DUSSELDORF, GERMANY - Imagine, if you can, two companies - both German, both named Herbold, both selling plastics granulating and size-reduction equipment, operating in many of the same markets at the same time. But they are not sister companies, they are rivals. Impossible? No, stranger-than-fiction reality.
Theirs is a troubled, twisted tale, punctuated by bitterness, bankruptcy, and a pending management buyout.
In a nutshell, 12 former employees of the soon-to-be-defunct Herbold GmbH in Mecke-sheim, Germany, are in the process of buying out most of the assets of that long-established company, which went bankrupt in April and which will operate under receivership until the end of the year, at the latest. This buyout team intends to create a new parent firm, also in Meckesheim, that it hopes soon will gain official government permission to be called Neue Herbold GmbH, or ``New Herbold.''
The U.S. subsidiary of Herbold GmbH, called Herbold Granulators U.S.A. Inc. in Sutton, Mass., is being liquidated, and the buyout team plans to re-establish it by January in North Providence, R.I., as Herbold Granulators Inc. Domenic Antico, who was installed as its managing director less than three years ago, says he will be president of the reborn U.S. subsidiary.
There is much more to it than that.
Karlheinz and Werner Herbold, who took over and righted a financially troubled Herbold GmbH Maschinenfabrik from their father, Oskar, in the mid-1970s, have seen much of their six-company, 350-employee machinery empire crumble around them. They saw it go too deeplyin debt to buy German competitor Condux GmbH in fall 1991, and then have that liquidity problem exacerbated by the German recession of 1993-94, ac-cording to Karlheinz Herbold.
He said it did not help that another one of Herbold's subsidiaries, Refakt GmbH, spun off in 1990 to make and market washing systems for recycled plastics, had its own problems. From sales in 1991 of 15 million deutsche marks (about $10.5 million), the unit's sales dropped to zero in 1992, largely because the price of virgin polyethylene plummeted to below that of recycled PE, Herbold said.
More recently, Refakt lost roughly DM5 million (US$3.5 million) from the sale of a turnkey recycling plant to Southeastern Recycling Industries Inc. of Tuscaloosa, Ala. Seri filed for reorganization and the bankruptcy court ruled that because the Refakt equipment did not operate as advertised, Seri did not have to pay full price for it.
Six months ago, Herbold said, the parent firm, Herbold GmbH, declared bankruptcy with liabilities totaling DM40 million (about $28 million), though net debt, after taking into account the value of all assets, was closer to DM 12 million ($8.4 million). Many employees went almost three months without being paid-but Karlheinz Herbold claims they were not the only ones to suffer.
``My brother and I lost personally all our money and houses. We personally owe the banks DM5 million ($3.5 million) each,'' he said in an Oct. 11 interview at his new firm's modest K'95 booth. ``But,'' he added, ``we believe we can find some sort of arrangement with the banks. The banks still believe in us.''
The brothers now have sold to the management buyout team the rights to their well-known logo, and re-established themselves in July under the name Herbold Zerkleinerungstechnik GmbH. Zerkleinerungstechnik means ``size-reduction technology'' in German.
Their new firm - which, like their old firm, also sells used size-reduction equipment - now employs just 25, and will go to unnamed outside manufacturers in Germany and the former Eastern Bloc to have private-label equipment made for them.
``With the secondhand business we have, we could survive even without new machine sales,'' claims Karlheinz Herbold. ``Our new plan is not to be the biggest, but to be a company that makes money.''
He and his brother have their work cut out for them. They already may have lost much of the former Herbold GmbH's worldwide network of 30-some sales representatives. Many of those reps still were owed their sales commissions when Herbold declared bankruptcy earlier this year - and some may never see most of that money they earned.
Neue Herbold officials are talking now with many of Herbold GmbH's former reps, but cannot sign any of them to contracts until the new firm officially gains its financing and is registered as a German company, Antico said in an interview at Neue Herbold's K show booth.
Neue Herbold officials say they also fully expect to end up securing the rights to Herbold GmbH's existing technology and technical drawings - a point Karlheinz Herbold says is moot until the new firm proves it has adequate financing. For now, the brothers' mother, Irmgard Herbold, owns not only the former company's buildings but also the rights to the technical drawings, which were assigned to her two months before the bankruptcy as collateral for a DM2 million ($1.4 million) loan she made to Herbold GmbH, according to Karlheinz Herbold.
For now, Herbold GmbH continues to operate in its 100,000-square-foot headquarters facility in Meckesheim under the guidance of a court-appointed receiver. It is being run by about 50 employees, including those involved in the pending management buyout, and attempting to generate revenue that can go toward paying back some of the debt owed to the banks.
Typical of the bizarre twists involved in this complicated scenario, the buyout team - headed by Peter Abraham, Josef Remiger and Klaus Griner - plans to move Neue Herbold next January from the former Herbold GmbH headquarters down the street into the modern, 70,000-square-foot building that had been home to Sima GmbH, the old firm's used-equipment unit.
In turn, the Herbold brothers intend to reoccupy with Herbold Zerkleinerungstechnik the huge, former Herbold headquarters building, and sublet much of the space to outside tenants. But they have plans to grow, too.
``We expect to have sales of DM5 million ($3.5 million) this year, with 25 people, and sales of DM15 million next year, with 50 staff,'' said Karlheinz Herbold.
Meanwhile, Antico said the U.S. arm - which generated sales of about $6.5 million in each of the past two full business years - plans to take up residence early next year in a 5,000-square-foot facility in North Providence, R.I. The firm has three employees now, and will double that by adding salespeople by the end of 1996, he said. That facility will provide office space, stock machinery and serve as a test center.
Herbold Granulators Inc. already is making plans to exhibit at Plastics Fair Dallas in February and at NPE in 1997. Antico expects Neue Herbold will quickly become a major force in the plastics size-reduction business.
However, bankruptcy, debts and all, the Herbold brothers and their allies remain unbowed.
Karlheinz Herbold says: ``We need to explain the situation to the people. People don't buy because of the name, they buy because of the technology.''
Neue Herbold and Herbold Zerkleinersrungstechnik offer granulators, shredders, pulverizers and hammer mills -some of which bear almost identical tradenames. However, Siegfried Engel, Herbold GmbH's former sales director, and now a senior official with Herbold Zerkleinersrungstechnik, says he is not concerned.
``Most customers internationally identify the reputation and quality with the family,'' according to Engel. ``I don't expect any confusion in the market.''