The Singer Company N.V. History

Company Perspectives:

Singer is one of the most widely recognized and respected brands in the world. The company is the largest manufacturer and seller of sewing machines and a leading marketer of consumer durables for the home.

Company History:

The Singer Company N.V. is the number one maker and seller of consumer and industrial sewing machines in the world, not to mention the oldest. With distribution into more than 150 countries worldwide and ownership of 1,500 retail outlets, Singer boasts of having one of the best-known brand names in the world. Throughout the late 20th century, however, Singer has struggled to maintain profitability, and the original sewing operations have weathered several incarnations as a private and a public company.

Company Origins

Isaac Merritt Singer was born in Pittstown, New York, in 1811, and ran away from his immigrant parents at the age of 12 to join a troupe of traveling actors. Singer remained an actor until 1835. During the following years he worked at various jobs while he invented things on the side. By 1850, Singer had gone to Boston with a patented device for carving wood-block type he hoped to sell to type manufacturers.

In Boston, Singer became interested in a prospective client's sewing machine repair business. The first patent for a sewing machine had been granted in England in 1790, but because of their unreliability none of the machines since then had been commercially successful. The first sewing machine with an eye-pointed needle, invented in 1846 by Elias Howe, seemed on the verge of capturing the public interest, but it, too, required frequent repairs. Singer quickly set to work to invent a reliable machine.

Singer finished his machine in 1850 and was granted a patent for it in 1851, the same year he established I.M. Singer and Company. The machine was an immediate success, prompting Howe to file suit against Singer for patent infringement. In 1854 Singer hired a young lawyer named Edward Clark to defend him; Clark agreed to take the case in exchange for a third of Singer's business, and eventually the two men became equal partners in the company, Singer running the manufacturing side and Clark the financial and sales side.

Clark stymied the lawsuits brought against Singer and then brought the manufacturers together to pool their patents by creating the Singer Machine Combination, the first patent pool in the United States. The combination, which lasted until 1877, when the last patent ran out, licensed 24 sewing machine manufacturers to make the machines for $15 a machine, with Singer and Howe receiving $5 each for every machine sold domestically.

Expansion in the 19th Century

With Clark supervising the day-to-day operations, I.M. Singer and Company began to grow rapidly. Until the late 1850s the price of a sewing machine limited its market to commercial interests like professional tailors and harness manufacturers. But at that time, Clark introduced the first consumer installment payment plan. This plan, combined with an aggressive marketing strategy, enabled the young company to survive the business panic of 1857 and gave Singer the decisive lead in sewing machines for more than a century.

In 1863 Clark and Singer dissolved their partnership and the company was incorporated as Singer Manufacturing Company after Singer's rather sordid personal life (which eventually resulted in 24 children by four women) came to light. Both Clark and Singer retained some stock in the company but sold the rest to their employees. Clark continued as president of the company until his death in 1882; Isaac Singer, who had fled to Europe, died in England in 1875.

For the next 70 years, the business was led by three men: F.G. Bourne, who was president from 1873 to 1905; Douglas Alexander, who led the company from 1906 to 1949; and Milton Lightner, who served from 1949 to 1958. These men increased Singer's role as the United States' first multinational company. Singer had begun manufacturing in Scotland in 1867 and in Canada in 1873. By the 1880s, the company's extensive European operations were exporting sewing machines to Africa and soon after the turn of the century Singer was selling its product in the South Pacific. The one setback during this growth and expansion occurred in 1917, when the company's Russian holdings were seized during the Bolshevik Revolution. In 1918 Singer acquired the Diehl Manufacturing Company to make sewing machine motors.

Throughout the 1920s and 1930s, Singer's profits rose steadily as it convinced more and more people around the world that a Singer sewing machine was indispensable. By the end of World War II, however, the sewing machine market had matured in the United States. To make matters worse, within a few years European manufacturers were offering zig-zag machines (which Singer had decided in the 1930s would not find a market in the United States) and, suddenly, highly competitive Japanese manufacturers began to flood the market. In the United States alone, Singer's market share had halved, to only one-third, by the late 1950s.

Singer had hired a lawyer, Donald P. Kircher, to supervise the company's legal affairs in 1948. In 1955 Kircher was appointed Lightner's assistant, and in 1958 he was made president. Hired to help turn Singer around, Kircher began a complete reorganization of the company: plants were modernized, manufacturing procedures automated, products upgraded, and merchandising improved. By 1963 Singer's share in the U.S. sewing machine market had increased to 40 percent.

Diversification in the 1950s and 1960s

Under Kircher's direction, Singer also began an ambitious overseas construction program. Besides spending large amounts of money to revamp company facilities in Scotland, Brazil, France, West Germany, and Italy, Kircher also started building new factories in Australia, Mexico, and the Philippines. In addition, Kircher reaffirmed the strategy of looking toward underdeveloped regions of the world for the company's largest markets.

Kircher also began a domestic diversification program. One of his first decisions was to purchase Haller, Raymond & Brown, Inc., a leading electronics research firm and Singer's first step into the electronics industry. He also bought three companies in 1960 and 1961: two knitting-machine makers and a carpet-tufting-machinery maker. Initially, this diversification strategy was also successful. Between 1958 and 1963, Singer's sales almost doubled, to $1.2 billion (between 1952 and 1956 sales had risen only 12 percent, from $325 million to $364 million). In 1963 Singer dropped the "Manufacturing" from its name to better reflect the nature of its business.

Kircher's plan also included a more aggressive acquisition and diversification policy. The first important purchase, in 1963, was of Friden, Inc., a manufacturer of office equipment and calculators. The second one, of General Precision Equipment Corporation (GPE), was made in 1968. General Precision gave Singer access to three markets: industrial products (such as gas meters), defense electronics, and aerospace. But GPE and Friden were only part of Kircher's grand plan. Altogether, Kircher bought 22 manufacturing firms with products ranging from audio to aerospace equipment.

In 1958, 90 percent of Singer's total sales came from sewing machines; by 1970, this portion was reduced to 35 percent, and Kircher's diversification strategy seemed to work. Singer's sales exceeded $1.9 billion, 40 percent from business abroad.

Losses in the 1970s

But Kircher, described by subordinates as autocratic and imperious, had overreached himself. Although the company reported $2.6 billion in sales for 1974, one Wall Street analyst estimated that Singer's debt had reached $1.1 billion--a staggering price for its acquisition program. Combined with a collapse in the aerospace market and a glut in office equipment in the late 1960s, it is not surprising that Singer reported a $10.1 million loss in 1974. The single bright spot that year was Singer's original sewing machine operation, which accounted for 54 percent of company sales.

While Kircher was confined to a hospital bed in 1975, the board of directors looked for someone to replace him. They hired Joseph Flavin, who had worked at IBM and at Xerox, where he was an executive vice-president. Forty-seven years old when he became Singer's president, Flavin immediately took a $411 million write-off to eliminate the company's money-losing ventures, including a home-building concern, a printing operation, a telecommunications firm, an Italian household appliance plant, and a West German mail-order house. This write-off was the largest of its time and reduced Singer's book value by 50 percent. Flavin then planned to revitalize the company's sewing machine operation and develop its power tool and aerospace businesses.

Over the next few years, Singer also concentrated on developing high-technology electric components, including air conditioning and heating systems, gas meters, thermostats, electrical switches, dishwashers, and auto dashboards. The company made the guidance system for the Trident missile and navigation equipment for airplanes and ships, and Singer electrical instruments played an important role in NASA's Apollo lunar modules.

Flavin managed to reduce the company's $1.1 billion debt by 55 percent after he became president, but in 1979 he took a $130 million write-off on the sewing machine business, which in North America and Europe had fallen off drastically. This move involved the restructuring of Singer's North American and European operations; its oldest factory in Europe, near Clydebank, Scotland, was one of the casualties. Flavin also replaced 80 of his top 200 managers. All these changes were made in the middle of a headquarters move from New York City to Stamford, Connecticut.

In 1980 Singer's aerospace and marine divisions' operating profits increased by 34 percent, to $36 million, due in large part to Singer's role as the nation's leading manufacturer of aircraft simulators, including the one used to train space shuttle astronauts. In addition, this division won a large contract for helicopters from the Defense Department in 1981. Encouraged by these results, management decided to create SimuFlite, a new venture that provided ground school and flight simulation training for corporate pilots.

Continued Problems in the 1980s

Foreign manufacturers like Bernina, Pfaff, and Viking, along with inexpensive imports from Japan, began to cut deeply into what little was left of Singer's sewing machine market during the early 1980s. That and the belief among top officials at Singer that the sewing industry in the United States was finally drying up led the company to abandon its century-old core business. In 1986 Singer spun off its sewing machine division as a separate company called SSMC Inc. Singer also got rid of all 1,600 company-owned stores and service centers, either by closing them or making them independent.

Although Singer had become a $2 billion-a-year defense conglomerate, it was beset by endless problems and an enormous debt. Its stock price was driven down by the announcement of a $20 million loss in July 1987, which it attributed to development costs for several new aerospace products. Then, that fall, Chairman Joseph Flavin died unexpectedly. Therefore, to no one's surprise, Singer became a prime takeover candidate. The buyer was a surprise, however: Paul Bilzerian, a somewhat obscure corporate raider best known as a greenmailer. For $50 a share--some $15 below what Singer's investment banker, Goldman Sachs, had expected it to sell for--Bilzerian walked away with Singer.

Despite a staggering debt load, Bilzerian at first promised not to strip Singer of its most productive assets, planning only to sell off its defense electronics business. But only months later, prime assets began to go. Between July and October 1988 Bilzerian sold eight of Singer's 12 divisions, for about $2 billion, which tidily covered his debt.

But, in December 1988, Bilzerian was indicted--for non-Singer-related activities--and in May 1989 he was convicted of nine counts of securities and tax violations. More troublesome for the company itself, however, was the multitude of suits filed against it after mid-1988 by former employees regarding pension benefits; stockholders disillusioned by Bilzerian's dealings; buyers of divisions who claimed they were overcharged; and the federal government, which sought treble damages of $231 million for Defense Department overcharges dating back to 1980. Renamed the Bicoastal Corporation in 1989, the company agreed to pay $55 million to the federal government in 1992 to settle the fraud charges.

Rebounding: Early 1990s

Meanwhile, SSMC, the original sewing machine business, defied predictions and managed to stay in business. In 1989 Semi-Tech Global purchased SSMC and began to turn the company around. SSMC reclaimed its heritage by renaming itself The Singer Company. Then, in 1991, the company offered shares to the public on the New York Stock Exchange. Semi-Tech Global retained control of the company with ownership of 50 percent of the shares. Two years later, Semi-Tech Global sold its interest in Singer to Semi-Tech Corp., owner of 43 percent of Semi-Tech Global.

Also in 1993, Semi-Tech Global acquired G.M. Pfaff AG, the second largest sewing machine manufacturer in the world. Founded in 1862 in Germany, the company had a history almost as long as Singer's and had built a comparable international reputation. Although Pfaff sold its machines mostly through its own retail stores in Germany, its international sales were handled through mass merchants, independent dealers, and distributors.

In the early 1990s Pfaff was operating at a loss, and Semi-Tech Global purchased 72 percent of the company's shares, thus gaining control of the company. Semi-Tech cut staff, outsourced and relocated much of the company's manufacturing, and sought growth primarily in developing countries. In addition, Semi-Tech Global hired Singer to manage the company. Within the next few years, Singer and Pfaff were cross-sourcing each other's products and had created efficiencies in research and development by working together to design new products.

In the mid-1990s Singer began selling other consumer durable products, hoping to cash in on widespread respect and awareness of its brand. New products included televisions, videocassette recorders, and home appliances. The company focused its sale of this new line in developing countries, where it had established distribution networks and, unlike most manufacturers and retailers in these countries, offered credit plans. For example, Singer met with a great deal of success in Mexico, where it focused its efforts on working-class consumers unused to the idea of credit but unable to buy a major appliance like a sewing machine without it. Singer's sales in Mexico quintupled between 1988 and 1993 and showed no signs of diminishing. It also held its repossession rate to about two percent.

Despite success in such developing countries as Mexico, Singer was reporting losses by the late 1990s. Although the company could still claim profits of $29 million in 1996, in 1997 Singer lost $238 million on revenues of $1.1 billion. Revenues had declined 19 percent from the previous year, stemming from the economic crisis in Asia, an economic slowdown in Brazil, and weak sales in the United States. A new president and chief executive officer, Stephen H. Goodman, took charge in early 1998.

In an effort to eliminate redundancies and thus reduce costs, Singer acquired Pfaff in 1997 for $157.5 million. Thus Singer's management of Pfaff became permanent when it purchased Semi-Tech Global's 80.5 percent interest in the company. Singer consolidated the two companies' marketing and distribution operations, shared their manufacturing plants, and reduced their combined overheads. As part of this reorganization, Singer eliminated almost 6,000 jobs, cutting 5,531 from manufacturing and 437 from marketing. The company projected this 28 percent cut would result in savings of $104 million a year.

Although revenues were up in 1998, to $1.26 billion, Singer still reported a loss of $207 million. The continued economic downturns in Asia and Brazil affected the company's performance, as did a decline in the industrial sewing market. Singer initiated a restructuring program in 1998 that included projected property sales of approximately $260 million. That year the company sold $37 million worth of property. In 1999 Singer continued with the program by selling its Taiwan operations for $58.6 million. On September 13, 1999, Singer announced that it was voluntarily filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company's stock continued to trade on the New York Stock Exchange at the NYSE's discretion.

Principal Subsidiaries: G.M. Pfaff AG (80%); Singer Nikko (Japan; 50%); Singer (Thailand; 48%).

Further Reading:

• Brandfon, Ruth, Singer and the Sewing Machine: A Capitalist Romance, London: Barrie & Jenkins, 1977.
• Cooper, Grace Rogers, The Sewing Machine: Its Invention and Development, Washington, D.C.: Smithsonian Institution, 1976.
• Siegle, Candace, "Sewing It Up," World Trade, May 1994, pp. 122--24.
• "Singer Merges and Trims," Apparel Industry Magazine, January 1998, p. 13.

Source: International Directory of Company Histories, Vol. 30. St. James Press, 2000.

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