Friday, May 21, 1999

Baldwin's suspicions confirmed


Imports siphoning business

BY MIKE BOYER
The Cincinnati Enquirer

        More and more pianos sold in the United States are imports, the federal government says in a report prompted by complaints from Baldwin Piano & Organ Co.

        Imports accounted for 46 percent of the U.S. market for vertical pianos in the first nine months of last year, up from 35 percent in the same period a year earlier, according to an International Trade Commission (ITC) fact-finding report.

PIANO FINDINGS
  The International Trade Commission's (ITC) fact-finding report on economic and competitive conditions affecting the U.S. piano industry said:
  • About 400,000 vertical pianos and 60,000 grand pianos were sold worldwide in 1997.
  • The Asian financial crisis significantly affected piano markets in that region. As those markets contracted, pianos intended for sale there were redirected to the U.S. market.
  • Sales of vertical pianos in the United States increased in 1997 and the first nine months of 1998, reversing a 20-year decline. Sales of vertical pianos rose 8 percent to 59,748 in 1997. Grand piano sales increased 27 percent to 33,600 units in 1996-98.
        The report, released Thursday, also found China's share of the vertical piano market in the United States nearly tripled in the January-September period last year from the same period a year earlier, increasing China's share of the U.S. market from 6 percent to 16 percent.

        Baldwin, based in Mason, complained that rising Asian imports have squeezed its sales and profits over the last year. Baldwin said it wasn't surprised by the report sent to a congressional committee.

        “Based on our initial look, I think it reflects the situation throughout the industry,” said Karen Hendricks, Baldwin's chief executive.

        Baldwin's complaints prompted U.S. Rep. Rob Portman, R-Terrace Park, and a Ways and Means Committee member, to request the ITC study late last year.

        The ITC report, based on questions to U.S. producers and importers, interviews and a Feb. 17 hearing in Washington, collected data on the U.S. and global piano markets and didn't recommend any specific actions.

        Brian Besanceny, Mr. Portman's spokesman, said it will now be up to Baldwin and other U.S. domestic piano producers to determine what action is appropriate.

        Those actions could range from doing nothing to seeking sanctions available under U.S. trade law, such as initiating an anti-dumping proceeding to demonstrate foreign producers were selling their pianos in the United States at a loss.

        Ms. Hendricks said Baldwin and its trade lawyers were still digesting the ITC report Thursday and weren't ready to comment on steps it might pursue.

        The ITC said inventories of imported pianos in the United States grew significantly last year, rising by 67 percent to almost 12,000 units by the end of last September.

        The ITC also found that U.S. producers are major im porters, buying foreign-produced pianos to complement their product lines.

        But Baldwin's complaints aren't limited to rising imports. It also has complained that trade restrictions and other barriers to entry have limited its access to Asian piano markets.

        But Asian piano producers told the ITC that American furniture-style vertical pianos aren't popular in Asia, and to be competitive, Baldwin would have to produce pianos in low-labor Asian countries.

        Assessing the competitive disadvantages of U.S. piano producers compared with the main Asian competitors, the ITC report concluded:

        • Large local markets in Japan and Korea with limited foreign competi tion have allowed producers in those countries to achieve greater economies of scale than U.S. producers.

        • Japanese and Korean piano operations in Asia are more automated than operations in the United States.

        • Asian producers, with the exception of Japan, have considerably lower labor costs than U.S. producers.

        • Currencies in Japan, Korea and Indonesia have depreciated in real terms against the dollar.

        On the other hand, the ITC said, U.S. producers have:

        • Closer proximity to high-quality wood for piano-making.

        • Lower transportation costs for selling in the United States.

        • A more experienced labor force for making piano cabinets.



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