Lawrence k. schnadig; schnadig international corporation
AMERICAN FURNITURE HALL OF FAME
ORAL HISTORY INTERVIEW
HIGH POINT, NORTH CAROLINA
SCHNADIG CORPORATION SHOWROOM AT THE HIGH POINT FURNITURE MARKET
ROBERT A. SPELMAN, Interviewer
INTERVIEWER: To start with, tell me something about your childhood. Tell me where you were born, tell me about your parents, your background, when you were young, about your education – that sort of thing. Start out by telling me the origin of your parents, where they live.
SCHNADIG: My parents were both native-born Americans. I was born in 1908. My first recollection of the furniture industry is going with my father on Sunday mornings to Pullman Couch Company. During that time he would do things on an old roll-top desk in an old factory, and I would simply run around and not bother him. My mother was a minority farm girl.
My early education was in a private high school called Harvard School for Boys. I graduated from that school and went into the University of Pennsylvania at the Wharton School of Finance.
INTERVIEWER: Now the town was what? What town are you talking about?
SCHNADIG: I was born in Chicago, went to high school in Chicago.
INTERVIEWER: That’s where this Harvard School was, in Chicago?
INTERVIEWER: What section of Chicago?
SCHNADIG: South Side. Thereafter, I went to the University of Pennsylvania at the Wharton School of Finance. It was strictly a business school, well-recognized then and well-recognized now. I was there for four years, in 1929.
INTERVIEWER: Did you graduate in 1929?
SCHNADIG: I graduated in 1930.
INTERVIEWER: 1930, right in the heart of the Depression?
SCHNADIG: I’m going to talk about the stock market crash of 1929.
INTERVIEWER: I know you majored in business and Wharton was a fine school. Tell me a little about the matriculation. What are your memories of the University of Pennsylvania and that sort of thing?
SCHNADIG: The high school I went to was a small private school. When I went to the University of Pennsylvania, I was overwhelmed by the size of it. I was homesick; I am sure, for a month or two until I adjusted to that size of institution. It was a time when you were left completely on your own, no supervision of any kind. Doing your school work was up to you. I was fortunate in having some outstanding professors; they were all worthwhile, worth listening to. I like to think I learned a great deal from them.
One thing we all did, because you could buy stocks on margins, we would buy and sell stocks between classes. It seemed like I would never have to work at all because we were making money so fast. It was all on the cuff and all on paper, but I thought it was real. Along came 1929 at which time the stock market took a tremendous drop.
At that time, nobody had any money to spend, including my own family. In order to continue my education and not be a burden to my parents, I got a job driving a taxicab at night. After the stock market crash, I went to school in the day and drove a taxicab at night. I’d like to think I learned as much driving that cab at night as I did going to school in the day. One thing I did learn as the result of 1929 was that I knew nothing about the stock market, and I consciously avoided it thereafter.
INTERVIEWER: All right, now you’ve graduated. You say that was 1930?
SCHNADIG: 1930. I graduated in 1930, and even though the Depression was well along, there were many corporations that would interview students for employment. Among them were the Macy’s Executive Training Group and Scott Paper. I was intrigued by Scott Paper, was fortunate enough to have an offer from them and my intention was to take advantage of that offer and go to work for The Scott Paper Company.
I got home and told my father about my plans. He told me, that unbeknownst to me, his health conditions were quite serious, and even though he only owned a minority in the Pullman Couch Company, he would like for me not to go to The Scott Paper Company (because of his health) and join the Pullman Couch Company instead. I did so.
Two years prior to my graduation, I worked one summer as a salesperson in a department store called The Davis Company. The Davis Company was a low-end department store but was owned by Marshall Field & Company. When I was at the Davis Company I was a novice, and I tried to sell anything I could. The overtime salesmen would hang around waiting for what was known as an outfit sale, which means a living room, dining room, bedding and the whole deal, because they didn’t want to spend their time fooling around with anybody that would buy something new.
Not knowing any better, I took whatever customer I could get and tried to sell them anything I could. I well remember a day when there was an advertisement for a $9.95 end table. That sounds ridiculous at this date, but at that time you could buy tables for $9.95. Not knowing any better, I sold all of the $9.95 end tables that I could. At the end of the day, I had sold enough $9.95 end tables that there were hardly any on the floor, which impressed me very much. Thereafter, I recognized it wasn’t only how much the sale was, but how many sales you could make.
Having graduated from school, I went to work for the Pullman Couch Company.
INTERVIEWER: Now this was in your junior year of college?
SCHNADIG: The Davis Company experience was between my sophomore and junior years at college. Subsequent to graduation, I did go to work for the Pullman Couch Company. The going rate for anybody at that time that could get a job at all was $35.00 a week. This was not a bad salary, because the money would buy something. You did not ask what pension plans they had or what insurance plans were available or the work hours or anything like that.
INTERVIEWER: What hours did you work?
SCHNADIG: The standard work week was five and a half days – full days all of the week days and half a day on Saturday. However, once you got started you frequently worked seven days a week, because the economic conditions in the ’30s declined very rapidly and the furniture business, being a consumer durable, was hit worse than any of the other industries.
I started in what they called the cost accounting department. However, it was not a cost accounting department; it was a cost estimating department, because the cost accounting did not tie in with the general books of the corporation. I soon learned that that was not where I wanted to spend the rest of my life.
Then I was moved into the manufacturing end of the business, and I worked in every department in the factory. The factory was located on 38th and Ashland Avenue, which was about two or three miles south of the Stock Yards. In those days, the Stock Yards in Chicago were a major industry.
INTERVIEWER: How far from the Stock Yards were you?
SCHNADIG: I would say about a half mile. In hot weather, really all the time, there was a terrific odor that came from the Stock Yards. People would come to see us and comment on the odor. With having gotten immunized to it, I didn’t smell anything. But everyone else, other than those who worked in the area, was aware of it. I worked in every department in the factory.
INTERVIEWER: Did that influence the traffic? The store people not wanting to come to the Stock Yards because they smelled badly?
SCHNADIG: No, it did not because in those days, store people didn’t come to a factory. The sales were in Chicago.
INTERVIEWER: I see. You’re talking about the factory now?
SCHNADIG: Yes. We had a permanent showroom at the Market. At Market time, or anytime in between that a customer cared to see our product, we were able to show our product at anytime at that Market.
INTERVIEWER: May I just ask you now – was that just at the American Furniture Market?
SCHNADIG: At the American Furniture Market.
INTERVIEWER: Brand new, relatively, was it 1923?
SCHNADIG: 1924, I think. In 1928, I worked there in the shipping and receiving department. It was down in the basement. The crated furniture (there was no such thing as cartoned furniture) would come in on wagons, horse-drawn, go down in the basement, and there they would have to have an extra team of horses to pull up the wagons. This impressed me because I had never been that close to horses before. Our job in the basement was to knock apart the crates, supposedly carefully, carefully remove the furniture, put it on skids, and take it up to the showroom floor where it was being displayed. I think the pay there was 30 cents an hour. That too, while it sounded bad, was not so terrible because you could buy a cup of coffee for a nickel and a sandwich for a dime. You weren’t giving up a lot of your pay to eat.
INTERVIEWER: This was a summer job?
SCHNADIG: Summer job for only two weeks during the Market.
INTERVIEWER: I see.
SCHNADIG: I soon learned in the manufacturing end that as bad as business was, (and it was terrible during those early ’30s) that any money that was to be made was made in the selling end of the business. So I was able to persuade my father and my uncle, my uncle being a majority owner of the business, to let me get into the selling end, providing I would continue to superintend the plant, which I was doing by that time.
INTERVIEWER: Now, this was what year?
SCHNADIG: This was 1932.
INTERVIEWER: 1932. You went into selling but you were plant superintendent?
SCHNADIG: Plant superintendent, but on two days a week, I was permitted to call on accounts in the Loop of Chicago. I enjoyed the selling end of the business very much and hoped that someday I would have a sales territory.
The business continued. Business conditions in the furniture industry continued to be very poor. Chicago was a tremendous center of upholstered furniture manufacturing. There probably were as many as 20 upholstered furniture factories. By factories I don’t mean shops with two or three people. I mean factories that had from 100 people up. The particular factory of which I was superintendent had about 300 people when I first got the job and had about 200 people at the depth of the Depression. The wages in the factory were 30 cents an hour, and you had no trouble getting people, even experienced people. There were all levels of furniture made, from very low-priced to very high-priced. We were about in the middle.
INTERVIEWER: Now how did you do when you were selling in the territory, the downtown Loop? How did you do on your sales?
SCHNADIG: I did very badly at first because I didn’t know how to sell. I knew the product very well, having grown up inside the factory. But I didn’t understand the relationship of a customer and a salesperson.
INTERVIEWER: Your Wharton training didn’t help you there?
SCHNADIG: Contrary as a matter of fact. I talked in a language that sometimes a buyer didn’t appreciate because it sounded like I was talking down to him, not intentionally, but it had that ring. I finally learned that I better get on their wavelength. By finally paying close attention to the buyers, I got to the point where I could present my product and get an intelligent audience. I gradually learned how to take my knowledge of the product and translate it to a buyer. It was a slow learning period because I wasn’t a very fast learner.
INTERVIEWER: I can’t believe that, after graduating from Wharton.
SCHNADIG: That was the case. Other people with much less education were far better at the sales end. They had what I call “street smarts” and I didn’t. But I had an opportunity to acquire it by my failures.
INTERVIEWER: Did you continue in the sales end of the business?
SCHNADIG: Yes, as a matter of fact. In my next job with Pullman I had a sales territory in Ohio and by that time, I was less offensive in presenting my product, and was able to do a reasonable job in spite of the Depression simply by extremely hard work. I did have knowledge of the product.
INTERVIEWER: What year? The year was around ’35 then?
SCHNADIG: It was about ’34, going into ’35.
INTERVIEWER: 1934 to ’35, OK. Tell me about the line you were selling – the kind of furniture it was, the prices, that kind of thing, styling ...
SCHNADIG: The line was an interesting line. It was quite diversified. It was what is widely known in the trade as borax furniture or mousey-looking. The reason that we edged in that collection is that we had both the talent to design it and the craftsmen to make it, which was a little more complicated to mix than some of the fully-upholstered furniture. It was heavily wooded, terribly designed, but until …
INTERVIEWER: Why was it terrible if you had staff designers?
SCHNADIG: Much of the designing in the upholstering furniture business in those days, and even today, was done by the proprietors in conjunction with a house designer. At least, that’s how it was with borax furniture.
INTERVIEWER: They were going for price points. Low price points. You say it was borax?
SCHNADIG: I use the term borax in terms of the styling, not in terms of the quality. The quality was always a well-made product in frame, filling material, covering and so forth. We were not strictly a price house; we were little income and up.
INTERVIEWER: What was the relationship with the Pullman name at The Pullman Couch and The Pullman Pack on the railroad trains?
SCHNADIG: It had no relationship whatsoever. There was a building in Chicago called The Pullman Building. I’m telling this not from my own memory, but from what I was told by my father and uncle. There was a company that made couches – not fully upholstered living room furniture as such, but literally a couch like today’s psychiatrist’s couch.
I think that they bought the business for $2,500. The money all came from my uncle because he had some money and my father didn’t have any money. They made the deal in The Pullman Building over a luncheon. They didn’t know what to call the company, so they said, “Well, we’re in the Pullman Building, and we make couches; we’ll call it The Pullman Couch Company,” and that’s how it got its name.
INTERVIEWER: That’s great. Before we go on, you mentioned your father, an American-born man. We don’t know much about your father or your mother. Let’s go back to that. Give us a little bit of a background on your dad and what he did, and your uncle and what he did, and their relationship and how they got into the business. It’s all part of your history.
SCHNADIG: My mother and my uncle’s wife were sisters. My uncle came to this country from Russia, probably as a 14- or 15-year-old boy. He landed – for whatever reason, I don’t know – in the Dakotas. He started out making a living by taking photos of farmers and their families, having the photographs developed and subsequently sending them the pictures and getting paid for them. In the process of traveling through that part of the country, he learned a little English and he learned a little Swedish, because they were basically Scandinavian people. Then, in addition to the picture-taking, he was given certain things to sell. He was traveling the countryside anyhow, so in addition to the picture-taking thing, he sold a certain amount of product. Just what type of product, I don’t know.
INTERVIEWER: He was really a salesman for somebody else. He supplied the photography equipment?
SCHNADIG: He wasn’t really what you called a salesman. It was more what you’d call a peddler in those days.
INTERVIEWER: A peddler? Did he travel in a wagon?
SCHNADIG: He traveled in a wagon, and he had his photographic equipment. He had some odds and ends of things that he sold. What they were, I have no idea, but he learned a lot, and he also saved his money. He moved to Chicago after he had met my aunt and married her.
INTERVIEWER: Do you know the approximate year?
SCHNADIG: It had to be around the turn of the century. He ultimately bought a saloon in Chicago, was a very successful saloon keeper and had some money. As a result, he was able to buy this Pullman Couch Company when it was up for sale.
INTERVIEWER: I see. They had just gone bankrupt?
SCHNADIG: No, they weren’t bankrupt.
INTERVIEWER: I meant the people who they bought from.
SCHNADIG: I don’t know the people they bought from, but I know that it wasn’t a bankrupt condition. It was a very small business and the man that owned it for whatever reason wanted to sell it. They rented a very run down little building on Kinsey Street in Chicago and moved this small operation into those quarters. The arrangement was that my uncle would run the manufacturing business and my father, who had an excellent personality, would do the selling. Gradually, year by year, they built the business to considerable size, a large company.
INTERVIEWER: Let me go back now for a moment because you are talking about your uncle now. He was a photographer. When did your dad get into the picture?
SCHNADIG: I think in 1908 when they bought the business. Prior to that?
INTERVIEWER: Prior to that, what did your dad do?
SCHNADIG: My dad was a traveling salesman. He sold bronze paint. Right after he did that and before they bought this business, he was a shoe salesman in a Chicago retail store. I think it was called Forman Shoe Company.
INTERVIEWER: What I am trying to get to is a relationship. When did he come from Russia?
SCHNADIG: He was a native-born American. My father was a native-born American. And my mother was also native born, as was my father’s sister.
INTERVIEWER: All right. Then your uncle was the foreigner of the family.
SCHNADIG: Yes, he was.
INTERVIEWER: Then he got into the business, and your uncle ran the manufacturing and your dad ran the sales.
SCHNADIG: Right. After I had a sales territory – that’s as far as I got. I did that for about a year and a half, and meanwhile, my uncle had died. His son, who was a very fine fellow but not really interested in the furniture business, was more interested in real estate. So they brought me in for management. My father was at an age and had a health condition where he couldn’t do it so it fell to me.
This was an extremely exciting opportunity for me because I had an opportunity to use whatever skills I had learned in the manufacturing business, coupled with the sales experience I had. I tried to put the two things together, and I picked up a little financial moxie. During that time I had a chance to show what I could do running a business. From that time on I moved ahead and I finally got to be president of the business, but not so much due to my ability. My father subsequently died and my cousin, who was the president of the business and not too greatly interested in furniture as such, also died as a very young man of 49 years of age. At that time, I was 39 years old and was left with the total management of the business.
INTERVIEWER: Before we get too far away from the product, let’s go back. Start by telling me about borax – good quality, medium-price furniture. Can you remember the types of filling material, the types of fabric used? Tell us a little about that. That’s furniture history.
SCHNADIG: When I first started, the chief material for a frame was hardwoods.
INTERVIEWER: Any type of species?
SCHNADIG: No, just general hardwoods for the interior, any species that would properly classify as a hardwood. When it came to the exterior woods on the less expensive product, we used gumwood or magnolia. In the better quality, we used mahogany. The filling materials for the less expensive were moss-filled. Moss grew on the cedar trees in the South, was dry and was a good filling material after it was cleaned and picked. For the better end of the line, it was curled hair fill, animal hair.
INTERVIEWER: Curled hair?
SCHNADIG: Curled hair – largely cattle hair – although some horse hair was in it too. The balance of the filling material in both qualities was felted cotton. The springing was of two types: open coil spring, which was tied by Italian twine as it is today, or spring cushion, four cushions.
INTERVIEWER: Was it eight-way hand-tied?
SCHNADIG: Eight-way hand-tied. It was in our product. There were other ways. There were wire-tied springs in those days too. Eight-way hand-tied was the accepted way. The cushion springs were all of the Marshal-type, which were individually pocketed coils. Very much like the Simmons Beauty Rest mattress. In addition to that, some were wire-tied springs that were put in as a unit.
The fabrics were 90 percent pile fabrics. When I first started, it was mohair, which is a very durable, desirable fabric, and it came in about three colors: brown, maroon and blue. The stock keeping for covers was probably two grains of mohair in those three colors. As the ’30s wore on, there were two changes.
Go back a minute. One other type of fabric was what they call frieze, which was also mohair content, but was woven on a wire loom as compared to a pile-fabric loom, which is double weaving cut in two. There began to be more use of flat fabrics of the tapestry type.
INTERVIEWER: The pile fabric and the mohair: how do you rate that versus the tapestry fabric?
SCHNADIG: They were both quality fabrics, and the reason they were quality fabrics was primarily their durability. They were in the pile fabric of the velvet market. They were the higher style.
INTERVIEWER: Do you remember in the mid-1930s what the price range per yard approximately was for these fabrics?
SCHNADIG: You could buy fabrics like velvet for as low as 75 cents a yard. The pile mohairs and the friezes ran from a low of about $2.40 to probably a high even then of about $4.00.
I want to say one thing about the evolution of springs. It happened at the same time. The first major change in the springs that went in the furniture was when an item that was then called No-Sag (which is a sinuous spring that required no bottom, like a web bottom or a burlap bottom for a coil spring), was attached to the front and back rail at integral parts of the frame. This was a major departure. It was much less costly to put in and if properly installed, it had all the durability necessary. But it did not have a quality image – then or now. It was a major breakthrough. Personally, I think it’s an illusion, but that’s irrelevant because it’s still perceived as a top specification.
INTERVIEWER: You’re saying, as far as you’re concerned, they are about the same in quality?
SCHNADIG: My conviction is that a well-engineered and well-installed No-Sag spring, now called sinuous wire spring, will give all the comfort and all the durability, at a lesser cost. The proof of that is that for the last 20 years the automobile people have been using it in all grades of cars.
INTERVIEWER: All right, now we are back to George Schnadig running the company for the first time. His uncle and father are dead and his cousin died early at the age of 49. You were 39 years old. Now let’s hear what happened to Pullman under the President Lawrence Schnadig.
SCHNADIG: It did reasonably well. Since there was no other executive except the brother-in-law I had working, we worked together. He was outstanding in design, and I knew enough about manufacturing and selling that together we made a good combination.
At that point, the line gradually broadened. It had always made what was known as a Pullman Revolving Bed Davenport. The fact that it was called Pullman and the fact the Pullman Car was a sleeping car led many people to believe that there was a connection. In our efforts, we did nothing to disillusion them, although we did nothing to assert that we were part of them.
INTERVIEWER: I understand. In other words you just let them think ...
SCHNADIG: Yes. It was a misconception, but it was not a dishonest presentation.
INTERVIEWER: As the result of that, you were popular. Now on to your distribution system – who were you selling to? Department stores were a big deal. Who were you selling to? Specialty stores? Tell me about that.
SCHNADIG: Things changed during a period of time. In the ’30s – until the end of the ’30s, at least – the largest distributors of furniture were the installment furniture people. The installment furniture people were major operators in every trading area. Their techniques were very high-powered and most of them – not all – but most of them, made their money, not necessarily on the sale of furniture, but in the financing of it. The interest charges were high and the payout was slow. It was a financial deal, but furniture selling was the vehicle by which the profitable end of their business was made – namely the financing of it.
That was true because of the education level of the populace. It was a high immigrant population, and they could be intrigued into buying something they didn’t have to pay for, for a long time, and they didn’t always accurately calculate what the long-term cost would be. This doesn’t mean that the product was misrepresented. It just means that they paid a very high price for the privilege of buying it on time.
This was not true of department stores. Department stores were major in terms of furniture then, but not nearly as large as the installment furniture people.
INTERVIEWER: Let me ask you a question about installment. Was it necessary to come into the store to make your weekly payment? Was that one of the backbones of that?
SCHNADIG: It was, and there were other ways of distributing furniture at the time too. One was at the retail level where they had literally peddlers that would go to the home and work out sales of every conceivable product. They were frequently people who could speak the same language. Like if they were Italian, they had an Italian client; if they were Polish, they had a Polish client. These people were known as peddlers, and they frequently had a showroom.
The people they worked for had a showroom where products were available to be seen and felt in the flesh. But the actual transactions and the collections were made in the home. The installment people understood that getting the people into the store – where they had the product – to make payments was always a matter of an opportunity to sell them more. If it was a bad-paying customer they naturally didn’t sell them more. If it was a good-paying customer the incentive was to keep them on the books, and they did that with considerable success.
INTERVIEWER: Let me ask you a question. They went around and knocked on doors?
SCHNADIG: Yes, that was how they would develop their first contact. I think we have to remember there was a time, from the time I got into the business really until the ’40s, where ethnic neighborhoods in big cities were common and these men had their own “book” as they called it. It was names of people they developed. They would have a customer. Then their brother would come over and they would call on them. They developed a customer list that way. This method died out as time went on.
There was one other area of distribution and that was wholesale. We must remember that in the ’30s furniture largely was transported by railroad. A wholesaler could buy a carload of furniture and redistribute it to local individual dealers on a piece-scale basis. They got advantage of carload freight rates, and they got the advantage of mass buying from the manufacturer. This was not a minor thing in the ’30s.
INTERVIEWER: As far as Pullman was concerned, were you trying to sell everybody? Was the wholesaler your primary target?
SCHNADIG: No, no. It was more primary in the early ’30s than as the ’30s went on. The installment furniture business was very strong, but as time went on it got weaker too. The mom-and-pop stores, both in small communities and large communities, were very important. Then you began to see the growth of small chains too. There were always large chains like Sears and Montgomery Ward. At Pullman, we didn’t sell them because our product was above their price points.
INTERVIEWER: They were medium?
SCHNADIG: Low, really.
INTERVIEWER: Was Sears around then yet?
SCHNADIG: Around? Very much so. Catalog and retail.
INTERVIEWER: Let’s put a time frame on this if we can. Installment buying was strong in the ’30s. This is before that, for a long time.
SCHNADIG: Probably even stronger, but I’m just not aware.
INTERVIEWER: I understand, but in your experience with this era, in the early ’30s it was strong and when did it phase out? In the ’40s or when?
SCHNADIG: It began to phase out even in the ’30s on a consistent basis.
INTERVIEWER: OK. So you’re saying maybe by the time the ’30s were over the peddlers were pretty well gone?
SCHNADIG: No, there were just fewer of them, doing less. They weren’t totally gone.
INTERVIEWER: So Pullman’s distribution was the mom-and-pop stores or department stores?
SCHNADIG: It was dominantly installment stores, mom-and-pop stores, and to a minor degree, department stores. Meanwhile our product line had changed radically; we made full-frame mahogany Victorian furniture. We sold very effectively in the South because it was a style identified by them. We also made very elaborate French furniture, full-frame wood French furniture. We were able to do this because we had the design ability to do it. We had the equipment to do it – mainly carving machines – and we had a great many Old World craftsmen who had the skills to handle that kind of product.
INTERVIEWER: These were real wood-carvers, I guess.
SCHNADIG: Right, we had wood-carvers who would carve the model. Then you’d put the model on a carving machine, and you could get maybe from 24 to 36 identical pieces from that carving machine.
INTERVIEWER: You’re into the Victorian and French. These were your major lines?
SCHNADIG: It was a significant portion. Eighteenth century was major and modern as it was understood then.
INTERVIEWER: Was Pullman selling all over the United States? What was your marketing area?
SCHNADIG: My marketing area was all over the United States, though being a Chicago-based company, we subsequently had an Ohio factory too, and the Middle West was our dominant business. What we did put us all the way up in New England and all the way to the West Coast. As the industry moved to the South it was harder to sell in that area, and as individual factories were built on the West Coast and in Texas and areas like that, those areas became more competitive for us because of the transportation. But even then in spite of that, we had a national distribution because some of our goods were unique enough.
INTERVIEWER: You had a representative salesman in that territory?
SCHNADIG: Yes, totally national.
INTERVIEWER: Can you estimate the approximate dollar volume of Pullman from the time you took it over when you were not the president and what happened to your volume as your distribution grew?
Incidentally, when you took over Pullman, obviously it didn’t have national distribution?
SCHNADIG: It did, primarily on the Pullman Revolving Bed Davenport.
INTERVIEWER: What was the approximate volume of the company then and what happened?
SCHNADIG: When I first came, they probably did about $750,000 a year. That is until the Depression, which was 1932 to ’33. That volume shrunk by about half to about $350,000. But we were able to shrink all our costs so that we could keep our head above water in spite of that shrink. Meanwhile many of our competitors could not do it. Many people, particularity in the Chicago manufacturing area, went out of business. I would say the number of factories probably dropped to 30 percent of what there had been all due to financial failures. Not all in one year, not all at one time. That was in a period of about 5 years. There were other things that contributed to that too.
INTERVIEWER: We’re into the end of the ’30s. We’re coming up to ’38, ’39 and ’40. We’re coming out of the Depression into war fever in Europe, which was starting to feed the economy. What was happening to Pullman?
SCHNADIG: Our business grew, but I was very slow to recognize that the Depression, if not over, was at least much less severe, and we were not as aggressive as we should have been to take advantage of the better business climate. I was still Depression-oriented and didn’t do some of the dynamic things that should have been done. I was slow in recognizing the economic turn. While I was slow to recognize the economic turn, once I recognized it, we did a great many things. Fortunately, most of them were right and we grew very, very quickly and profitably.
INTERVIEWER: That was what year to what year?
SCHNADIG: I would say from ’39 to – I have to treat the World War II years separately, but I’m just taking this to ’48.
INTERVIEWER: ’39 to ’48. What about World War II?
SCHNADIG: There was a hiatus during the Second World War in terms of growing in our orthodox upholstered furniture product.
INTERVIEWER: Approximately what are we talking about in dollar growth?
SCHNADIG: By 1948, we were up to about $6.5 million from the base that I gave you before.
INTERVIEWER: We’ve covered such a wide number of years. You said at the bottom of the ladder you were at $350,000 in 1932 to ’33. From then you started to climb. When did you hit a million dollars? When did you hit $2 million? If you can remember, what was the rate of growth?
SCHNADIG: I will take a guess at this. It was 1933 when we did about $350,000 worth of business. I would say for the next two years we grew at about $100,000 a year. That brings us to 1935.
From 1935 to 1939, we probably doubled our business, and I would say 1939 was probably a million-dollar year for us. This is an estimate; it’s the best I can do. By 1948, we probably were up to $6 million.
INTERVIEWER: You said you were slow to recognize the Depression was over, but when you did, what did you do aggressively?
SCHNADIG: We started to nationally advertise our name. We enlarged our sales force and developed a few technical things that were very determining in the growth of our business, and I will touch on that.
Until the middle ’30s what is now known as a sofa bed could only accommodate a thin pad. It was called a mattress, but it wasn’t a mattress. A man who used to work for us as a salesman had developed, without a patent on it, a bed fixture that would accommodate an inner spring mattress.
INTERVIEWER: What year was that approximately?
SCHNADIG: That was in 1935. He had already sold the patent to a local Chicago bedding manufacturer.
INTERVIEWER: You said you were slow to recognize the Depression was over, but when you did, what did you do aggressively?
SCHNADIG: We started to nationally advertise our name. We enlarged our sales force and developed a few technical things that were very determining in the growth of our business, and I will touch on that.
Until the middle ’30s what is now known as a sofa bed could only accommodate a thin pad. It was called a mattress, but it wasn’t a mattress. A man who used to work for us as a salesman had developed, without a patent on it, a bed fixture that would accommodate an inner spring mattress.
INTERVIEWER: What year was that approximately?
SCHNADIG: That was in 1935. He had already sold the patent to a local Chicago bedding manufacturer.
INTERVIEWER: Could you tell us this man’s name?
SCHNADIG: His name was Joe Thomas. He was the inventor and a sales representative for us – loved to sell. He developed this item. He brought it to the copyright people. This bedding manufacturer picked it up.
INTERVIEWER: What was the name of that manufacturer?
SCHNADIG: I can’t think of it. I know the name of the people who made the fixture, if that will help – called Haggard & Marcasson. They made the bed fixture.
This bedding manufacturer that he licensed to make it had some initial success in the Chicago Market in 1935 but went bankrupt. He brought it to me, and I was intrigued with it because I had seen the product in the stores and the stores were selling. We developed it, hired him and also made an exclusive contract that he would sell this fixture only to us, and that we would pay a royalty on every item that we sold. His first six months were to further develop the product with us.
We showed it for the first time in January of 1936. Our first two customers were Marshall Field & Company, and Woodward & Lothrop of Washington, D.C. Once those two stores bought it, our sales force took fire and this item became a technological first. Technology has not had too many firsts in the upholstered furniture industry.
INTERVIEWER: Was most of your production into that?
SCHNADIG: No, no it wasn’t. We kept on with our standard line of upholstered furniture and had a very diversified line, but that gave us a boost, an identity and a national ad and so forth. It helped us a great deal to gain attention.
INTERVIEWER: That explains going to $6.5 million very rapidly.
SCHNADIG: Yes, that’s right, plus the fact that our general line was improving and the economy was improving. All of those things going together. It was a period in which we outdistanced the field.
INTERVIEWER: Now we’re in 1936, and we’re going up. That’s when it started, January 1936?
SCHNADIG: Yes, then came along the second World War and with the war came the restriction that you couldn’t put steel in upholstered furniture, bedding or anything else. At least it was limited so that the amount of steel necessary for a sofa bed was completely out. This started another point in my career.
INTERVIEWER: You just couldn’t make those anymore?
SCHNADIG: No, you couldn’t make them and you couldn’t put springs in upholstered furniture legally. It was done. We didn’t do it and lots of other people didn’t do it, but some people did.
There was a guy working for me, and he developed the wooden spring, made out of hickory, and it was like a leaf spring in an automobile. Due to the fact that the wood was strong, we developed a way of putting it together. We were able to make upholstered furniture with wood springs in it. It certainly didn’t sit or feel like the metal springs, but it was durable, so we made that. Nobody wanted it, but they bought it because the other wasn’t available.
INTERVIEWER: Were your competitors doing the same thing?
SCHNADIG: Not to my knowledge. Some of them cheated, and that was very risky to do. A legitimate company wouldn’t do it anyhow. But there were high binders that did it. They were able to get other high binders to do it. But that wasn’t the major part of the business.
The business we led dried up a lot too. A lot of people didn’t want to buy anything with a wood spring in it. Some people made it without any spring in it at all. Probably sat like it too. But we couldn’t sell enough furniture made like that to use our factories. So we got into, at that point, the goods used in the war effort – like mess tables, bunk tables. We made teak floaters for mine sweepers and that character of goods, which kept our factories at least there and doing something, and our work force employed. These things were bought in colossal quantities.
INTERVIEWER: Give me an idea. You said you were making mine sweepers and mess tables and bunk beds.
SCHNADIG: Even before the war started, but especially when the war started, with a lot of impact. The War Production Board wrote what they called limitation orders to tell the civilian economy what they could and couldn’t use. They would have meetings all over with the people who were in that industry. They had a meeting in the Blackstone Hotel in Chicago, and the people from Washington were reading a limitation order to the furniture upholstery people from all over the country. I read this limitation order, and it didn’t make any sense.
At the meeting, I asked the people if they had ever been in the upholstered furniture factories, “Do you know what you are saying?” They said, “No, we’ve never been in upholstered furniture, but we had people tell us.” I said, “Well I’ve got a factory right here in Chicago. Why don’t you come visit me, and I’ll try to show you that what you’re asking is impossible, and what you’re not asking and should be asking, you’re not asking.” The meeting was adjourned, and nobody was happy with it. I got a call at my office maybe the next morning at the break of dawn and they said, “We would like to come out to see you.”
I said, “I’d be delighted to have you.” They came out, commented on the odor from the Stock Yards, and I took them around and showed them what couldn’t be done, and some things where steel could be taken out. They thanked me very much and went back to Washington. My cousin was still living then.
INTERVIEWER: They wrote the limitations?
SCHNADIG: Meanwhile, in about two days they asked my cousin, who was still president of the business (I think this was close to his last year), whether they could have me in Washington. He said yes, but not full-time; he didn’t even ask me. I agreed to serve one day a week in Washington.
I went there. I was called a-dollar-a-year man, and that was the pay too. I worked on rewriting this limitation order, and it permitted, which they had taken out, what was known as joining hardware. You could use screws and bolts and that kind of stuff, but you couldn’t use anything else, which was OK, because you could make something.
Then Arnold Nelson, who was head of the War Production Board, heard about my taking issue with how they had written it and my help in rewriting it. He said, “We want you here more than one day a week.”
I said, “What are you talking about?” They told me what the pay was for doing a job for other industries. I said, “I can’t afford to do that. I’ve got a wife and three kids.”
He said, “Well, what about dividing your time?” So I went to my boss, who was my cousin (he was a nominal boss, but he owned the business). We agreed I’d work three days in Chicago for The Pullman Couch Company, and three days in Washington for the War Production Board still on a dollar-a-year basis, because I needed (and they were willing to pay) full pay at my company.
Then they gave me other things to write limitation orders on. On caskets, all the way from baby carriages to caskets, about which I knew nothing. We would get these committees from the industry and we would sit down. Everybody was patriotic and nobody was on the take. In spite of all the talk about the bureaucrats and all, they were all hardworking, honest people. Little by little, we got the steel taken out of everything. You could make a wooden casket, and you could use screws and bolts and nails for the casket, but you couldn’t make a metal casket. Baby carriages: you had to be careful that they were still safe, but you couldn’t use a lot of steel in it either. So from industry to industry, we went taking steel out.
Then my number came up for the draft. I took my exam, passed the exam and was due to go into the service. But the day I went to sign up, literally the day I went to the station to sign up, they came out. They didn’t want fathers that were over 30 because they make lousy soldiers. They don’t want you. I was delighted really because I had three kids, and I wasn’t anxious to be a soldier. I wasn’t prepared to duck it, either.
INTERVIEWER: You were 30?
SCHNADIG: Let’s see this was in ’39 or ’40, I guess. I’ll tell you exactly … I was 32, maybe 33 by that time.
INTERVIEWER: You weren’t called to military duty? You didn’t serve because you were 32?
SCHNADIG: I didn’t have a deformity.
INTERVIEWER: Technically, was the age 35?
SCHNADIG: I don’t know, but all I know is that I went down to the station. Well, I didn’t have enough hair to bother with anyhow. They said, “No we don’t want you.” I said I was interested; I passed the physical. He said, “We don’t want any fathers over 30. They make lousy soldiers.”
INTERVIEWER: You kept doing this for the balance of the war – three days in Chicago and three days in Washington?
SCHNADIG: Yes, except as the war effort declined, they released me. It was a great experience, but not a happy one. Then I went back full-time in the furniture business. There was such a demand for furniture.
INTERVIEWER: Were you flying back and forth in those days?
SCHNADIG: No, I started to fly, but every time there would be a military guy, I’d get bumped and have to go back to the railroad.
Simmons had developed a bed during the war years. They didn’t make any Simmons beds, upholstered sofa beds or hide-a-beds. But they did develop them. When the war was over they started making them. I sued them and lost the suit.
INTERVIEWER: You had a patent for this Thomas fellow, but it didn’t hold up?
SCHNADIG: The fact that Simmons could design a satisfactory fixture around it made it open season for anybody that could develop one. The patent, in effect, did not hold up.
INTERVIEWER: But you still went back in the business.
SCHNADIG: Back in the business, only we had a very strong competitor in Simmons and very shortly thereafter, a lot of competitors.
INTERVIEWER: That was a disaster. Now we’re talking about the ’40s? ’45? What did you do? Are you back at $6.5 million?
SCHNADIG: We were less because we lost a lot of business during the war years on furniture. We did make it up in dollar volume on other things. The other business was large enough, so we kept our factory going and our work force going.
INTERVIEWER: The war contracts are gone. You’re back in the furniture business, and volume was probably down around five and a half?
SCHNADIG: I would say around 5.5 percent, but the demand for our product was growing very fast. Soldiers came back and the households were being formed. There was a lot of money around. We went to work and did all the business that we could like everybody else, and our business continued to grow.
I was with Pullman until 1951. In 1949, my cousin, who was the majority owner of the business, died. The business was very successful and very profitable, but his widow remarried a very wealthy man and wanted to sell the business. I wanted to buy the business. They didn’t call it a management-leveraged buyout in those days; they just called it the desire to buy.
I had the finances to do it, but I couldn’t do it because the tax law was such and I was a stockholder by then. I was a stockholder because my father was, and he had left me half of his stock and my sister half of his stock. The tax impact on them if they had sold it to another stockholder would have made the deal unsatisfactory to them, and I can understand that. So the business was sold and my portion of it was sold with the majority interest. The deal was I would stay with the business for 90 days after the sale. After 90 days the man who bought it asked me to stay with them but cut my salary.
INTERVIEWER: What was his name?
SCHNADIG: I will think of it, but I can’t think of it right now.
INTERVIEWER: So you were bought out?
SCHNADIG: Bought out. He offered me more money than I had ever made in my life to stay, but there were many, many questions about his moral character, his idea of doing business. He had some suggestions for what we should do that told me we could never live together. I told him I appreciated the offer, but really I didn’t think he should do what he planned to do. He bought a profitable business and should keep running it the way it was run.
INTERVIEWER: Now you’re looking for another furniture company?
SCHNADIG: Now I’m without a job, but I have some money, because my equity was sold along with theirs.
INTERVIEWER: So you cast about to start your own company?
SCHNADIG: No, not necessarily. I cast about for a job or a company; either one would have been OK. I got enough money from it that I was under no dire necessity to get a job immediately. I didn’t want to move that fast anyhow.
I interviewed at one time at Kroehler, who was a dominant upholstered furniture manufacturer in the industry, and they needed somebody worse than they knew. What they offered me was OK in terms of salary, but not OK in terms of the area of responsibility and authority. We didn’t get together.
I had a friend that was the vice president of merchandising at Sears Roebuck. He was a social friend. He asked me to have lunch with him and Mr. Hauser, who was then chairman of the board of Sears. I had never sold Sears any furniture because what I made and what they bought were different levels of product.
At that time, Sears had interests in many factories of various types, most prominent of which was the Coldspot operation. They had comparable things and other appliances; they were even into the clothing business. They also had one small case goods operation at the time.
Their idea was that we’d get together, Sears and I, and put together a group of factories to make upholstered furniture for Sears. I told them I was very flattered by the offer, but to start from scratch to do what they had in mind was a five- to ten-year project. Of course, the furniture was a hand-made item, and it would take an awfully long time to develop and find a factory for us to do that.
They asked if I was turning them down, and I said, “No, I’m not turning you down, but I don’t think this is the way to go about it.” And they said, “Well, how do you think we should go about it?”
I said, “Well, maybe there’d be something for sale or there’s something around,” not knowing at the time that anything would be for sale.
He said, “Do you know of anything for sale?” And I said, “No, not now, but there might be.” “Well,” he said, “why don’t you keep your eyes open?”
I was very excited at the prospect, because the financial security of Sears and the volume of their outlet was an extremely intriguing thing. So that was dead for about four months.
I went to a dinner party with my wife and other husbands and wives. There was a fellow there by the name of Arnold Maremont. He was part of one of the early conglomerates. He asked me what I was doing. I said I was looking for a job or a business. I’d looked at all kinds of businesses, from women’s lingerie to candy businesses. But I really wasn’t interested because if I could, I wanted to get back into furniture because I felt I knew something about that.
At any rate, at this dinner party, after I told him I was looking for a job, he said, “Got just the job for you.”
I said, “What’s that? You don’t mean that Kalamazoo Stove thing that you’re looking at?” He said, “That’s just what I mean.”
INTERVIEWER: What was the name of it?
SCHNADIG: Kalamazoo – like the town – Stove Company. I said, “Arnold, I don’t know my rear end from third base about stoves.”
He said, “Lawrence, I’ve got lots of guys that know all about stoves. What I need is somebody to run a business.”
I said, “Arnold, that’s really not for me. I have to do something I know something about.”
He said, “Well, you wouldn’t go back to that upholstered furniture business again, would you?”
I said, “I sure as hell would. It was good to me. I made money in it; I made a lot of friends in it; I learned how to make furniture and sell it and all that. I’d sure go.”
He said, “Well, there’s one for sale.” He mentioned International Furniture Company, whose head had also died, strangely enough, maybe a year and half, two years ago. His name was Philip Pelz. They had the same experience. The head guy died. Business was left in trust to his wife and children. She had remarried to a very wealthy guy too.
INTERVIEWER: The name of the company was International?
SCHNADIG: International Furniture. I knew they were competitors of ours, and he’d built a business from scratch very effectively.
He was an engineer by background and a very smart guy. He died very young.
At this stage, the First National Bank had sold the business to a group of liquidators – 14 liquidators. They were in the market to sell the business.
I went back to Sears. I said, “Here’s an outfit that’s got about four or five factories. They’re in business, you buy from them.” Sears bought from them. I said, “What about pursuing them?”
They said, “Is it something that will fit?” I said, “They’re ideal for what you were talking about. I don’t know if we can make a deal or not.” But we got together – a fellow by the name of Tom Brooker at Sears, who was a vice president of factories.
INTERVIEWER: His name was Tom Brooker?
SCHNADIG: His name was Tom Brooker. He was a vice president of Sears’ factories. He said, “Go see them. Find out.” So I did. They were a group of characters like I’d never met before, as liquidators are.
There were two or three of them that talked to me. We had a discussion, and they said, “This is what we paid for the business; this is what we want for it. If you want to buy it at that price, we’ll take it.” I said, “You mean buy it at that price sight unseen?” He said, “Yeah.”
INTERVIEWER: Wait, hold it. Sight unseen?
SCHNADIG: He said, “Yes. Sight unseen. That’s how we bought it.”
I said, “Yeah, but your idea was to liquidate it. My idea would be to run it.”
They said, “Well, what do you want to look at?”
INTERVIEWER: Do you mean you hadn’t seen the factories at all?
SCHNADIG: I hadn’t seen anything. They said they hadn’t either. I don’t know whether they were telling me the truth or not. But I knew very well that I couldn’t, certainly Sears wouldn’t let me, if I was dumb enough to do it.
He said, “What do you want to see? Here it is.” A piece of paper.
I said, “I want to see the factories. I want to see the equipment. I want to see the inventory.”
He said, “That’ll take you a long time.”
I said, “Yeah, it will.”
He said, “Are you talking about months?”
I said, “No.”
He said, “What are you talking about? Days?”
I said, “No.”
He said, “Are you talking about weeks?”
I said, “It’ll take me a few weeks to do this; they’re so scattered around. There’s somebody I want to take with me.”
He said, “Who do you want to take with you?”
I said, “Somebody from Sears, the people who can have the financial thing to make this deal because I can’t make it by myself. And I wouldn’t make it by myself if I could.”
He said, “Why won’t you make it by yourself?”
I said, “Because I’d be afraid. It’s too big, too big for me to swallow. It’s one thing to swallow for Sears. It’s something else to swallow for me. Also, I don’t know if I can get the money.”
Anyhow, he said, “OK, take a look at it.”
I went back to Sears and said, “I want somebody from Sears to go with me.”
They said, “OK. Look at it. We want to sell it.” So they gave me a buyer to go with me.
INTERVIEWER: These plants were still operating? The liquidators took them over. They didn’t shut them down, did they?
SCHNADIG: Not at that point. But that was their plan. The upholstered furniture buyer and I made a trip to every factory, looked at the buildings. They had factories in Montoursville, Pennsylvania; Rushville, Indiana; Bryant, Texas; and Madison, Georgia, all of which were upholstery factories, and they had two wood-working factories: one in Cornelia, Georgia.
INTERVIEWER: What kind of factories? These were all upholstery?
INTERVIEWER: That was Montoursville (Pennsylvania), Rushville, Indiana, Bryant, Texas, and …
SCHNADIG: Madison, Georgia.
INTERVIEWER: Madison, Georgia. Where were the other factories?
SCHNADIG: They had two wood-working factories that made the frames. One in Cornelia, Georgia, and one in Jacksonville, Georgia.
INTERVIEWER: OK. So the two of you took off and started to look over the plants.
SCHNADIG: Looked at the plants, looked at the equipment and looked at their inventory, which was where the money, where the dollar figures were. We found the plants OK, the equipment more than reasonably good but not great, and the inventory – terrible.
INTERVIEWER: Loaded with inventory?
SCHNADIG: Loaded with inventory and not good inventory. It was apparent right away that that’s where the problem would be. I came back with this buyer of Sears to the Sears people, told them what I found, and they said, “Well, that’s no reason not to negotiate for the deal, is it?”
I said, “No, but I’ve never bought a business this size and I will need some help on it.”
They said, “Well, you go as far as you can, and when you need help, we’ll be there.” So I started with these liquidators, with two or three people in it. There were a lot of things going on in the business, inside the business, purchasing and that stuff. It wasn’t completely arms-length, either. There were things going on that were bad, which I found out independently, looking at the factory.
I did take it as far as I could. I thought the value of the inventory was a stumbling block because we knew that they had evaluated the buildings and the equipment was OK. I mean, it wasn’t low, it wasn’t high, but it was a good buy. But the inventory was ridiculous. It took about $5.25 million to buy this business. All the money that I had, that I could get my hands on, (including borrowing some), was half a million dollars. So Sears said, “What part of this do you want?”
I said, “I want half.”
They said, “We usually buy this with 51 percent.”
I said, “I want to tell you: I was flattered that you came after me, but I don’t want to get in business with anybody with less than 50 percent. I’m not asking for 51 percent, now.”
They said, “OK, that settles it.” It turned out that I put up a half a million dollars for stock equity, they put up half a million dollars for stock equity. They put up $1.25 million on a subordinated note. The First National Bank was completely willing to loan money as long as Sears was on the paper.
INTERVIEWER: The name of that bank was?
SCHNADIG: First National Bank. The subordinated note was subordinated to the bank. The bank didn’t ask for anything other than an annual audit, and it was on a relatively long-term payout. But then we were able to, after lots of negotiation, we were able to put the thing together. I think it was December of ’51 or ’52.
INTERVIEWER: That was December of ’51. It’s still called International Furniture Company?
SCHNADIG: That’s right. At the same time, these liquidators had another business called S. Karpen.
INTERVIEWER: That was a much smaller company?
SCHNADIG: Much smaller. Practically out of business. But Karpen had a wonderful name, had really made the kind of furniture, the type of upholstered furniture that I had made at Pullman. While Pullman was going up in value in every way, they were going down. This appealed to me.
INTERVIEWER: Was Sears in on that too?
SCHNADIG: I’ll come to that.
The corporate name had to be changed because it would be a new corporation with Sears and me as 50-50 partners. It had a debt structure of its own. Both Sears and I felt that we didn’t want Sears identified with it because we wanted to sell everybody we could other than Sears. I had a reasonably good name in the industry; though not heroic, it was a good name, and they suggested that we call it Schnadig Corporation, which we did. Really, International and Karpen just became trade names, which they are to this day. The corporate name is mine. The reason for that was to divorce it to that degree at least from Sears.
INTERVIEWER: November 1951? That deal was made at the same time?
SCHNADIG: Went along with it, yes.
INTERVIEWER: Where was Karpen located?
SCHNADIG: Karpen had two buildings: one was in Chicago, a very old multi-story building; and the other was a factory in Lexington, Kentucky. On that part of the deal we did not buy the Chicago building. The liquidators liquidated that on their own, but we did buy the Lexington, Kentucky factory. It was operating and doing some business.
INTERVIEWER: Before we go on, we’ve covered a span now. We’ve talked about materials and what you were doing where. We went all the way through the war, and we’re out of the war. We’re up almost to the Korean War, and we haven’t talked about changes in technology – the material and technical changes.
SCHNADIG: In terms of equipment, there were many changes in wood-working. All of them advanced technology, but most of them were applicable to the case goods business as compared to the wood frame upholstery business. The chief change – major change – in equipment was that in upholstered furniture the covers had been put on upholstered furniture with basically a tack hammer. The upholsterer would carry tacks in his mouth.
INTERVIEWER: Tack spitter?
SCHNADIG: Tack spitter is exactly right. With a magnet hammer, he would take the tacks out of his hand and tack the cover to the frame. Along came the staple gun and staples, and this really revolutionized the actual upholstery equipment that was used and mechanized it to a degree. Even though it was hand-held, it still mechanized it to a degree.
INTERVIEWER: In your case, you said as far as upholstery was concerned, the staple gun was a big breakthrough.
SCHNADIG: It was a major change. Other things happened at the same time.
INTERVIEWER: The sewing machine?
SCHNADIG: Vastly improved sewing machines. Vastly improved cutting knives for the cutting of the cover. Those things really represented the major equipment change. There were some changes in finishing equipment too, but that also was more applicable to case goods.
INTERVIEWER: Fabrics or covers? And filling?
SCHNADIG: Filling material. The moss and curled hair used as a filler practically stopped for all intents and purposes in the upholstered furniture industry.
INTERVIEWER: This was after the war?
SCHNADIG: It would have to be after the war because you couldn’t use foam rubber during the war. It was developed prior to the war and had some more than limited use but not broadcast. The first foam was pure rubber foam. The second foam was artificial rubber foam, and the third foam, which became dominant by the end of the ’50s and early ’60s, was polyurethane. It really took the place of the old-time moss and hair filler. It did not replace cotton felt entirely, although it greatly reduced its use.
INTERVIEWER: What about sisal?
SCHNADIG: In our operation we never used sisal because it was not a durable material, it crumbled quickly and was only used on really low-end furniture, lower-end than I made. I can’t tell you what happened with the use of sisal because I never had any experience.
INTERVIEWER: OK. Now sewing machines tremendously changed. What changed the sewing machines that made them dramatically different from the old foot-pedal-operated machines to the automatic?
SCHNADIG: I would say the speed of the machine is a great change. The development of separate worktables for an operator adjacent to the machine, so that there were no longer banks of sewing machines; there were rows, but each row had its worktable – plenty of space for the operator to function. I don’t know that I’m competent to tell you every change. The technical changes, the quality of the steel in the needles, I know was improved, because there was much less breakage. There were undoubtedly other things that I’m not cognizant of because during this time I was going away a little bit from the detail too.
INTERVIEWER: What about the structure? Sears wanted to be a silent partner. You were president of this company and to all the world, it was your company.
SCHNADIG: It was generally known that Sears was a partner. It wasn’t kept any secret.
INTERVIEWER: What happened to distribution during that period? The installment was going out and the department and the mom-and-pops were coming along. Where are we? What happened? Let’s take from the end of the war to the Korean War. That’s about a 10-year period.
SCHNADIG: I think the demise of the installment stores continued but at an accelerated rate.
INTERVIEWER: Now we are at the point where you’ve taken over the International and Karpen companies and set them up as your own corporation with Sears Roebuck. But before we go on from here, I’d like to talk a little bit about your family. You haven’t told us about your romance and your marriage and your children. During this section right now, tell me a little bit about your wife and your children.
SCHNADIG: Well, having started work in the Depression, an early marriage was out of the question for two reasons. First of all, I didn’t have the income to think of marriage seriously. And secondly, I didn’t have a girl that I wanted to marry.
INTERVIEWER: That’s important.
SCHNADIG: So lacking both ingredients, I stayed single until I was 28 years old. During the last years, ’27 to ’28, I met a girl who was my future wife. That is really the wrong description because I had known her so many years, but had never thought seriously about her or marriage.
INTERVIEWER: How did you meet her?
SCHNADIG: She was the daughter of a couple who were friends of my parents. This was about the worst basis for romance there possibly could be. However, as we both matured, we both overcame that obstacle and got to know each other better. She was employed as a secretary in a Loop investment banking firm. We got serious. My father had died and the idea of spending the rest of my life alone was certainly unappealing. We got married in 1936.
INTERVIEWER: Had you been living with your parents up until this time?
SCHNADIG: I’d been living with my parents up until this time.
INTERVIEWER: OK. You were single, and you were 28 when you married. What was her age at the time?
SCHNADIG: She was 25.
INTERVIEWER: How long had you known her before you married?
SCHNADIG: Oh, probably 10 years or more. But I never went out with her very seriously until I was about 27. She was a Chicago girl.
INTERVIEWER: Her parents were from Chicago too?
SCHNADIG: Her parents were originally from New York and moved to Chicago.
INTERVIEWER: You were married on what date?
SCHNADIG: April 12, 1936. Married in Chicago.
INTERVIEWER: OK. Then time went on and you had a family.
SCHNADIG: Time went on and I did have a family. My first child was named J. Lawrence Schnadig. He was named that because my father’s initials were J.L. He was born in May of 1937. A little more than two years later I had a second son by the name of Richard, who is an attorney with a large and successful Chicago law firm. About three years after that I had a third child which was a girl, Susan. That was the extent of the family I thought I could support and educate.
INTERVIEWER: Your second son, Richard, was born in ’39?
INTERVIEWER: Then Susan was born in...
INTERVIEWER: Where’s she today?
SCHNADIG: Well, she’s a mother with three sons of her own – one out of college, two in college. For the last three to four years, she’s worked in a Chicago suburb in a very exclusive women’s ready-to-wear store, for which she both sells and buys. Her husband, Don Belgrad, is president of our company.
INTERVIEWER: OK. Richard – does he have children?
SCHNADIG: He has four children: three boys and a girl. Lawrence has three children: two boys and a girl.
INTERVIEWER: That adds up to?
SCHNADIG: Ten grandchildren.
INTERVIEWER: Ten grandchildren. Let’s go back to 1951. You now had taken over the new company of International and Karpen. You chose to use those names as your trade names. Then you made an umbrella company, which was Schnadig Corporation, and that was yours and Sears.
SCHNADIG: That’s right.
INTERVIEWER: Then the Korean War came along. What happened during that period?
SCHNADIG: Nothing very important happened to us during the Korean War. The business operations were for us, as well as other people, not disrupted. The furniture business was quite good. 1955 was an extremely good furniture year for everybody else and also for us. The Sears-Schnadig relationship moved ahead harmoniously. Four of my directors were Sears officers. Would you be interested in the names?
INTERVIEWER: Yes, sir.
SCHNADIG: Hauser. Mr. Hauser. He was Sears’ chairman of the board and was on my board. Tom Brooker, the Sears vice president in charge of factories, was on my board. And Edward Gudeman, Sears’ merchandising vice president, was on my board. An attorney for Sears from a law firm that was their general counsel was also on my board. His name slips my mind.
INTERVIEWER: OK, he’s not a furniture man anyway, so don’t worry. You had your own people on it with yourself, of course, as chairman.
SCHNADIG: Yes. And that was it. The Sears relationship continued harmoniously. They encouraged me at every turn; supported me at every turn.
INTERVIEWER: What was happening to the business at this time?
SCHNADIG: Business was growing.
INTERVIEWER: Can you give me some ideas on volumes for years 1951, ’52?
SCHNADIG: I’ll try to do that. I think when I took over the business, it was a business of about $12.5 million. It grew consistently from that time. It was 1951. It grew consistently, both with Sears and with non-Sears, right through the ’60s, and when we parted company with Sears, which we’ll dwell on in a minute; we were up to about a $70-million business. The only issue that Sears ever had with me was that they complained I wasn’t taking a high enough salary. This is true.
INTERVIEWER: Do you want to record that salary for posterity?
SCHNADIG: I have no reason not to. When I first put the deal together I suggested that I get paid $35,000 a year, which was what I was making at Pullman before this deal was put together. That was agreeable to everybody, and I think that salary stayed at about that level for about two years and was moved in gradual increments so that by 1967, I was making $75,000 a year.
INTERVIEWER: That wasn’t much of an increase.
SCHNADIG: That did not include profit-sharing bonuses, which we had a formula for.
INTERVIEWER: Do you want to reveal those?
SCHNADIG: I would reveal them if I could recall them. I really can’t, however.
INTERVIEWER: I’m just wondering what your annual income was.
SCHNADIG: I would say by the time Sears and I dissolved partnership, it was probably in the range of $100,000.
INTERVIEWER: OK. Now tell me about the rupture with Sears or the buyout.
SCHNADIG: There were several supervisors in the furniture department, which were really merchandise managers, but Sears’ name for them was supervisors. The last one was Fred Hecht.
I’d gotten along very well without them. The last one was Fred Hecht, whom I’d known socially before he got that job. I’d never had any business relationship with him.
When he got the job as supervisor of the furniture department, we did have a business relationship. We got along very badly together. Now since I’m alive and telling the story, I say it’s his fault. I’m sure, were he available, he would say it was my fault. My suspicion is that the truth was someplace in between. Both of us were at fault.
INTERVIEWER: Two strong personalities, that’s for sure.
SCHNADIG: So, since I was unhappy with him, I went to then chairman of the board, Mr. Cushman, whom I knew when he was a territorial vice president of the West Coast.
INTERVIEWER: What was Mr. Cushman’s first name, do you recall?
SCHNADIG: I don’t recall. He was the chairman of Sears and I told him I was unhappy and would like a divorce. He asked me why. I told him it was because of incompatibility. I said I also knew that he wasn’t going to change his supervisors because I was unhappy. He said he didn’t want me to be unhappy, didn’t want any resource to be unhappy. He suggested that Sears buy our share. I said that wasn’t my idea. I said I thought I’d buy theirs.
He said, “Don’t we own 51 percent of the business? We do in most of these.” I said no.
He said, “How come?” And I repeated to him the story that was in the prior part of this interview. He asked me if I could buy it. I said yes, and I didn’t have the assurance that I could, but I went to the bank, told them my story. I told the bank representative I probably wouldn’t do what I was asking him to do if I was in his chair, but I asked him to do it anyhow. We talked a while. He asked me one question: “How was my health?” I told him my health was OK.
He said, “Go ahead and make you a deal.”
I said, “Can you just do that without consulting a committee or anything?”
He said, “Let me tell you something. When you ask a banker for something and he says, ‘OK’, get out of the bank.” So I got out of the bank.
At that point, I knew I was going to lose a substantial part of my Sears business, which at that time accounted for 40 percent of our total business. I was naturally very concerned about what I was going to do.
It so happened that at that time Mediterranean styling was the biggest thing in the case goods segment of the industry, and I decided we were going to make upholstered furniture with a Mediterranean flavor. I got together with my designer about a week before Thanksgiving in 1967, and put together several Mediterranean groups. In January of ’68, we showed it at Market and we were extremely lucky. It took off tremendously because we were the only people making that styling of goods. The retailers were all familiar with the success of Mediterranean case goods. Within the year 1968, due to this introduction and with an awful lot of luck, I was able to replace the business.
INTERVIEWER: Forty percent? In one year?
SCHNADIG: That phenomenal.
INTERVIEWER: My goodness gracious. In terms of dollars, what was that increase approximately?
SCHNADIG: Some $25 million to $28 million, in that range. It represented 40 percent of a roughly $70 million business.
SCHNADIG: The business continued from 1968 on a growth pattern, a very modest growth pattern, as a matter of fact.
INTERVIEWER: About what per year?
SCHNADIG: I would say in the range of $1 million to $2.5 million a year.
INTERVIEWER: You were satisfied with that growth?
SCHNADIG: I don’t say I was satisfied, but that was all I was able to accomplish.
INTERVIEWER: Obviously the Mediterranean was knocked off fast by your competitors.
SCHNADIG: Yes. It so happened that we patented our design on this. It was copied, but I was able, through lawsuits, to make the patent stand up, and we got an awful lot of money for damages from competitors who had copied it.
INTERVIEWER: You were in litigation a lot.
SCHNADIG: Not a lot, but some. We were able to stop the copies of the best items.
INTERVIEWER: On the basis of changes, now you’re talking about six plants. Is that the total? Two case goods and four upholstery?
SCHNADIG: Yeah. They weren’t case goods, really; they were frames.
During that period, very shortly after we got together with Sears, we added an additional plant on the West Coast in Corona, California. Also during that period, we closed one frame factory in Jacksonville, Texas.
INTERVIEWER: Tell me a bit about Corona. Is that the company you acquired?
SCHNADIG: No, it wasn’t an acquisition. We actually bought the real estate and built the factory.
INTERVIEWER: Under the name of Schnadig Corporation?
SCHNADIG: Under the name of Schnadig Corporation and had Sears backing of course, through this. Very shortly after we opened it, maybe within a year or two, my son went out to head up our West Coast operation, both from the manufacturing, as well as the product development standpoint. He’s been there ever since. It’s a little out of sequence.
INTERVIEWER: OK. I’m just trying to remember which son it was. His name was Lawrence?
SCHNADIG: Yes, my older son, Lawrence.
INTERVIEWER: Then you closed the plant in ...
SCHNADIG: Jacksonville, Texas.
INTERVIEWER: Jacksonville, Texas, which was a woodworking plant.
INTERVIEWER: I was going to ask you if you could give me some idea of the type of growth, perhaps employee growth. Some measure besides the dollar volume of how you were moving forward.
SCHNADIG: In head count?
INTERVIEWER: Approximately. I don’t want each plant, just a figure.
SCHNADIG: I would say, when we first acquired the International-Karpen operation, it probably had about 750 to 900 employees, somewhere in that range. That grew to a peak of about 1800.
INTERVIEWER: What year did that hit? When did you peak?
SCHNADIG: 1985 probably was the highest employment year that we’ve had. It was also probably our largest volume year; we reached about a $90 million operation.
In that interim, we also bought a factory operation in Henderson, Kentucky to make tables.
INTERVIEWER: What year was that? Approximately.
SCHNADIG: About 1980 or ’81. We struggled with that for a couple years to get it off the ground and finally, about in ’84, it began to stand on its own feet and has become a relatively successful division in its own right since.
INTERVIEWER: In terms of the distribution of the product, let’s go back and trace the distribution pattern that you followed with your customers. Who were they? From the time International started, and then Schnadig Corporation started, until 1985.
SCHNADIG: At the initial stage of joining forces with Sears, it was not easy to attract customers independent of product.
INTERVIEWER: Right. They, the customers, knew about the Sears connection?
SCHNADIG: Yes, many of them felt they were buying from a competitor which certainly in part was true. Gradually that prejudice was erased and we were able to largely separate the Sears concept from our company.
INTERVIEWER: In fact, were you producing a different line with the other distribution than you were with Sears? In design?
SCHNADIG: In design, yes.
INTERVIEWER: Tell me what accounted for the change and the growth from the time when first you were identified with Sears.
SCHNADIG: In design it had to be different for two reasons. First of all, the Sears development of their own furniture business would not permit us designs that were too far out.
Therefore, our designing for them, though in my opinion was superior to what they had had previously, still was more in the main line of consumer acceptance.
INTERVIEWER: You’re saying the middle-of-the-road type design? What do you mean by “main line” versus whatever you’re also going to tell me you did?
SCHNADIG: Main line would be styling that was at least familiar to the average consumer, namely not stylish 18th century or stylish contemporary, meaning light-weight, streamlined looks, but more radial design, less venturesome use of wood with the same specifications of quality features that were in our non-Sears line.
INTERVIEWER: You pretty much defined your products as you would market them? It came out the back door of the factory as a Sears-type?
SCHNADIG: The pieces were completely different, although there was some overlap in styling, but not in the execution of that styling.
The Mediterranean came after our Sears relationship.
INTERVIEWER: They wouldn’t go for anything far-out, and you were not far-out with your line, you just had a different modification.
SCHNADIG: Two reasons, one: Sears didn’t want to carry the same thing that everybody else did; and everybody else didn’t want to carry the same thing as Sears. So it was a desirable separation.
INTERVIEWER: I see. Now we did this before with the Depression. We went from there, and then again in the late ’50s, the technology changes, fabric changes, the material changes and so forth. You said that the drop-in, the No-Sag unit, was a major thing. The biggest development was the staple gun. Now what happened from the period from ’67 to now? What other changes took place? Anything significant?
SCHNADIG: Addressing it specifically to materials?
INTERVIEWER: No, technology. Better material? Polyurethane foam replaced the rubber. Cotton was reduced. Many materials were changed. Better machine development. Development of the worktable idea. Development in the quality of the steel. Those were things that you had mentioned.
SCHNADIG: OK. The computer age arrived. I had even started with computers when I was still at Pullman; we were the first furniture company that ever had a computer in its operation – not in its manufacturing operation, purely in paperwork.
INTERVIEWER: That’s interesting. Can you remember the dates of that, approximately?
SCHNADIG: I would say in the late ’40s. Started with an IBM computer.
INTERVIEWER: You were into card-sort and that type of thing?
SCHNADIG: Yes. Punch cards. The whole paperwork operation of our business was just strictly office. Our techniques advanced as the computer field advanced.
INTERVIEWER: From my own observation, I’m aware that you’ve been a leader in setting up specifications and standards for the materials that you used. Will you tell me why you did that, how it happened, and how it progressed?
SCHNADIG: One of the pressures that we were under from our customers was to continually upgrade our product. We met with our head of operations and the head of our engineering department to talk about methods by which we could do that. Their answer was that we had done the best we could in our own manufacturing, but there was much that could be accomplished if we could get a better product from our suppliers. We then set up standards of what we wanted the various materials to do – starting with tensile strength of the springs, the density of polyurethane and various factors on fabric.
We found that as a whole, our suppliers were quite far behind in this and had received very little pressure from their customers to move forward. We therefore had to enlist the support of the upholstered furniture industry toward the objectives that we had as a single company. As a result, we developed standards. We developed our own equipment to test whether the furniture would stand up.
INTERVIEWER: What were you testing?
SCHNADIG: We were testing springs, we were testing polyurethane, and we were testing our fabrics – those being the principal components that go into a piece of upholstered furniture, in addition to our frame spring, which we also tested.
INTERVIEWER: Several other manufacturers were doing this kind of thing also. As a result of your example, they got together and formed some standards. Tell us about the results of that work, as far as you’re concerned, in the industry – the impact on the industry.
SCHNADIG: It helped a great deal. However, just setting it up wouldn’t do the job alone. We had to police it on a constant basis. The fact that we had other major upholstered furniture manufacturers joining with us in working with suppliers made it incumbent upon the suppliers to do the necessary things.
They were not reluctant to do this, but they had never had the realization of what the total significance of upgrading their own quality would be. They were also very cooperative once it was established just what was expected of them.
INTERVIEWER: What is the result today?
SCHNADIG: I would say that, as a result, today all of these things are better. They’re still not by any means perfect, and you have to keep checking everything you get on a sampler basis, but they are far better. The consumer, as a result, is getting a far better product, and the store keeper is getting products that require much less shop cost on their part.
INTERVIEWER: We’ve jumped up to 1985, which is almost today, only a few years difference. Would you project what you think is going to happen in the upholstered furniture industry in the next 10, 15, 20 years, whatever time frame you’d like to put on it? What changes do you see coming that haven’t already taken place? What changes would you like to see coming?
SCHNADIG: Maybe there should be a question before that.
We should talk about what has happened at the retail level. During this period of time that we have talked about, there were many changes in our customers and in the whole pattern of the retail distribution of furniture. By all means one of the greatest changes was the Levitz-type of warehouse-showroom operation, where the units were very large in size, where the customer walked through large warehouses full of furniture to get to the retail showroom. The growth of this on the Levitz’s part was tremendous and many people followed them, some successfully, some unsuccessfully.
INTERVIEWER: Were you following Levitz in the beginning?
SCHNADIG: No. As a matter of fact, we refused to sell Levitz in the beginning of their growth because there was a good deal of antagonism toward them on the part of our dealer list. However, their success was so fast and so great that we recognized we’d made a mistake; we went back and made an effort to develop their business, which we did.
INTERVIEWER: That was the first change.
SCHNADIG: In addition to that, gradually as the ’80s advanced, there became fewer and fewer independent furniture stores – the old line mom-and-pop stores. Not all, but all modest in size. It was caused by two things: many of them were unable to meet the competition and stay in business; and many of them closed, simply because the effort was just too great.
The many big stores were staying open seven days a week, some of them four or five nights, and competing with that, as well as price advantages that some of the larger retailers had, made the independent retailer’s job tougher. This doesn’t mean by any means that the strongest independent dealers didn’t survive; some also grew. But their numbers, their physical numbers, dwindled.
With the growth of the large stores, price pressures on manufacturers increased because the leverage of their buying was so great. The demands on the manufacturer increased in regards to price-value relationships. But there were also pressures on delivery times because retailers did not want to invest the dollars necessary to carry large inventories, and they were pressing manufacturers for faster deliveries in order to improve their own turnover, which they needed. So as the retail business increased in competitiveness, so did the manufacturer’s business increase in competitiveness. Companies that had an advantage of efficiency at the manufacturing level grew at the expense of less efficient manufacturers.
At the same time, many manufacturers that had started as private businesses and grew to considerable size underwent two changes: some grew large enough to go public; others were bought up into larger groups. And today in the industry, at both the manufacturing and the retail levels, a higher and higher percentage is going to the largest retailers and largest producers.
I see no change of this trend in the future, except there will be a growth at both the manufacturing and retail level of specialists. For example, already there are many retail stores that specialize only in upholstered furniture. There are also many retailers that specialize in dual-purpose furniture; dual-purpose and recliners combined. We’ve also seen the growth of the gallery technique, which was in the last three to four years. It has become an established method of distribution for the manufacturer, and an established method of presentation for the retailer. I see both of these trends continuing.
A big challenge to the furniture industry will be to increase the industry’s share of the consumer’s spendable income, which has been going down for a long time. I see more effort in the industry at both the manufacturing and retail levels to pursue national programs that will give the furniture industry either a larger share of the consumer’s spendable income or at least stop the downward percentage that the industry’s getting.
INTERVIEWER: You mentioned the gallery concept. You said you see it increasing. Do you think that the gallery concept is going to be dominant? What about people who have chosen not to take that approach?
SCHNADIG: I won’t say that the gallery concept will be dominant, but I will say that its growth to date has been successful and it seems as though it will continue. I think there are two kinds of retailers: those who can benefit from it due to the limitations of what they may be able to do themselves; and those who are big enough and strong enough to make their own selections from the marketplace and do their own gallerization. But I think that method of presentation will continue to be more important.
INTERVIEWER: What about Schnadig’s gallery concept?
SCHNADIG: We were late in the introduction of the gallery presentation. We don’t call it a gallery; we call it a Parade of Rooms. Our strength was that we could put our table developments in with our living room, have them style-coordinated, and sell them as a package. The big thing that we offered was fast delivery. It’s only a year old now, and we’ve been very successful to date. We see its growth continuing.
INTERVIEWER: What is fast delivery? How fast?
SCHNADIG: Fast delivery to us and to the dealers is 30 days. We are now operating at about a 90-percent performance on that commitment.
INTERVIEWER: Limited frames?
SCHNADIG: There are from 15 to 18 frames in varied covers, but the covers can be “special ordered” for longer delivery.
INTERVIEWER: For the benefit of someone who doesn’t know what a married frame is, will you tell us?
SCHNADIG: It means a pre-determined cover and color to a given frame. A married frame is a specific cover on a specific frame. It’s available for fast delivery that way because we stock covers that are on fast delivery basis, and we can cut in-depth those items that are married. That’s why the fast delivery and the married cover technique join forces.
INTERVIEWER: Of course, then it’s in opposition to the C.O.M., the customer’s own material order, which is a special order? Would you explain that very quickly?
SCHNADIG: The customer’s “special order” – we use that term when we don’t receive an order until a consumer has actually made a selection at a dealer’s floor.
There are two kinds of those. One, by far the largest with us at least, is where they select another cover on our frame other than the one shown on the floor. It could be a different color of the same fabric or it could be a different fabric altogether. That’s one category.
The other category is when the consumer shops around for a cover themselves, usually with a decorator, and then decides what cover she wants on some manufacturer’s frame. That they call a Customer’s Own Material or C.O.M. abbreviated. That is much more difficult because frequently there are matched or set patterns involved in the cover, and most manufacturers don’t have patterns in advance for that kind.
INTERVIEWER: Fan order?
SCHNADIG: Yes, product order.
INTERVIEWER: For the record, would you please go back to the day when there were only married frames and very little C.O.M.? When did that start to change as far as the industry’s concerned? I know there have always been special orders. What I mean is that it became a method of distributing upholstery, selling upholstery.
SCHNADIG: It really came when the upholstery fabric industry broadened into a tremendously wide selection of fabric. From a date standpoint, I would judge that it started after World War II, so from the middle ’40s on. It was accompanied at the same time by many manufacturers who were trying to give ordinary retailers the kind of service that the consumer historically only would get from a private decorator.
INTERVIEWER: Now as far as the trend today is concerned, the C.O.M. is very much a part. What percentage is C.O.M. versus a stock order?
SCHNADIG: In our case, it’s probably less than 1 percent of our business, whereas the so-called “special order” business (in which a consumer selects a fabric from our assortment) runs with us at about 37 percent. Now, the higher you go up the style and price category, the more usual is the C.O.M. cover technique.
INTERVIEWER: Let’s give way now to distribution. We were talking about the changes in both the Levitz-type warehouse program and also gallerization. Is gallerization permanent now as a part of distribution?
SCHNADIG: It seems as though gallerization is permanent. However, like in all new ventures, there are disillusionments that creep in on the part of the people who have the gallery franchise from a given manufacturer. It freezes the amount of space that the manufacturer has in a given store. By doing that, it is great for the manufacturer because they own the real estate. On the other hand, the retailer, by his agreement with the manufacturer, has committed substantial floor space to that one resource.
In any manufacturer’s mix, there are good sellers, weak sellers and no sellers. The retailer is tied into a program that has these various categories on his floor: good sellers, weak sellers and no sellers. This works a hardship on him because he has floor space that’s not productive, and some of the desirability of the gallery technique is beginning to be re-evaluated by storekeepers.
INTERVIEWER: For the benefit of someone who doesn’t know what you’re talking about when you say “real estate” in the retail store, please explain that.
SCHNADIG: Real estate in the retail store is the square footage that’s allocated to display. That’s very valuable to every retailer. From a manufacturing standpoint, the more of that retailer’s space that he has, the higher percentage of the retailer’s business will go to that manufacturer.
INTERVIEWER: In this regard, some of the larger retailers have chosen to set up their own gallery programs rather than be tied into or be captive to the factory’s program. Is this a trend that you see continuing?
SCHNADIG: Absolutely. The really large retailer has no need to gallerize from a given manufacturer. He has the sufficient talent in-house to develop all of the display necessary to be attractive to the consumer. In fact, I know of practically no major retailer who has gone to gallerizing his store to any extent.
INTERVIEWER: Are you saying that the medium-size retailer is the least likely gallerization prospect for manufacturers’ gallery programs?
SCHNADIG: I would say from small- to medium-size because the manufacturer is providing him with things that he can’t do for himself.
INTERVIEWER: Mr. Schnadig, this has been very interesting and I know we’ve covered a long period of time. I think it would be helpful to readers interested in the history if you could tell me, in summary form, what you feel have been the major changes that have affected distribution that have also influenced manufacturing, or vice-versa, from the 1930s until almost the 1990s.
SCHNADIG: It’s a long time span. Its furniture distribution from the time I entered the industry, namely in 1930, when the major outlets for furniture were large installment-type stores, where the advertising was high pressure, the selling was high pressure and the big advantage they had was that you cold-buy your furniture from them on the time-payment basis.
Many of these retailers made their money not on the mark-up of the furniture, but on the finance charges. This could be done because the largest segment of furniture buyers were foreign-born people who really didn’t understand the American distribution system, and the fact that they could get their needs met and pay for it over a long period of time was more important than the exact price that was paid.
As the education level of the consumer gradually improved and they became more and more literate, the high pressure methods that were used to sell furniture in those days became less and less effective. You saw the growth of department stores as a channel of distribution for furniture getting stronger as there was an aura of legitimacy in both their advertising methods and in their selling technique on the retail floor.
INTERVIEWER: They offered credit, didn’t they?
SCHNADIG: They offered credit but not as a matter of years and years of credit. The credit that they offered was frequently a charge account technique, and they really weren’t geared toward extremely long payout periods. At the same time that this was happening, individual retail stores were also abandoning the installment store techniques for the same reasons that the department stores were coming into their own as furniture distributors. As the country had become more prosperous, individual successful stores were opening up branches one at a time, usually in the same geographical area. As time went on they also spread out their geographical areas. So you had the growth of small, geographical chains gradually increasing to chains that numbered from 50 to 100 stores.
INTERVIEWER: During that period of time, there was a Sears Roebuck and there was a Montgomery Ward. Where do they fit into this picture?
SCHNADIG: Sears Roebuck and Montgomery Ward were large distributors of furniture. They both were specialists in big ticket items and furniture was a big ticket item.
However, neither one of them were ever able to gain the share of the market in furniture that they had in other hard lines, such as appliances, electronics and so forth.
The chief reason was that the element of style was major in furniture, as compared to pure utility, and neither of them was able to capture the American woman’s endorsement for their style in furniture anymore than they were in clothing.
They could do very well in relatively popular-priced, basic-looks furniture. But as soon as they left that category, they were not fashion-wise competitive. As a result, we became somewhat of a hybrid. We did accomplish a fashion look, but we could not accomplish competitive price points where upwards of 50 percent of the volume was done. Therefore, our growth was limited as compared to pure price manufacturers.
INTERVIEWER: As of today, do you see this same philosophy? Are you satisfied with what you’re doing, or are you making changes in anticipation of the future?
SCHNADIG: I would say that as of today, mainly just entering the ’90s, that our philosophy is sounder today than at any time prior that we have embraced it.
The big furniture market today, just as in other products, is a quality product, a fashionable product that can be delivered at a reasonable, but by no means, cheap price.
INTERVIEWER: We’ve had one phenomenon in our industry, and that is conglomerates coming into what had been essentially a family-owned industry up until about the 1960s. How do you analyze the role that conglomerates have played in the industry in the last 40 years?
SCHNADIG: In my opinion, there have been two distinct stages. You hit upon one, mainly about the middle ’60s right when the furniture industry was enjoying unusual prosperity. The several large corporations in the country viewed the furniture industry as very backward – large in its tone, but made up of relatively small family-owned enterprises, family-owned and family-operated enterprises.
Some of the large corporations bought out some of the family-owned businesses at both the retail and manufacturing levels. The results, while not 100 percent disastrous, were very close to that. The reasons were very simple. A family-owned business was no longer either a family-owned or family-operated business. Somehow or other, when the ownership changed, the dedication of the people who had made the business in the first place changed. The conglomerate ownership did not have in their management ranks personnel that could cope with the highly individualistic business that furniture was. In many cases, these businesses were sold back to the original owners. In other cases, businesses just disappeared, and in some isolated cases, they nearly brought down the parent conglomerate with them. So as a whole, the first wave of conglomerate buyouts was a fiasco.
INTERVIEWER: What period was that? Did it take five, 10 years? Do you recall?
SCHNADIG: I would say it was probably from the middle ’60s to the early ’70s before it ran its course. The ownership picture stayed quiescent for a relatively long period of time. Then a new technique in buying businesses swept the country, swept the financial world. It’s come to be known as the leveraged buyout method, in which either the new ownership or frequently, the management of a company, were able to borrow sufficient sums of money to gain control of individual furniture enterprises.
We are right in the midst of that cycle now. There are many retailers in the country today who are so highly leveraged in a debt-to-equity ratio that many manufacturers have to be very cautious with credit extensions to them.
At the same time that this has happened in retail, it’s also happened at manufacturing levels; many factories have been either bought out by outside money, or paralleling the retail scene, their management also remains in a highly leveraged position.
These techniques have a very risky financial gain. As long as there is a tail wind to the economy, many of them will be able to survive. However, given two straight years of an economic recession, there will be many big names in both the retail and the manufacturing levels that will not be able to withstand any interruption of a profitable operation and its intended cash flow. I think that gives you the post-method kind of thing that we talked about at the last Market and all that. This just brings it up-to-date.
INTERVIEWER: Imports have become a factor in the last 15 to 20 years, though for many years before that, there have been some isolated cases like Danish furniture or Scandinavian furniture. There has not been a great volume of furniture, both case goods and upholstery, imported into the United States. Approximately 15 to 20 years ago that became a factor, particularly with the Far East and Taiwan and so on. Would you like to comment on that, Mr. Schnadig?
SCHNADIG: The importation of furniture into our country today is not an incidental business. There are two general areas of major importation. One is the woodworking itself, which may consist of an entire product, for example: a dining room group, in which both the wood is machined, finished and imported. There are other wood products, such as occasional tables, in which the same technique would be involved. But there are also other techniques, namely the woodworking done in Taiwan for example, or the finishing done in the States, or even parts of furniture, of a table, being machined and finished in Taiwan, and assembled in the States for redistribution.
In many cases, large retailers are doing their own importations.
There is one other large segment of imports. The leather upholstered furniture, which has been major in Europe for the last 30 years, is now being successfully marketed in the States. Much of the leather upholstered furniture that is sold in the States is manufactured and imported from Italy. Two segments of importation plus other minor ones account for at least $2 billion worth of imports annually – in most cases due to lower cost production and in some respects due to specialized capabilities. This is exactly what’s happening.
INTERVIEWER: Mr. Schnadig, you’ve had a long and successful career in the furniture industry and there are certain individuals I know you’ve met along the way who have impressed you more than others. There must be some who are outstanding. Can you tell me about one or two of them?
SCHNADIG: The most outstanding man that I’ve met in the furniture industry is Nat Ancell. He took an idea, namely the glamorization of the American home, and built the Ethan Allen Corporation from a small business to a dominant manufacturing retailer of quality product. He recognized that selling furniture to the housewife is not selling isolated pieces of furniture, but selling groups that could live together from the design and color standpoint. In order to achieve his objectives, he decided to make his own product line and have it sold to a few of the company-owned stores in the chain and to a great number of franchise stores. By integrating the manufacturing and retailing of furniture, he was able to achieve just the product look that not only he, but the consumers wanted. He continued to expand on this concept to the point where accessorizing became a major part of his business, as did draperies, floor coverings and so forth.
He was the one man in the industry that had the foresight to know what to do and how to do it to capture the American woman’s imagination and her spendable dollar.
Another man that impressed me was Ed Lane of Lane Furniture. He made the Lane cedar chest a household word in nearly every home in America. It was not unusual to have a Lane cedar chest available to every young married couple, either as a trousseau given to them by her family or as a present by some relative or friend. From this well-known product, Ed Lane built the Lane Furniture Company, which today embraces nearly every segment of the furniture industry with name-brand recognition and acceptance as a quality product.
Probably the one man whom I knew the most about was Pete Kroehler, because he was a direct competitor of mine in the upholstered furniture business. He built his business on a relationship with Sears and pioneered many manufacturing improvements in the upholstered furniture industry. I believe he was the first manufacturer of upholstered furniture on the assembly line principle. Also, he introduced a high level of standardization – interchangeable parts and so forth. He not only was an efficient manufacturer, but through long and persistent national advertising, developed one of the few brand names of consumer recognition in the industry. He combined abilities of both manufacturing and marketing. I think I’ll stop there. I could add a lot.
INTERVIEWER: In New Orleans last week, the American Furniture Manufacturers Association bestowed on you their highest honor, which is the Distinguished Service Award, for years of service.
You served the industry in many capacities. One of the items in the citation that I think would be interesting is your interest in child care and your leadership role in it. Can you tell me a little bit about that, Mr. Schnadig?
SCHNADIG: It’s an area of deep interest to me. You may be interested in knowing how I happened to get into it. Fortunately, while I was at Wharton, which is a business school, in order to graduate we had to have a certain number of liberal arts courses. We took them as electives, but in order to get your degree, they were required. I took one – a sociology – because I had a latent interest in it. On one of the field trips that we took in that course, we visited a federal prison not far from Philadelphia. I became interested in the rehabilitation of people – men with prison records – and shortly after I started to work at Pullman, I was approached to give employment to a prisoner who was up for parole if he could be assured of a job. I visited the Joliet Prison, met the individual and agreed to give him a job when he was released. He was subsequently released and I employed him and prepared his fellow workers for his acceptance and encouragement.
INTERVIEWER: What was his offense? What was he serving time for?
SCHNADIG: His offense was a minor pilferage from an employer, but he was guilty. He had been found guilty and had been in prison for this minor offense for between five and six years when he was eligible for parole. He made a very good adjustment. Strangely enough, he married a policeman’s daughter, and in time went on to be a very successful salesman at Pullman. He was the first man that was an ex-convict whom I knowingly hired.
I hired two more subsequent to this, one of whom turned out to be a forger and went back to prison. The other made a successful adjustment and went on to manage a supermarket. This record is about twice as good as generally happens with people once they have a prison term. I learned from this that my interest was starting too late and that the real place to be sociologically helpful was in child care.
I became a member of the board of the Jewish Children’s Bureau, president now, and learned a great deal about children’s needs and what the failure to meet those meant, not only to the individuals, but to their families, their communities and their country as a whole. Having served my term as president of Jewish Children’s Bureau, I became involved in other private care agencies as a trustee, particularly the Illinois Children’s Home.
INTERVIEWER: Is that in Chicago?
SCHNADIG: In Chicago. The Illinois Children’s Home. It actually is statewide. I went on from this to participate in several public agencies. And probably as a non-professional, I know as much about child care as any layman in the field. I believe in it deeply. While the size of the problem is gigantic, none of us can afford to turn his back.
INTERVIEWER: What about child care problems? You’ve been in it a long time. Are they being solved?
SCHNADIG: I would say some problems are being solved. Actually, they are being created faster both numerically and in depth of disturbance than they are being solved. For example, the working mother cannot possibly, in the child’s early years, give them the love and attention that is necessary for their healthy development.
In addition to that, the number of illegitimate births is climbing. What you have is children giving birth to more children without the faintest idea of what good parenting requires. The increasing significance of the drug scene, with all the attendant violence and disruption, has an immense impact on a child’s health and security. So if anything, my belief is that there are more problems, and of a more serious nature, in child care today than at any time in our history.
INTERVIEWER: Are there any solutions?
SCHNADIG: The solution can come only through education in parenting, better housing, better economic conditions, and the dedication of high-level professional people to take the tremendous funding of government-sponsored programs and translate it into the good therapeutic treatment which that implies.
INTERVIEWER: This has been a good interview, and I’d like to ask you, if you would please, to summarize for me in a few simple sentences what the furniture industry has meant to you over all these years.
SCHNADIG: I can summarize it in one word: everything. I started in the Depression years and the survival techniques required total dedication, total industriousness, and it taught me self-discipline. It forced me to get into every division of the business – from the purchasing of materials and equipment, to the manufacturing processes in both the woodworking division and the upholstering division. Ultimately, it led into design contribution, sales and marketing, overseeing the whole area, and finance in order to keep the business solvent and growing.
It has been very meaningful because it provided the accumulation of moderate wealth, which meant security for my wife and children. It gave me the opportunity to earn respect, both within my company and within the industry. I am fortunate that I chose furniture. If I had to do it over again, I would choose the furniture industry again.