Wheelchair Maker Looking for a Way Back to the Top

Times Staff Writer

Everest & Jennings President Whitney McFarlin went to lunch one day last year in a motorized wheelchair made by the company he runs.

Eager to experience what it's like to use one, McFarlin was joined by two of his executives on a trip from their offices on Sepulveda Boulevard in West Los Angeles to a delicatessen seven blocks away. What should have been a 45-minute lunch, McFarlin said, took twice as long as the three executives maneuvered through an obstacle course of automobiles, potholes, narrow doorways, pedestrians and waitresses.

Like his lunchtime excursion, the course McFarlin has driven as chief executive of the world's largest wheelchair maker has been bumpy. In June, 1985, McFarlin was put in charge of a family-controlled company that a decade ago was the General Motors of the wheelchair business with about 60% of the U.S. market. But in recent years the company's market share has fallen to about 40%, thanks to a series of strategic blunders and competition from aggressive upstarts.

The company's problems included expanding into the hospital bed business in 1984, only to lose $250,000 a month before management scrapped it a year later. Moving its U.S. manufacturing division from West Los Angeles to Camarillo in 1982 ended up costing $38 million, instead of an expected $24 million. And perhaps most damaging, Everest & Jennings was plagued with the complacency that often comes with success. As a result, innovative wheelchair makers in the United States and low-cost manufacturers in Taiwan saw an opening to challenge the industry giant.

There's also a nagging legal problem for the company. Missouri Atty. Gen. William L. Webster is suing Everest & Jennings to force a recall of the motorized wheelchairs built by the company from 1978 to 1983. Webster filed suit after the drive shaft of a wheelchair used by one of his lawyers broke, nearly sending the man rolling into a busy street. Everest & Jennings has denied that there is a problem with the motors, and out-of-court negotiations are taking place in an effort to settle the 2-year-old suit. Because of this and other lawsuits, Everest & Jennings' auditors will qualify the company's 1986 financial results, McFarlin said.

A further complication was the triple-bypass surgery that Gerald Jennings, the company's chief executive since 1953, underwent in 1978. "I was not full of energy as I used to be, and things weren't getting done. As a result, mistakes were made," he said.

All of these problems led Jennings and his family, who still control 55% of the company's voting stock through two classes of shares, worth about $47 million, to look for an outsider to take over the operation. Enter McFarlin, a 46-year-old Arkansas native who was an executive with Medtronic, a manufacturer of heart pacemakers in Minneapolis.

Since arriving, McFarlin has moved quickly. He shut down the hospital bed operation, although it resulted in a $4.9-million loss in 1985, the company's first annual loss since going public in 1968. He is also streamlining the company's manufacturing system. Instead of making 4,400 different kinds of wheelchairs, the company will produce only a dozen or so basic wheelchair frames that can be tailored to individual users.

Last year McFarlin also sold the company's West Los Angeles real estate, which hadn't been used after domestic operations were moved to Camarillo, for $7.7 million in cash and $19.1 million in notes to real estate developer Donald Bren.

The sale leaves only a small building on Sepulveda Boulevard where Everest & Jennings keeps its international headquarters. McFarlin used the proceeds from the sale to cut long-term debt from $47 million to $32 million, and said he will reduce debt by an additional $19 million when the notes become due within four years.

The company expects to report this week improved 1986 results of $12.1 million in net income on a 12% increase in revenue to $195 million. But only $2.2 million of the profit is expected to come from continuing operations, the rest from the real estate sale.

Began as Partnership

Back in 1933, Everest & Jennings was formed as a partnership when Harry Jennings, Gerald's father, built a folding wheelchair for his friend, Herbert Everest, who was forced to use a bulky, wicker wheelchair as a result of a mining accident. From there, the company steadily grew until it was the world's largest maker of wheelchairs, with its products used by Franklin D. Roosevelt and Winston Churchill. The Everest family sold its stake in the company in 1953.

But its dominance of the market has invited lawsuits. In the 1970s the company battled the Justice Department, which claimed that Everest & Jennings monopolized the industry. The company agreed to a settlement that prohibits it from buying another wheelchair company until 1989.

It still faces an antitrust legal battle from its chief rival Invacare, a rapidly growing wheelchair maker in suburban Cleveland. Invacare is suing Everest & Jennings in federal court in Cleveland, accusing the company of unfairly cutting prices five years ago.

Everest & Jennings denies that it has tried to force Invacare out of business. "That's never been our intention, although that's what they like to say," Jennings said. Analysts estimate that each company has about a 40% share of the U.S. market, with Invacare selling more wheelchairs but Everest & Jennings having more total revenue because of its higher-priced models. (Overseas, Everest & Jennings still has an edge.)

Some of Everest & Jennings' recent problems weren't its fault. A tightening by the federal government in health care reimbursements hurt medical equipment spending. And the computer industry downturn hurt the company's profitable metal-casting unit that makes metal boxes for computer disk drives.

Besides straightening out finances, McFarlin is moving the company into new markets.

The company is giving more attention to light, easy-to-steer wheelchairs that weigh about 25 pounds and are especially popular among disabled Viet Nam veterans. EVEREST & JENNINGS AT A GLANCE Everest & Jennings International, based in Los Angeles, is the world's largest manufacturer of wheelchairs. It also produces other medical equipment and metal products. Its U.S. subsidiary in Camarillo employs 1,100.

9 mos. Year ended Dec. 31 Sept. 26 1985 1984 1983 Revenue (millions) $144.3 $174.2 $171.6 $156.1 Net Income (loss) (millions) 11.4 (4.9) 1.2 0.29

Assets: $152 million Employees: 2,500 Outstanding shares:

Class A: 5.7 million

Class B: 2.36 million 12-month price range: $10.25-$14.25 Monday close (ASE): $13.625, up 25 cents

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