Norwalk Furniture: The Factory That Refused to Die

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Zippo thought of shutting the store but was distraught at the idea of running into people who'd given her money for furniture and then gotten stiffed. Her husband told her it was O.K. to fail, but that only panicked her more. "I said back to him, 'Don't talk to me that way. It's not going to fail. I don't fail,' " Zippo recalls. "Deep down I thought, 'Oh my god. We're going to fail.' "

The agitating in Ohio was paying off, though. On July 28, Comerica agreed to meet with potential buyers. Over the course of a day, in a conference room at Cleveland's airport, the bankers talked with a series of private equity firms and individual investors. Comerica was there at the request of Ohio Lieutenant Governor Lee Fisher, who on Lesch's urging had put a $1.8 million loan offer on the table. Eventually one group of private equity investors made an acceptable bid, and while they did due diligence through the month of August, Norwalk reopened its doors and resumed operations.

But by Labor Day the deal was in trouble. The investors have since filed suit in Huron County Common Pleas Court accusing Comerica of demanding they complete their due diligence faster than was possible, among other things. On Sept. 16, after the two sides couldn't come to terms, Norwalk closed its doors for the second time, almost certainly for good.

Then something extraordinary happened. A group of 12 local families called the company and said they were interested in making a bid for just the Ohio factory. Both Comerica and the Gerkens liked the idea. After just a few days of due diligence, the investors bought the plant for $4 million. The next week the investors started taking applications to rehire workers.

The new company is called Norwalk Custom Order Furniture and is run by Daniel J. White, one of the 12 investors. White has long ties to the town of Norwalk—his family has lived there for more than 100 years—and he says concern for the community is what drove him to step in. Before taking the reins at Norwalk, White, a retiree, had founded Geotrac of America, a company specializing in the flood zone research required by mortgage lenders, which he sold in 2004.

For most of the other 11 Norwalk investors, the desire to save well-paying jobs wasn't purely humanitarian. Doing so would mean a stronger local economy, higher property values, and better business in general, says Tom Bleile, one of the investors and co-owner of the Saw Mill Creek Resort on the shore of Lake Erie, a half hour to the north. "If our community benefits, then we benefit," says Bleile.

In his first two weeks as CEO, White visited 28 of Norwalk's retailers. They had been without product for 30 to 60 days, and many were on the verge of bankruptcy. They'd been caught off guard by Norwalk's problems and "felt betrayed," White says. He quickly took steps to win them back. First he started work on the $4.5 million in orders that had gone unfulfilled. Next he changed the company's production cycle to make sure retailers wouldn't have to wait months before they could start selling Norwalk's newest line.

White insists the new Norwalk is built to last. The company has no significant debt aside from the $1.8 million loan from the state of Ohio and a $225,000 equipment loan from the town of Norwalk. White expects the Norwalk plant to generate more than $25 million in sales by 2011, less than half the level it once enjoyed but far more sustainable.

Jodi Zippo's outlook is brighter these days, too. When Norwalk closed last year, she was on the hook for $280,000 worth of orders. Sitting at her husband's desk in their Littleton (Colo.) home one night, she called one customer after another to beg them for a chance to find another vendor. By the end of the night all but four agreed, and she had to refund only $25,000. Still, she's out some $150,000 worth of floor models and samples she sold for a fraction of their value last fall because she thought Norwalk would no longer be making them. All 31 lenders she has approached to refinance her Comerica loan have declined.

But now that Norwalk is back producing furniture, Zippo is selling it again, along with several other lines. Sales are improving, and she's current on her loan payments. The panic attacks she suffered last summer have eased. "We're past the scary part," she says.

For Kim Gross, survivor guilt may be creeping in. She and her husband, Jeff, were among the 94 workers who successfully reapplied for their jobs at the factory. Most of the 800 who applied were turned away, including many with decades' worth of experience. Gross has run into some of them at the grocery store, and the encounters have been awkward. Now Gross shops at odd hours to avoid her former factory mates.

Rightly or wrongly, much of the anger around town is directed toward the former owners. Bill and Jim Gerken may have mismanaged Norwalk, but they also fought desperately to save it. Now they're financially devastated. Bill says 90% of his net worth was tied up in the company, and all of it is gone. "No one lost more than I did," he says. Mayor Lesch says the Gerkens "were wonderful" through the process, talking to her every day. "It's so easy to point fingers from the outside," she says. "It's always more complicated than that."

While the Norwalk saga created rifts in this small Ohio town, it will be remembered more for bringing people together. Whenever a prominent company is about to close, "the temptation for too many people is to throw up their hands and say it's inevitable," says Lesch. "We said, 'Wait a minute, this is really, really important. We're going to stand up and fight.' "

Byrnes is a senior writer for BusinessWeek in New York.

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