Former lawyer yearns to restore ailing businesses

SATISFYING THE ITCH

September 07, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

After watching half a million dollars of his own money vanish in an effort to turn around a pipe organ company in Hagerstown, Paul J. Coughlin concedes there are certainly things he would have done differently, including walking away from the deal.

"In hindsight, that's what I should have done," Mr. Coughlin said about his attempt to rescue M. P. Moller Inc., once the world's largest pipe organ maker. "One should do a more thorough due diligence on the prospects for a company."

However, when he came to look over the company in early 1989 at the invitation of the board, he felt it had a future. "I thought it was possible to save the company," he said.

But the experience has not soured him on trying to turn around another company, if the opportunity arises.

In fact, for the past nine years, Mr. Coughlin has been in the business of trying to turn around struggling businesses -- most of which he has substantial investments in. In the process, he has also become an apostle for corporate reinvestment and modernization and a more "inclusive" philosophy of labor management.

Mr. Coughlin, 53, got into his present line of work after spending 18 years as a corporate attorney, rising to the position of vice president for government affairs for Union Pacific Co.

In 1978 he went to the advanced management program at Harvard Business School, which whetted his appetite to run a company. "That was a great experience for me, and it convinced me that my career should be more orientated towards business rather than law."

But he found that his position at Union Pacific did not satisfy his entrepreneurial urges and left the company in 1982. Then he found that there was not much of a market for a person with his skill except for jobs like he had back at Union Pacific.

"The only way I was going to do what I wanted to do was to buy myself a job," Mr. Coughlin said. And in 1983, he and other investors bought Washington Aluminum Co., a Baltimore aluminum fabricating company where he is still chairman.

But his itch to grow and build companies did not end there. He also has been the chief executive officer of Eastern Stainless Steel and is a founder and chairman of the Foundation of Manufacturing Excellence, a Maryland group promoting innovation in small and medium-size businesses.

Then there has been the Moller effort.

Last week the 117-year-old company filed for Chapter 11 bankruptcy protection with a reorganization plan that would make the employees and their pension fund the primary owners. The company closed its doors in April after running out of cash to pay suppliers and its 115 workers.

Founded in 1875 by Mathias Peter Moller, a Danish immigrant, the company had made nearly 12,000 pipe organs -- more than any other company.

In the 1960s, Moller had 30 percent of the market. But during the next two decades, its position slipped because of declines in some church memberships, competition from electronic organs and product quality and management problems.

Since 1980, it has had only one profitable year, according to the bankruptcy filing. In 1988 it was hit by a five-month strike.

Two months after the strike, Mr. Coughlin and other investors bought the failing company in April 1989 with the hopes of turning it around based on its reputation as one of the foremost pipe organ makers in the world. But while the new owners were able to make advances on the operational side of the business, Moller's poor finances dragged them down.

Mr. Coughlin's last time in the limelight was in 1987 when he was chief executive officer of Eastmet Corp., the owner of Baltimore-based Eastern Stainless Steel. His appointment to that position came about a year after the company had filed Chapter 11 Bankruptcy.

Subsequently, Cyclops Industries Inc. bought Eastern Stainless Steel. Cyclops itself was bought by Armco Inc. last April.

Mr. Coughlin chalks up the Eastmet effort as a "huge success" because 90 percent of the creditors got their money back and the employees kept their jobs.

Beyond those two well-publicized efforts, Mr. Coughlin points to his success in helping to build Washington Aluminum, a company that fabricates custom-made equipment from aluminum and other metals.

He is also chairman of Empire Steel Castings Inc., a $13-million-a-year manufacturer of steel castings for the pump and valve industry in Reading, Pa.

Mr. Coughlin has also gone beyond tending his own companies and tried to spread the gospel of more productive business through the Foundation of Manufacturing Excellence, a group he helped found two years ago.

But while he is a supporter of manufacturing, he is critical of how it is often practiced, particularly the high salaries received by some chief executives.

"The difference between the highest and the lowest paid should be some multiple like 20 or 25," he said. "Not 500."

Mr. Coughlin also champions an overturning of the traditional model of "power and control" where all decisions are made at the top.

"I don't think that model works any more," he said. "The whole basis for my style is to turn the pyramid around and say, 'It's all based on trust.' "

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