Knock on Wood

Two bankrupt cabinet makers saved by an appliance manufacturer have streamlined
their shop floors
and upped quality
in hopes they can successfully bounce back.
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In 2000, John De Giulio began selling luxury kitchen cabinets made by Rutt Handcrafted Cabinetry, a custom manufacturer nestled amid cows and crops in rural northeastern Lancaster County. Soon after, De Giulio installed three new Rutt displays in his showroom in suburban Detroit.
“Then they shut down,” said De Giulio, owner of De Giulio Kitchen and Bath Inc. His customers include Jacques Nasser, the ousted chief executive officer of Ford Motor Co.
On Jan. 19, 2001, Rutt and its sister company, Heritage Custom Cabinetry, closed their factories and filed for Chapter 11 bankruptcy protection. It was a little more than three years since the manufacturers had been bought by Berwind Financial Group, an investment bank based in Philadelphia. Efforts to reach Berwind for comment were unsuccessful.
Though Rutt and Heritage had had problems filling orders, the shutdowns came as a surprise to both insiders and outsiders, such as De Giulio. He had made $100,000 in deposits on future orders and wondered whether he would see the money again.
The nearly 600 workers from Rutt and Heritage took other jobs, some at competing companies. But, many of the ex-workers kept an eye on developments that eventually led both cabinet manufacturers back into business.
In spring 2001, Rutt and Heritage found a savior in Fred Carl Jr., founder and owner of Viking Range Corp., based in Greenwood, Miss. A former home builder, Carl had started Viking to make luxury oven ranges similar to those found in fancy restaurants and with prices up to $9,000. The company also makes dishwashers, garbage disposals and refrigerators costing up to $6,175.
Rutt and Heritage cabinets, which also cost thousands of dollars, complemented Carl’s existing businesses, said Mary Huff, a Viking spokeswoman. Viking bought the two companies from Berwind.
Viking’s backing gave confidence to workers and cabinet dealers wondering whether the two companies would ever come back.
“I knew the potential was here,” said Ken Hayden, 42, who oversees Heritage’s specialty cabinet department inside its factory in New Holland Borough.
Like many workers at both Rutt and Heritage, who earn an average of $14 an hour, Hayden returned when the plants reopened. “We just needed someone with money and an understanding of the business,” he said.
Under Berwind, Heritage and Rutt spent more time on sales and marketing than on manufacturing, Hayden said. “It was set up to fail.”
Since taking over, Viking has paid much attention to the factory floor, investing more than $2 million in new machinery and introducing the notion of “lean manufacturing.” The concept involves consolidating work stations to free up room, shortening the distances that workers and products must travel during production and reducing the amount of products going through the process at any one time.
“Things used to go all over the place,” said Michael Eichenseer, Rutt’s president.
Acceptance of the new methods wasn’t a given among longtime workers like Steve VanPelt, 41.
A door fitter who has worked at Heritage since 1989, VanPelt said he was skeptical at first. But, he has gradually warmed to the changes. “I’m not fighting the philosophy anymore,” he said.
Lean manufacturing has helped Rutt and Heritage solve one of the biggest problems that afflicted both companies prior to bankruptcy. Many orders were sent out before they were complete, frustrating builders trying to assemble kitchens in people’s homes. Missing cabinets delayed installation of other parts, such as countertops and appliances.
“The client is expecting his kitchen to come and be installed right away, intact,” said De Giulio, the suburban Detroit dealer. Customers didn’t want to pay for an incomplete kitchen.
Today, all the pieces in an order travel together, from start to the finishing coat of paint or lacquer.
The factories also work faster than before. In the past, orders took at least 18 days. Now, they take 15 days, Eichenseer said.
The changes have freed up space in the factories, such as in an older portion of the Rutt plant. So, the companies are considering new cabinet-related ventures, said Larry Stokes, president and chief executive officer of Viking Cabinet Group, which was set up to run Rutt and Heritage. He declined to be more specific.
Despite all the changes at Rutt and Heritage, sales have not reached their pre-bankruptcy levels of nearly $50 million a year.
Currently, combined annual sales are around $30 million, Stokes said. The work force is also smaller, about 400, compared with 590 before January 2001.
A few layoffs occurred after Viking’s purchase because sales didn’t pick up as quickly as planned, Stokes said. Rutt laid off about 10 factory and office workers a few weeks ago, leaving rivals to question whether the company was in trouble again. Stokes and Eichenseer said the layoffs were necessary to keep the company running efficiently.
The slow economy has accounted for some of the drop, as did business lost during the bankruptcy. Stokes said he didn’t expect the companies to earn a profit until 2003.
Meanwhile, Rutt and Heritage have repaid the deposits that dealers lost in the bankruptcy. “The meltdown, we call it,” De Giulio said. He got back $60,000 in deposits. The remaining $40,000 was covered by his credit-card company.
De Giulio and other dealers were confident that, with Viking behind them, Rutt and Heritage would come back.
“Everything that they’ve done so far is first-class,” said David Hendrick, co-owner of Custom Kitchens Inc. The Richmond dealer has sold Heritage cabinets since 1981. “It’s the best quality that I’ve seen out of Heritage in many, many years,” Hendrick said
Employees, too, were optimistic, and proud of their work.
“It makes you feel good when they give you something like that,” said Rich Klingler, 27, a master craftsman at Heritage. He gestured toward a custom piece he was building out of maple wood for a kitchen island. “It’s a well-known name, and, hopefully, it’ll come back.”