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Singer Corporation

Singer is the largest manufacturer and seller of sewing machines and a major vendor of consumer durables. It is one of the most respected and recognized brand names in the world.

The Singer Company N.V. is the foremost among the makers and sellers of consumer and industrial sewing machines in the world. It is also the oldest. Singer owns more than 1500 retail stores and its merchandise is distributed in more than 150 countries, making it one of the most renowned brand names in the world. However, Singer has found it difficult to keep up its profitability in the last century and it has had to reinvent its sewing operations, with several makeovers as a private and public company.

Isaac Merritt Singer was born to immigrant parents in Pittstown, New York, in 1811. He ran away when he was 12 years old, and joined a troupe of traveling actors. He continued acting till 1835, and then did many different jobs, all the while inventing things on the side. Singer went to Boston by 1850, with the intention of selling a patented device for carving wood-block type to type manufacturers.

A potential client’s sewing machine repair business aroused Singer’s interest in Boston. In 1790, the first patent for a sewing machine had been granted in England. The machines, however, had not been commercially successful because of their undependability. Elias Howe had invented the first sewing machine with an eye-pointed needle in 1846. This sewing machine looked all set to make a grand entry in the market and capture the interest of the public, but failed to do so because of the frequency of the repairs it needed. Singer, aware of this, set himself to work to invent a dependable machine.

Singer worked on his invention, and the machine was ready by 1850. He was granted a patent in 1851,and established the I.M. Singer and Company. The sewing machine earned accolades and immediate commercial success, which caused Howe to file a patent infringement suit against Singer. In 1854, Singer hired Edward Clark, a young lawyer to represent him in the case. Clark asked for a third of Singer’s business in return for his legal services. Singer agreed, and Clark and he became equal partners in the company, with Singer looking after manufacturing, and Clark, the financial and sales sides.

Edward Clark thwarted the lawsuits that were filed against Singer. He then went on to create the first patent pool in the United States by bringing the manufacturers together to pool their patents, and forming the Singer Machine Combination. The combination lasted until 1877 when the last patent expired. The combination licensed 24 sewing machine manufacturers to make machines for $15 per piece. Singer and Howe received $5 each for every machine sold in the United States.

Clark supervised the routine operations of the company, and under his guidance, the company began to grow at a rapid speed. The pricing of the sewing machines was an issue which narrowed its market considerably. The high prices meant that the machines would only be bought by professional tailors and harness manufacturers. In the 1850s, Clark came up with the first consumer installment payment plan. This attractive plan and Clark’s aggressive marketing strategy helped the company tide over the business panic of 1857 and gave Singer a definite and conclusive lead in sewing machines for over a century.

Clark and Singer’s partnership ended in 1863, after it was discovered that Singer had led a disreputable. The company was then incorporated as Singer Manufacturing Company and both Clark and Singer kept some stock in it, and sold the remaining to their employees. Clark continued to work as President till his death in 1882. Isaac Singer had fled to Europe, and died in England in 1875.

F.G. Bourne, Douglas Alexander and Milton Lightner led the company over the next 70 years. Bourne served as the president from 1873 to 1905. Alexander led the company from 1906 to 1949. Milton Lightner was at the helm from 1949 to 1958. During these years, Singer’s position as the first multinational company of the United States was strengthened. Singer’s operations had started in 1867 in Scotland, and in 1973 in Canada. Its European operations had begun exporting to Africa, and at the beginning of the next century, its products were being exported to the South Pacific.

Singer’s profits increased at a steady rate in the 1920s and 1930s, as it was able to convince more and more people around the world that a sewing machine was something they could not do without. When the Second World War ended, however, the market for sewing machines had grown in the United States, with many players in the market. In addition, European manufacturers introduced zig-zag machines – the kind that Singer had rejected in the 1930s, thinking there would be no market for them in the United States. The entry of the extremely competitive Japanese manufacturers in this situation, who inundated the market with their products, Singer’s market share fell down by a half in the United States alone. It was now only 1/3rd of the US market.

Donald P. Kircher, a lawyer, was hired by Singer in 1948 to look after its legal affairs. Kircher was appointed Milton Lightner’s assistant in 1955, and in 1958, he became the president of the company. Kircher, who was hired to turn the fortunes of Singer around, did so by a complete overhaul of the organization. Under his tenure, plants were modernized, automated manufacturing procedures were introduced, product-quality and packaging and marketing were improved. As a result, Singer’s share in the United States market had risen to 40 percent by 1963.

With Kircher at the helm, Singer embarked upon an ambitious plan of revamping the company facilities in Scotland, Brazil, France, West Germany and Italy. Not only did it spend huge amounts of money in this, it also built new factories in Australia, Mexico and the Philippines. Kircher also reasserted and demonstrated the company’s policy of looking at the underdeveloped parts of the world as its biggest markets.

Kircher also focused on diversifying Singer’s operations within the United States. He purchased Haller, Raymond & Brown, Inc., which was a major electronics research firm. It marked Singer’s entry in the electronics industry. Two knitting-machine making companies and a carpet-tufting-machinery manufacturing company were purchased by Kircher in 1960 and 1961. Singer’s sales had increased by only 12 percent between 1952 and 1956 – from $325 million to $364 million. The new measures Kircher adopted were successful, and the sales showed a steep rise to reach $1.2 billion, between 1958 and 1963. The nature of Singer’s business had expanded, and to reflect this diversification, Singer omitted the word ‘Manufacturing’ from it's name.

Kircher also focused on adopting a stronger acquisition and diversification policy. As part of this policy, Singer made the important purchase of Friden, Inc., a manufacturer of office equipment and manufacturers in 1963. In 1968, it purchased General Precision Equipment Corporation (GPE). The purchase of General Precision opened up three markets for Singer - industrial products (such as gas meters), defense electronics, and aerospace. Friden and GPE, important purchases as they were, were only two of the 22 manufacturing concerns that Singer acquired. These manufacturing firms produced items ranging from audio to aerospace equipment.

Sewing machines accounted for 90 percent of Singer’s sales in 1958, but an increased focus on diversification meant that by 1970, this figure was down to 35 percent. Kircher’s strategy seemed to be working, because in the same year, Singer’s sales were over $1.9 billion, about 40 percent of which came from overseas markets.

The 1970s were a time when it was becoming increasingly clearer that Kircher, who was considered an autocratic and imperious boss by his subordinates, had tried to do more than he could manage reasonably. The sales in 1974 were $2.6 billion, but according to the estimate of a Wall Street analyst, Singer’s debts had gone up to $1.1 billion, which was an astoundingly high price it had to pay for its acquisition strategy. A crash in the aerospace market, and an oversupply in the office equipment market in the late 1960s meant that Singer incurred a $10.1 million loss in 1974. The only bit of good news for Singer came from its original sewing machine operation, which stood at 54 percent of the total sales.

The board of directors at Singer was looking for someone to replace a hospitalized Kircher in 1975. Forty-seven year-old Joseph Flavin, who had worked at IBM, and as an executive vice-president at Xerox, was hired. Flavin decided to dispose of all Singer’s ventures which were losing money for the company and immediately took a $411 million write-off to do away with such companies. In the list were an Italian household appliance plant, a home-building concern, a printing operation, a telecommunications firm, and a West German mail-order house. The write-off, the biggest of its time, reduced Singer’s book value by 50 percent. The next step in Flavin’s plan was to rejuvenate the company’s sewing machine operation, and to expand its power tool and aerospace businesses.

Singer’s focus over the next few years was on developing and expanding high-technology electric components like air conditioning and heating systems, gas meters, thermostats, electrical switches, dishwashers, and auto dashboards. The guidance system for the Trident missile was made by Singer. It also made navigation equipment for airplanes and ships. Singer’s electrical instruments were also used in NASA’s Apollo lunar modules.

Flavin’s efforts saw the company’s $1.1 billion debt reduced by 55 percent. But with the sewing machine business going downhill in North America and Europe, he had to take a $130 million write-off on it in 1979. This move meant that Singer’s operations in North America and Europe had to be revamped. Singer’s oldest factory in Europe, near Clydebank, Scotland had to be given up. 80 out of the 200 top managers in Singer were replaced by Flavin, and these changes were made when a change of headquarters – from New York City to Stamford, Connecticut, was in progress.

Singer became a major manufacturer of aircraft simulators, including those used to train space shuttle astronauts. This led to an increase in Singer’s aerospace and marine divisions’ operating profits. In 1981, the profits in these divisions rose to $36 million, an increase of 34 percent. Encouraged by this, and by the large contract for helicopters that it won from the Defense Department in 1981, the management of Singer decided to create a new venture for providing ground school and flight simulation training for corporate pilots. This venture was called SimuFlite.

In the early part of the 1980s, foreign manufacturers like Bernina, Pfaff, and Viking made an entry into the sewing machine market in the United States. This, along with the low-cost machines imported from Japan cut deeply into the already diminished market-share of Singer in the sewing machine division. Added to this ground-reality was the belief among the top officials at Singer that the sewing machine industry in the United States was approaching its end. These factors led to Singer abandoning its century-old core business. Singer made its sewing machine division into a separate company called SSMC, Inc. in 1986. It also gave up all 1,600 company-owned stores and service centers – by closing them or by making them autonomous.

Singer was a $2 billion-a-year defense empire, but was besieged by an unending spate of problems and a huge debt. A $20 million loss in July 1987, which the company said was the development cost for many new aerospace products, resulted in a fall in its stock price. In the fall of the same year, Joseph Flavin died unexpectedly, making Singer a prime candidate for a takeover. In a surprise move, it was bought by Paul Bilzerian, a corporate raider and a greenmailer. Singer’s investment banker, Goldman Sachs expected to sell each Singer share for about $65, but Bilzerian got each share for $50, and took control of the company.

Singer’s enormous debts notwithstanding, Bilzerian began with a promise not to sell its most productive assets, and declared that he would only sell Singer’s defense electronics business. But within a few months, he began to sell off the most important assets of Singer and from July to October, 1988, he sold eight out of the twelve Singer divisions for $2 billion. This sale meant that his debt was covered.

In December 1988, Bilzerian was indicted and in May 1989, convicted on nine counts of securities and tax violations. These convictions were not related to Singer’s affairs, but the company did get into trouble midway through 1988. A number of former employees had filed suits against it for pension benefits. Suits were also filed by stockholders disappointed and annoyed by Bilzerian’s dealings; by the buyers of Singer’s divisions who claimed that they were overcharged, and by the federal government which sought three times of the Defense Department overcharges amounting to $231 million, dating back to 1980. Singer was renamed the Bicoastal Corporation in 1989, and settled with the federal government on the fraud charges in 1992, by agreeing to pay $55 million.

Withstanding all the pressures and defying all forecasts, the original sewing machine business, SSMC, managed to stay alive and in business. It was purchased in 1989 by Semi-Tech Global, and its fortunes began to turn around. SSMC, going back to its origins, renamed itself The Singer Company. The company’s shares were offered to the public on the New York Stock Exchange in 1991. The company’s ownership rested with Semi-Tech Global, which owned 50 percent of the shares. Semi-Tech Global’s interest in Singer was sold in 1993 to Semi-Tech Corp., which also owned 43 percent interest in Semi-Tech Global.

In the same year, Semi-Tech Global acquired the second largest sewing machine manufacturing business in the world – the G.M. Pfaff AG. Pfaff was a German company founded in 1862. With a history of almost as many years as Singer’s, it had also built itself a reputation similar to Singer’s. Within Germany, Pfaff sold its sewing machines more or less through its own retail outlets, while internationally, its sales were carried on by mass merchants, independent vendors and distributors.

Pfaff’s business was incurring losses in the early 1990s when Semi-Tech Global gained control of the company by purchasing 72 percent of its shares. Semi-Tech engaged Singer to manage Pfaff. It also cut Pfaff’s staff, outsourced and moved a good part of its manufacturing to other countries. Semi-Tech primarily looked for growth in the developing countries. Over the next few years, Singer and Pfaff obtained sources from each other and improved the ratio between research and the output of research and development by designing new products together.

By the mid-1990s, Singer’s name was widely known and the company had earned widespread respect. Hoping to take advantage of this, the company started selling other consumer goods. Television sets, video-cassette recorders and home appliances were the new products that were sold. Singer focused on developing countries as the prime markets for this line of its products. It had an advantage over other manufacturers and retailers in these countries, because in addition to the distribution networks it had established there, it also offered credit plans. Singer gained great popularity and success in Mexico, for example, where the working-class was its target-group. These were people who could not afford to buy a major appliance like a sewing machine without credit, but the concept of credit was not something they were used to. Between 1988 and 1993, Singer’s sales in Mexico quintupled, and kept growing at a healthy rate. Its repossession rate was also a steady 2 percent.

Notwithstanding its huge success in countries like Mexico, Singer’s business started to suffer and report losses by the late 1990s. Although the profits in 1996 were $29 million, the company lost $238 million on revenues of $1.1 billion the following year. The economic crisis in Asia, the slowdown in Brazil and poor sales in the United States resulted in a decline of 19 percent in the revenues in 1997. Early 1998 saw Stephen Goodman appointed as company’s president and chief executive officer.

With the objective of cutting down on superfluity and reducing costs, Singer acquired Pfaff for $157.5 million in 1997 by purchasing Semi-Tech Global’s 80.5 percent interest in the company. Bringing together the marketing and distribution operations of the two companies, and sharing their manufacturing plants, Singer was able to reduce their overheads. This restructuring cost 6,000 people their jobs – 5,531 jobs were cut from manufacturing and 437 from marketing. The management estimated that this 28 percent cut would save the company $104 million a year.

Revenues in 1998 were up to $1.26 billion, but Singer still incurred a loss of $207 million due to the continued economic slowdowns in Asia and Brazil. The diminution in the industrial sewing market also contributed to the company’s poor performance. Singer decided on a restructuring program in 1998 which involved the sale of property of an estimated value of $260 million. Property worth $37 million was sold that year. Its Taiwan operations were sold the next year for $58.6 million. It was announced on September 13, 1999 that Singer would voluntarily file for reorganization under Chapter 11 of the Bankruptcy Code. Under the watch and discretion of the NYSE, Singer’s stock continued to trade on the New York Stock Exchange.


1851

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