence and the gulf war. All will affect the company, he said in a management analysis in Bassett's annual report.
The company's earnings for the year ending Nov. 30 came to $5.1 million, down 73 percent from $18.9 million in 1989. But a major part of the decline was a $14.3 million charge for closing a case-goods plant at Bassett. Net sales last year were $435.7 million, down 5 percent from $459.9 million a year earlier.
Spilman and J.C. Philpott, senior vice president-manufacturing, described Bassett's investment of more than $9 million in labor-saving, computerized equipment and building improvements to meet government health and safety regulations.
Construction prices are down during the slump and Bassett is using reserve funds to modernize its plants and buy equipment, Spilman said. At the end of the year, Bassett had $238.7 million in retained earnings, down slightly from $243.3 million a year earlier.
"We've got to reduce labor costs and the only way is to get smart machines," Spilman said.
Philpott told of a board-cutting machine purchased in Germany for $1.8 million. The machine replaced 14 workers, increased the yield by 8 percent and will pay for itself in one to two years, he said.
If the machine breaks down, Philpott said, the company calls its German maker "and they call it up on a computer and tell us what's wrong. Don't ask me how they do that."
As new computerized numerical control equipment is developed, "we'll buy it," Philpott said.
Most of the high-tech equipment in the furniture industry is made in other countries, "a sad testimony that we have to buy everything offshore," Spilman said. This sometimes causes service and spare parts problems, he added.
Bassett has more than 400 computerized sewing machines, costing $25,000 each for a total of at least $10 million. That's 10 times the cost of manual sewing machines, he said.
But the computerized equipment "has tremendous competitive advantages, producing shorter runs, maintaining quality and reducing costs," he said.
Spilman said the company is trying to meet the needs of consumers who "want more intrinsic value" in such features as mouldings, more shapes and contours in furniture.
The stockholders returned 15 directors, including Spilman, to office. John W. Snow, president of CSX Corp., has been named to the board since last year's stockholders meeting.
by CNB