After 117 years, pipe organ maker to liquidate

THE DAY THE MUSIC DIED

October 21, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

After months of trying to revive what was once the world's largest pipe organ maker, the management of M.P. Moller Inc. has decided to liquidate the 117-year-old Hagerstown company.

"It's not a very happy story," said Paul J. Coughlin Jr., Moller's chairman and chief executive. "No one has shown any further interest in buying it."

The company, housed in an old brick mill, closed in April after years of efforts to save the world-renowned pipe organ maker.

But in the end, the company succumbed to a sagging market, mismanagement, heavy debt and a bad economy.

On Aug. 31, the company filed for protection from creditors under Chapter 11 of federal bankruptcy laws. It also submitted a plan to make the workers and their union, the International Union of Electrical Workers, the primary owners.

But that proposed deal fell through in early September when the union backed out. A Pennsylvania industrialist, John L. Grove, considered buying the operation, but he, too, backed out by the end of September, said Mr. Coughlin.

Now, the company is hoping to meet with its major secured creditor, Hagerstown Trust Co., to work out a liquidation plan for the company, he said.

Under a liquidation plan, the bank would get some of its money back while the unsecured creditors, including the employees who are owed back wages, would probably get nothing, Mr. Coughlin said.

Founded in 1875 by Mathias Peter Moller, a Danish immigrant, the company has built nearly 12,000 organs, ranging in price from $50,000 to $1 million.

As late as the 1960s, Moller had 30 percent of the market. But during the next two decades, its position slipped.

Membership declines forced churches to cut spending on items such as pipe organs. Competition from electronic organs increased, and the company suffered from product-quality problems and mismanagement.

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

Two months after the strike, the Moller family sold the company to a group of investors led by Mr. Coughlin and Roland F. Funk.

Despite boosting revenues from $4.4 million in 1988 to $8.2 million in 1989, the new management was saddled with large debts from the acquisition and a modernization effort.

The final blow come in late 1991 when sales plummeted because of the recession, Mr. Coughlin said. The new owners had borrowed heavily to make improvements at the aging facility.

Hagerstown Trust lent Moller $1.8 million. But $800,000 of that debt is guaranteed by the state through its Maryland Industrial Development Financing Authority. Another $200,000 is personally guaranteed by Mr. Coughlin and two other investors.

In all, $4.4 million is owed to unsecured creditors. To satisfy these debts, the company has total assets of only $1.6 million.

Larry Myers, president of the Pipe Organ Workers Local 21108 of the IUE, said the company owes each of the 80 union workers between $6,000 and $7,000 in back wages, vacation and deferred pay.

He said workers were told by management on April 8 that if they continued to work without pay for about another month -- while receiving unemployment benefits -- they would get the two weeks of pay due them after the company sold more organs. But after working two more weeks, the union discovered that the money was going to the bank. The workers then left the plant.

Mr. Coughlin said the problem stemmed from a misunderstanding by a senior manager who believed that new revenues could be used for wages. However, Hagerstown Trust had a lien on the company's accounts receivable.

"When it came to my attention, I corrected [the misunderstanding]," Mr. Coughlin said.

But the workers did not receive their back pay.

Even though the prospects for the company are bleak, the company still has a $4 million backlog of orders and Mr. Coughlin holds on to a sliver of hope. "If anybody wants to come forward, now is the time," he said.

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