Office furniture slump hits the big boys hardest

November 17, 2008
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Believe it or not the sky is NOT falling for the office furniture industry. With Herman Miller announcing major layoffs and Steelcase putting 300 employees on notice, many might believe the entire industry is in a funk. Indeed, rumors are floating around that many mid-level managers at Herman Miller have their resumes out, and Haworth is slowly and quietly laying off lower-middle management.

While, many smaller niche-focused, design-driven companies that are fairing well: StelterPartners, Nurture by Steelcase, and Herman Miller for Healthcare.

Coincidentally, on the heels of Herman Miller and Steelcase layoff announcements, Michael A. Dunlap & Associates released the 18th edition of its quarterly Office Furniture Industry Trends Survey, which is used to measure the current business activity of the industry and its suppliers. It was conducted during October.

The Overall Survey Index fell to 50.54 on a 100-point scale — surprise, surprise. However, Mike Dunlap, owner and principal, sees a ray of hope in office furniture manufacturers branching out into other markets, including health care, higher education and hospitality.

"The industry is far more diversified today than it was eight or 10 years ago," said Dunlap. "When the last major recession hit between 2000 and 2004, that was mostly a result of a decline in office work, and now with other markets, it's much easier to absorb that and get into other fields."

As the dust begins to settle after the Herman Miller and Steelcase announcements, Dunlap said people should keep in mind that the announcements warned of potential layoffs.

"Steelcase has made the announcement to a number of employees that they are potential layoff situations. They've been given notice that it could happen. It's a warning situation. Now Herman Miller said, 'Alright, we have an aggressive cost-cutting scenario.' It may involve 400 to 650 employees spread out over the next three months," said Dunlap.

"I think they're looking at this and they're looking at a very similar situation that we're seeing here from my survey — a decrease in sales and a decrease in order backlogs — and they're saying, 'You know, if this doesn't improve, these measures are going to have to take place.' Is it a concern? Of course it is."

Dunlap said following the statistics indicates gross sales and backlogged index will continue to drop into the fourth quarter.

"If we were to follow the trend line and see how it has gone for the last four or five quarters, with the exception of the little uptick we had in July, we continued to go down. If we were to trend this out mathematically as we get into the fourth quarter of this year, we would expect to see both the gross sales and backlog indexes to be below 50, which means that they would be in a significant decline," he said. "Whether we actually see that or not remains to be seen, but purely from a mathematical standpoint, that's what we would expect."

Full speed ahead

When city commissioners approved an application last week for a new resort Class C liquor license for a new southeast side restaurant, one commissioner toasted the developer. Second Ward Commissioner David LaGrand didn't exactly raise a glass to the Arnold Lee family for their renovation of the two-story building at

648 Wealthy St. SE
, but he certainly lifted the family's spirits when he said, "They've done everything right."

LaGrand, who previously owned the building, praised the Lees for going ahead with the project without asking the city to lengthen the property's Renaissance Zone status. "I'm glad to see everything going on without asking for a Renaissance Zone extension," he said.

In addition to Arnold, who owns the building, the Lees include Rachel, Paul and Jessica. They're opening a new gastro pub named Winchester on Wealthy, and are renovating the second floor into apartments. Paul and Jessica, the husband-and-wife team that will run the restaurant, will rent one apartment and an uncle and aunt will rent the other. Rachel is directing the renovation work.

LaGrand seemed truly impressed with what the Lees are doing to his former building, an emotion the commissioner doesn't always show. "There haven't been any real residents up there for 50 years," he said. The Ren Zone on the Lee's property ends on New Year's Day 2012. They have declining partial tax exemptions for the next three years.

To sanction or not to sanction

Last week's West Michigan Public Relations Society luncheon program focused on ethics in the industry, and it quickly became clear that the Meijer debacle in AcmeTownship still has local PR practitioners rankled. Readers may recall that about a year ago, the Traverse City-Record Eagle broke the story, based on a lawsuit deposition, that local PR firm Seyferth & Associates (then known as Seyferth Spaulding Tennyson) had secretly orchestrated recall election efforts against Acme Township officials who opposed development of a new Meijer Inc. store. The affair resulted in additional legal action and a record fine levied against Grand Rapids-based Meijer for failing to report campaign contributions.

Speakers Betty Pritchard, a former Grand Valley State University public relations professor, and John Bailey, president of Detroit PR firm John Bailey Associates, fielded numerous questions about whether the society has the ability — and even the obligation — to sanction, reject membership or otherwise remove its seal of approval from organizations that act in opposition to its code of ethics. Pritchard and Bailey both have been involved in ethics issues for the society.

Proving her expertise at her craft, Pritchard commented that "it would be appropriate for (WMPRSA) to say this activity is wrong and we don't support it. I would not go so far as to turn it against an individual. We don't know all the details."

Bailey said the Public Relations Society of America is revisiting the idea of instituting sanctions for unethical members, which had been removed in the early 2000s. But Pritchard noted that out of 233 cases investigated since 1959, just 10 resulted in sanctions.

Bailey said he's "fired" about 10 clients over the years for asking him to cross ethical lines. "It's very clear in the code of ethics: You can't misrepresent or not represent fully what you're doing," he said.

Early in his career, Bailey said, he worked for the late Anthony Franco, who owned the largest PR firm in Detroit in the 1980s and was elected president of the Public Relations Society of America. When he heard his client — a publicly traded retailer   was about to be purchased, he called his broker to buy 3,000 shares. The Security and Exchange Commission investigated, Franco resigned his PRSA post and signed an agreement regarding his future trading activities.

And where did Seyferth & Associates principal Ginny Seyferth work, and who helped her get her Grand Rapids firm off the ground more than 20 years ago? None other than Tony Franco.

"There were so many elephants in that room," one WMPRSA member confided.

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