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Bad News... Owner of Vermont Castings files for bankruptcy

Post in 'The Hearth Room - Wood Stoves and Fireplaces' started by Vermontster, Apr 20, 2008.

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  1. Vermontster

    Vermontster New Member

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    Owner of stove maker Vermont Castings files for bankruptcy

    Published: Saturday, April 19, 2008

    By The Associated Press

    RANDOLPH — The owner of Vermont Castings has filed for bankruptcy protection.

    CFM Corp. filed for reorganization under Chapter 11 of the bankruptcy code, which gives debtors a chance to reorganize, pay creditors and stay in business.

    “At this point in time, my whole operation is shut down,” said Vermont Castings general manager Dale Trombley, referring to the company’s Randolph foundry and a Bethel plant where wood stoves are enameled and assembled. “A lot of our people are on unemployment for a period of eight weeks.”

    The Bethel facility closed Monday, a week after the foundry.

    Trombley said the company will be building stoves again by June.

    The two-month layoff for 170 employees is a blow to the area’s economy, according to Trombley, who said the sluggish economy — particularly the housing market — was to blame.
    The downturn in the housing market definitely has had a huge impact on our corporate sales, not just in Vermont, but I’m talking about our whole corporation,” he said. “That’s what the issue is.

    “Usually Vermont feels (recessions) last, but we’re feeling it right along with everyone else this time,” Trombley added. “And since Vermont Castings is an international supplier, we feel it quickly.”

    Copied from:

    http://www.burlingtonfreepress.com/apps/pbcs.dll/article?AID=/20080419/NEWS/80419002

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  2. webbie

    webbie Seasoned Moderator Staff Member

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    Oh, we had it early from the dealer - but you are right that it was held back by the news media. There have been no stories at all - and it's been about 10 days or so since it was reported here.

    There is one other thread in the Hearth Room and a long one in the Ash Can (although it may have been deleted)......

    You missed some fun - we even had a "spinning" Elk avatar.

    Here is the ash can post:
    http://www.hearth.com/econtent/index.php/forums/viewthread/17313/

    over 4000 views on that one - I think we became the main source of news on the web for this issue!
  3. tradergordo

    tradergordo Minister of Fire

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    THis could be a fantastic opportunity (in my opinion) for ESW to pick over a carcass and maybe buy something valuable on the cheap. They already do business with VC (foundary/casting in vermont). Someone has to want to carry on the VC name I'm sure...
  4. Heat Miser

    Heat Miser New Member

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    The next owner hopefully will do a few things:

    - Completely eliminate all non-stove business lines. No more BBQ grills and the like. No more big-box store products where you're competing against Chinese slave labor on the price point. VC should just be building heating stoves. Wood stoves and gas stoves. That's it. So many companies get into trouble by growing too big and getting into unfocused product lines.

    - Get on your hands and knees and beg each and every independent stove dealer in the US that used to carry your products for forgiveness for stabbing them in the back by trying to open up competing stores. Pledge to return to honest and direct business by rebuilding your destroyed network of dealers. Assure them that you're not going to have cheap products that cause problems for their customers any more.

    - Stop cutting corners in your products. Return to higher quality components that result in low-maintenance appliances. You are building cast iron stoves and not plate steel. You can't compete with the plate steel manufacturers on price so just acknowledge it and move on. People who want the look of cast iron are going to pay more for it so make it worth their money. Mercedes Benz is not threatened by people who want to drive Ford Escorts. They're a different market and you should stop trying to make everyone happy.

    - Hire a crack team of engineers and get your non-catalytic technology fixed. It's giving you a bad reputation on top of everything else. Pour as much money as you can into R&D;to take your stoves to the next level of efficiency and ease of use.

    Now I'm not in the stove industry. These are just the problems I've noticed as a (former) VC owner and someone who has perhaps spent too much time researching these issues. CFM management did a tremendous amount of damage to the VC name and product. Frankly, they deserve to go into bankruptcy. That's what happens when you're make mistakes in the free market.
  5. stoveguy2esw

    stoveguy2esw Minister of Fire

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    agreed, Vc shouldnt do grills, just stoves (though we are currently kicking the "&#@&^% outta the chinese in big box stores and will likely be picking up the slack in Lowes because CFM wont be there, gonna be an interesting season.

    - quote author="Heat Miser" date="1209002022"]Get on your hands and knees and beg each and every independent stove dealer in the US that used to carry your products for forgiveness for stabbing them in the back by trying to open up competing stores. Pledge to return to honest and direct business by rebuilding your destroyed network of dealers. Assure them that you're not going to have cheap products that cause problems for their customers any more. [/quote]
    Vc should have stayed with the buisness plan they used to follow , heck they used to sponsor barbicues for customers at the dealer level, verry open neighborly company , damned shame they got ate up by a corporate disaster like they did.


    - quote author="Heat Miser" date="1209002022"]Stop cutting corners in your products. Return to higher quality components that result in low-maintenance appliances. You are building cast iron stoves and not plate steel. You can't compete with the plate steel manufacturers on price so just acknowledge it and move on. People who want the look of cast iron are going to pay more for it so make it worth their money. Mercedes Benz is not threatened by people who want to drive Ford Escorts. They're a different market and you should stop trying to make everyone happy.[/quote]

    ive seen recent castings they did for us , they are SUPERIOR excellent work if the foundry doesnt stay open it'd be worth it to buy it just to get the castings , anyone who knows metal can tell they are a world class foundry.

    - quote author="Heat Miser" date="1209002022"]Hire a crack team of engineers and get your non-catalytic technology fixed. It's giving you a bad reputation on top of everything else. Pour as much money as you can into R&D;to take your stoves to the next level of efficiency and ease of use. [/quote]

    i agree they need to 'dumb up" their non-cats, they are too complicated

    quote author="Heat Miser" date="1209002022"]Now I'm not in the stove industry. These are just the problems I've noticed as a (former) VC owner and someone who has perhaps spent too much time researching these issues. CFM management did a tremendous amount of damage to the VC name and product. Frankly, they deserve to go into bankruptcy. That's what happens when you're make mistakes in the free market.[/quote]

    Frankly i hope they come back , if for no other reason , they at one time were the class of the field in woodstoves , names like "Defiant" , "Vigilant","Aspen" ,"Encore","Resolute" strong respected names

    VC was done a disservice by CFM in my opinion if the old VC were to emerge from this mess the woodburning world would be better for it, but the old VC is the only version i'd like to see back.

    not beatin on ya miser, on the contrary, you gave me a template to bounce my opinions off of, thanks.
  6. Heat Miser

    Heat Miser New Member

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    When I was more active in investing I learned to be very wary of companies going into businesses that aren't their core focus. If I owned a stock for instance and saw the company was branching out into something that wasn't their core business I would sell the stock almost immediately. It is usually the kiss of death. What usually happens is something like this:

    a) The CEO gets some great idea about making more money going into a new line of business. The line of business may be only tangentially related to what the company actually does (like BBQ grills).

    b) The board of directors thinks it's a great idea. Both they and the CEO dramatically underestimate the money and risk involved in the new venture.

    c) The venture launches with much fanfare.

    d) The company soon realizes that perhaps the competitors in their new market aren't as dumb as they thought. Their new products, for whatever reason, have problems in the field or can't be produced at the originally thought price point without losing a bunch of money.

    e) Because of (d) above, the company either raises prices or cuts corners or does both.

    f) The new product begins to falter. Customer problems start showing up. Their tech and dealer support begins sucking up more and more of their resources.

    g) Marketing budgets begins to grow exponentially. The company suddenly realizes that they need to market to different areas in different ways and through different mediums for their new vs. old products. Advertising budgets explode and conflict erupts as the business units fight over limited dollars.

    h) The new business venture isn't doing so well. Instead of recognizing their mistake early and leaving the market, the company decides to double their efforts (and expenses) and ensure the product succeeds.

    i) The new product now gets more traction, but their older product lines are suffering as precious capital is being siphoned off trying to get the new idea off the ground.

    j) Both old and new business ventures begin to suffer. The CEO and Board of Directors are still is too stubborn to admit defeat in order to avoid looking bad to investors. They pour more money into their new business diversions. The old product line really begins to decline and their core revenue starts dwindling. Customers are leaving in droves.

    k) By the time the leaders realize what is going on the damage is irreversible. The company has lost so much money and their revenue streams have shrunk so much they get into financial trouble.

    l) The company files for bankruptcy protection.

    So I'm speculating here obviously, but that's what I see happen to many good companies. There is an old saying: "Shoemaker, stick to your last!" Which basically means you should focus on what you know. New business ventures should be taken on with extreme caution and you need leadership that can react to the problems that show up in a non-religious way. They should also be smart enough to know when they made a mistake and protect their core business at all times.

    I think there are salvageable parts of VC. If I were to buy them out I'd shut down all non-stove related business units. Go back to making good stoves and stop messing around with all that other stuff they got into.
  7. Choppedliver

    Choppedliver New Member

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    As a VC Dealer, I'm going to have to disagree with you. We have made more profit and done less warranty work selling there grills in the last few years then there wood stoves. They have spent a great deal of time and money building up a great name in grills and it is now really starting to pay off. As far as the Big box crap your in luck at the end of last week they sold off the "mass-merchant" division
  8. Heat Miser

    Heat Miser New Member

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    That's the problem. I suspect they spent too much money trying to launch their new business unit and let their existing core business (wood stoves) go down the toilet. I think VC made a huge strategic error going up against established grill makers like Weber, etc. at the expense of their wood and gas stove units. I understand it may be more profitable for you, but it certainly wasn't a profitable move for VC! :(

    Same thing happened to Cannondale bikes many years ago. They were a market leader bike manufacturer and thought they should make dirtbikes. Dirt bikes are just bikes with motors right? So Cannondale thought they should be able to do dirt bikes just as VC probably thought that making grills would be kind of like making stoves.

    Cannondale decided to setup a huge new expensive dirtbike division to compete against Yamaha/Honda/Kawasaki/Etc. It was a tremendous waste of resources. Their bike quality nose dived in the process as they began cutting corners. They soon went bankrupt. The creditors bought out the company, shut down the dirt bike division, and just started focusing on making great bikes again. The company survived and hopefully learned their lesson.

    But again this is all speculation. It would be interesting to find out what really happened to VC to cause such a fall from grace. I suspect it was a hodgepodge of bad decisions.
  9. tradergordo

    tradergordo Minister of Fire

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    So Craig, when are you going to get an interview with a key insider? Time for a new podcast!
  10. Heat Miser

    Heat Miser New Member

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    That would be a good interview. Need to find some senior employees to spill some dirt.

    Honestly, I think we should all get together and buy out VC. The members of this forum would do a better job running that company than CFM ever did.
  11. Choppedliver

    Choppedliver New Member

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    Although there is no official word on who is buying them but, most of the "insiders" I have talked to say the deals done and the investment group that purchased Martin Hearth & Heating, Monessen and Lexington Forge is going to purchase them. we should know on May 8th or 9th.
  12. Shane

    Shane Minister of Fire

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    I had a feeling someone would pick them up. Now we just wait and see what they do with it.
  13. BrotherBart

    BrotherBart Hearth.com LLC Mid-Atlantic Division Staff Member

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    That is virtually impossible. I deal with the bankruptcy courts a good bit and it will take much longer than that just to get legal notification to the creditors and establish a creditors committee. A reorganization plan will have to be developed and approved by the creditors and the court. And in this case it involves two courts. In two countries.

    There isn't going to be anybody bought or sold by May 9th. In only one case have I seen it done in anywhere near that short a time and that was an airline and it went straight to Chapter 7 liquidation. And that took four months just for the auctioneer to develop a list of assets so they could print the auction catalog.
  14. webbie

    webbie Seasoned Moderator Staff Member

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    BB, might be some way they can get things going because of Canada? That is where the actual papers were filed. It might be that the creditors are being made whole or nearly whole, but that the bankruptcy was filed as an "easy" way out because they had no money for ongoing operations?? If this were the case, I doubt creditors or courts would stand in the way.

    The people who are ending up screwed are the employees as well as the city of Huntington and other entities that gave them millions in tax breaks. Thanks to our fair system here, those are down the tubes....the employees will get unemployment, I guess. But health care is gonna be tough.

    Monesson was rumored to be the buyer from the start. Interesting....the biggest producer of vent-free systems sold mostly through mass merchants! And owned by another big investment group? I know a top R&D;person there, and he is A-1 dude.....so I know they have good help, but this would not be your mommas VC.

    As far as Podcasts, recent management are not likely to kiss and tell. It's part of the corporate code of silence if you want another job in the future. But I think I am going to try to do one with the last "good" CEO, who then was canned when they sold to CFM. He has been watching the whole thing, so may have a unique perspective. Hey, if anyone knows anyone more recent who wants to talk, let me at 'em!
  15. begreen

    begreen Mooderator Staff Member

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    The VC unit has been a strong operation. Here's an article from the Randolph Herald:

    "Rumors have surfaced that a buyer may be interested in purchasing CFM, Olson acknowledged, but predicting what might happen would be "pure speculation," Olson said.

    He confirmed the assertions of managers here that the Vermont Castings manufacturing plant, and the brand itself, are a successful segment of CFM.

    "If I were to speculate on the relative values of the pieces of the company, Vermont Castings would be right up there on the top," he said."

    http://www.rherald.com/News/2008/0417/Front_page/f03.html
  16. moondoggy

    moondoggy New Member

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    "has been hit with a collapse of demand within the stove market, he said."

    is this true?
    I see more stove trucks in driveways, new liner installs, and know more people that got stoves this year then you'd think.
    being the way OIL is, i thought stove sales were still on the rise... even though new homes sales are down.

    Is the 'collapse' statement correct?

    by the way.. I got my other shelf last week, its been a long time on order probably over 6 wks, but it shipped from one of the factories.
  17. BrotherBart

    BrotherBart Hearth.com LLC Mid-Atlantic Division Staff Member

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    If so they why the shutdowns in Vermont? If CFM was hungry for operating cash to pay the bills they damn sure wouldn't idle a productive, profitable operation. That was not making ZC fireplaces for builders. In a year where every dealer with a tongue was saying stove sales were up 30%.

    Something ain't passing the smell test here.
  18. begreen

    begreen Mooderator Staff Member

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    Yeah, it would be nice to know the complete picture. The idle foundry might have to do with bad contract negotiations. Did CFM also double their casting prices to prop up other sagging divisions?
  19. Corie

    Corie Minister of Fire

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    No.
  20. david Lee

    david Lee New Member

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    In 1999, when Lennox acquired Superior and Marco fireplaces it was called “Super-Mar-Nox” by some. If Monessen – Martin purchased CFM, would it be named “3M” or” M3 (as in M to the third power)?
  21. stoveguy2esw

    stoveguy2esw Minister of Fire

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    VC is viable , especially with the foundry capacity they have , the rest of the conglomeration is not worth investment. even the CFM plant in huntington (which produced very decent products for their market) would be a risk as the clients they served have already moved to a different supplier.

    the right guy, with the right amount of money... Vc "could" be a gem but it would take some serious rolling up of the sleeves to pull it off.
  22. R&D Guy

    R&D Guy New Member

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    Hmm I won't hold my breath for the 9th. The 9th will come and go as every other Friday does, and that dealer will have to chalk up the info they received from their Rep/Insider as another rumor of great things to come. Takes more time to close a simple home sale than has been allotted in this May 9th time frame, but then again as I said in the other thread, VC has been on the market longer than advertised. Either way this will not be a quick fix and even after a hopeful buy-out the new owner, or owners depending on how it is split up, has a lot of bailing to do before getting that ship off the rocks.

    My $0.02
  23. webbie

    webbie Seasoned Moderator Staff Member

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    To answer the "demand" question, things are slack with most manufacturers....probably worse with VC than many for numerous reasons. The foundry has incredible capacity, so a "normal" amount of stoves is not nearly enough to keep the place busy. This is complete guesswork, but it might be capable of making 60-80K stoves per year.....but 20 to 30K is a good business. But at the lower number, the foundry would have to be at lower capacity and employment and perhaps seasonal layoffs.

    Also, a LOT of capital is required because these companies tend to finance the dealers in the off-season.

    It's a tough business, any way you look at it - and, IMHO, would be handled better by "true believers" as opposed to folks only in it for the return of $$. From that perspective, heck, why get your hands dirty?
  24. moondoggy

    moondoggy New Member

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    thanks, man this economy/state of the country stinks.
    we need to turn things around.
    you now what the guy in the cube next to me it bitching about......
    he read the lable on "America's Choice Apple juice" (AC is the generic brand for supermarket Waldbaums)......
    Made from Concentrate from China.
    WTF???? we dont have apples in the USA anymore?
  25. R&D Guy

    R&D Guy New Member

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    Agreed, there's also all types of new fruit and food products coming out of India now, and I'm sure every 3rd world is going to start growing corn.
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