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Wheelchair Maker Tries to Regain Profits

April 03, 1990|JAMES F. PELTZ | TIMES STAFF WRITER

For decades, Everest & Jennings International Ltd. dominated the wheelchair business. Its chairs were used by Franklin D. Roosevelt and Winston Churchill. The company had as much as 70% of the U.S. market 15 years ago, and small competitors went to court claiming the company monopolized the business.

But in the 1980s, everything changed.

Everest & Jennings diversified into hospital beds, and the move was a flop. A new manufacturing plant in Camarillo, where the company is now based, was "poorly planned and executed" in the early 1980s and deliveries fell months behind schedule, said former company President Whitney A. McFarlin.

That opened the door for two young companies, Invacare Corp. and what is now the Quickie division of Sunrise Medical Inc. in Torrance, that began filling the void with lightweight, easy-to-use chairs. Even after its manufacturing snags were fixed, over the next few years, Everest & Jennings was slow to introduce newly designed chairs.

As a result, the company "threw buckets of market share" to its new rivals, McFarlin now admits.

Then last November, Gerald M. Jennings, the patriarch of the Jennings family that co-founded the company in the 1930s, died at the age of 70. A month later, Ronald Brierley, a New Zealand financier who had been accumulating Everest & Jennings stock since 1985, took control of the company by buying more shares from the Jennings family and on the open market. McFarlin says that only one family member, Dianne J. Jennings, Gerald Jennings' niece, remains on the company's board of directors.

Now the job of bolstering the company rests with Brierley and his staff, who control more than $1 billion worth of investments overall. The stake in Everest & Jennings is held by his Industrial Equity Pacific Ltd., and Robert G. Sutherland, the head of Industrial Equity's North American operations, was named chairman of Everest & Jennings in January, succeeding the late Jennings. Sutherland did not return calls seeking comment.

Last month the management overhaul continued when Everest & Jennings named Barre L. Rorabaugh, 48, who joined the company only four months ago, to replace McFarlin as president and chief executive. "The new owners basically wanted their own man in place here, and that's understandable," said McFarlin, who had held the post since 1985, when the Jennings family went outside for a new top executive. McFarlin remains a director of the company.

Brierley's assumption of control and his changes may only extend the turmoil at Everest & Jennings. But they also have the company's rivals taking notice.

"The new owners appear to be businessmen," said A. Malachi Mixon III, chairman of Invacare, an Elyria, Ohio-based concern. "Industrial Equity has a reputation for looking at troubled businesses and trying to turn them around."

Although Everest & Jennings remains the acknowledged leader of the worldwide wheelchair market, it concedes that Invacare might now sell more chairs in the United States. Invacare's presence in the professional medical market alone, where Everest & Jennings wheelchairs were long a staple, "has eroded tremendously," asserted Wayne Kunishige, vice president for product management at Sunrise Medical's Quickie division in Fresno.

Everest & Jennings also expects to post a net loss of about $33 million for its fiscal year that ended last Dec. 1, contrasted with a $2-million profit the previous year. Part of the loss included $18.5 million in reserves Everest & Jennings set aside to overhaul its operations. Also, the company was trying to recover some market share by waging a price war in the wheelchair business, which hurt profit margins. Everest & Jennings' sales were flat in fiscal 1989 at about $192 million, McFarlin said.

In turn, Everest & Jennings' two classes of stock have tumbled 40% in the past 14 months. (The company has Class B shares, which have one vote per share, and Class A stock that has only a tenth of a vote per share. Brierley owns 51% and 48% of the Class B and Class A shares, respectively.)

Brierley's response has been swift. In addition to hiring Rorabaugh and Sutherland, Everest & Jennings has laid off 350 employees since December--including 150 salespeople and other salaried personnel--lowering its worldwide work force to 1,900, Rorabaugh said. The company also is merging some overseas manufacturing operations; British production is being shifted to Germany, for instance.

The company also raised prices of its wheelchairs 5% on March 1 to bolster its profit margins, and the chairs now cost between $350 and $6,000.

And two weeks ago, the company acquired several small divisions from Huntco Manufacturing Co. for $4.5 million cash and 15% of its Class A stock. The divisions make other medical products, such as hospital beds and oxygen equipment, and are part of Everest & Jennings' new strategy of expanding into the manufacture of other durable medical equipment.

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