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Mr Sandra Musk

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Ohio Mattress Co.'s takeover of Sealy Inc. last year capped a Decades-long battle between Ohio Mattress and Sealy and ended one of the most interesting chapters in the bedding business's history.

But for Ohio Mattress, headed by chairman Ernest Wuliger, a dramatically Different era is just beginning. It'll test Ohio Mattress's capacity to manage and motivate the recently acquired Sealy organization, which had mostly been a licensed team.

And, based on Wuliger, it will indicate the end of intrabrand Contest--a strategy that shaped the bedding industry for decades as well as some say, helped propel Sealy to the top in earnings--among the plants which currently constitute Ohio-Sealy.

"First, We Must see where the company is being Done," said Wuliger. "We will be moving the business to the plant closest to this market. We'll be analyzing the capacity of that plant. Sealy plants have spanned into each others' lands to get into a marketplace. This has taken place over many years. We're examining where are the sensible change. Now Boston won't be competing with Oakland."

Last June's decision by a Chicago jury to award Ohio Mattress that a Startling $77 million in compensation from Sealy Inc. for antitrust violations given the impetus for seven crucial Sealy licensees to agree to sell their holdings to Wuliger.

Former Sealy president Howard Haas, backed by Chicago financiers Jay and Robert Pritzker, reportedly made a $250 million proposal for those licensees shortly after the jury conclusion. But, Wuliger's $258 million proposal, coupled with his deal to spare the licensees from paying the compensation, finally swung their decision his manner.

In little more than a flash, Ohio Mattress had doubled its size. With the purchase, it acquired 82% of Sealy's stock and gained control of the licensor, which possessed 16 manufacturing centers and accredited 10 overseas and two staying domestic bedding organizations to generate Sealy-brand solutions.

Fiscal 1986 sales of just under $300 million have been projected to balloon to between $600 million and $650 million in 1987. Wuliger estimates that his Sealy business "has close to a 25 percent market share."

And the company continues to grow In February Ohio-Sealy Announced it would boost its possession of Sealy to 94 percent with its agreement in principle to purchase Sealy Mattress Co. of Michigan Inc., among the two remaining domestic Sealy licensees. Michigan Sealy had Sealy-brand earnings of about $12.5 million in 1986.

"It is a big job integrating Sealy and the licensees into The company," explained Wuliger, record Ohio Mattress's priorities because "gross profits and prices, employees, and shipping--placing the business at which it belongs. We are determining what kind of company we'll have and how to put it all together.

"We need to Check out the acquisitions and get them integrated. We will need to move the company to the plant closest to where it is being done. We will need to look at the Chicago office--see how it fits in, how the people fit in. We will need to look at the people in the licensees, find who is going to be the best fit."

Wuliger said incorporating the plants may involve consolidation.

"We're searching for ways of streamlining," he said. "We may find we have more crops than we need. We don't have that pegged out"

Competitors point out now that the tail possesses the puppy, the Business has a lot to worry about. They note that in decreasing the size of their company Wuliger might have bitten off more than he is going to have the ability to chew for quite some time.

"They have a tremendous amount to do," said one executive. "There's certain to be some slippage. We're doing just as far as we can to make the most of that."

The problem for Ohio Mattress is aggravated, they say, because Wuliger is basically a one-man show. "He's light on direction," said one department store buyer.

According to Wuliger, however, this perception is completely inaccurate. "I did pursue the litigation for 15-1/2 years," he explained. "However, the transaction has tended to think that I conduct this business with a iron hand.

"It is time to tell the narrative of the business," he said.

That story basically includes six branches, All which Report on Ron Trzcinski, 42-year-old president and chief operating officer of Ohio Mattress, who joined the firm as assistant to the president at the age of 26. Both of the other attorneys from the current Sealy surgery are Steve Kneeland, president of Ohio-Sealy as 1986, who joined the business as a sales rep in 1968, and Richard Roe, former group vice president beneath the old Sealy, Inc. regime and currently vice president and general manager of licensed holdings with Ohio Mattress.

Kneeland heads up operations and marketing for all of the Sealy plants owned by Ohio Mattress. Roe directs a number of corporate places such as national reports, contract sales, the Sealy spring operation--which was owned by the former Sealy Inc. company--and present national and foreign licensing operations.

"We are putting together the Sealy company," stated Trzcinski. "We're working out how to run it. People need to know what their fundamental responsibilities will be. If you do not know, you stagnate."

The other divisions under Trzcinski's umbrella are Stearns & Foster Bedding, innerspring manufacturer; Advanced Sleep Products, producer promoted under the brand names Monterey and Wavecrest; Woodstuff, waterbed furniture manufacturer, and Stearns & Foster Upholstery.

In this structure, Wuliger's function is to remain near the marketplace. "My function will continue to be largely advertising," he said.

Competitors notice that perhaps one of the most Troublesome challenges Ohio Mattress faces is maintaining the plants as sharp and competitive since they were as independent, entrepreneurial businesses. "People work differently if they work for someone else," said one executive.

Wuliger had little to say on this, noting that "Ohio Mattress has a benefits program which will be provided to new workers."

Said Trzcinski: "We try to give plants autonomy--a great deal of The autonomy they'd as independents. There's a risk in running them from Cleveland. We have a bonus plan. We have had it all along with Ohio-Sealy and Stearns & Foster.

"The power of a big company is programs and plans," he said. "A big business may be the best of both worlds."

Rumors abound that a Significant shake-up from the Chicago office is Underway, and Wuliger would just say no decision has been made about going Sealy headquarters to Cleveland.

In the plant level, Trzcinski said very little will change as a Result of this Ohio Mattress takeover.

"With the exception of the owners walking apart, the businesses have been intact," he explained. "There will not be much of a shakeup. The plants that ran quite well will go along as they've been. There'll be a lot of changing in the way they run their business concerning different reports, things like this. Some people could leave, they will not enjoy how we do things. But that always happens."

"Most of the owners are gone," said Kneeland. "The people who reported to them report to us"

Competitors and merchants are waiting to see how Ohio Mattress Will manage pricing for Sealy merchandise. The company started directly competing with other Sealy licensees within their markets for Sealy-brand sales around 1970, when Sealy Inc. began working out its right of first refusal and purchasing several Sealy licensees, preventing Ohio Mattress from growing by obtaining those plants.

To contend, other Sealy licensees started using the exact same strategy. Sealy licensees were known to undercut each other regularly in a variety of markets on price. Some retailers were reported to have no fewer than four different Sealy cost lists from four distinct Sealy plants.

This intrabrand competition among Sealy licensees was credited With pushing down costs throughout the business. Many also think, nevertheless, it helped Sealy grow into the most popular spot in bedding sales by spurring fresh, aggressive marketing campaigns.

"Sealy climbed through the span of intrabrand Contest," said Wuliger. "Was it because of it or in spite of it? We are not prepared to answer this."

Competitors and merchants were pleased, then, when the Ohio Mattress Acquisition was announced--mostly, they said, because it would stabilize industry pricing. "We expect him raising Posturepedic cost points into a higher degree," stated one big retailer. "Everyone's waiting for him to do that. They will go in any direction he belongs."

"It isn't that promoted retail price factors are shifting, But different merchandise has been offered for all those price points," said one competitor. "It's healthy not to have ridiculously low rates for premium."

One manufacturer asserted the ending of intrabrand competition will Give different manufacturers the chance to undercut Sealy pricing, something they couldn't do efficiently when Sealy plants were undercutting one another so harshly. "In the past, other manufacturers have appeared less than competitive," he said. "Now we'll look more competitive"

However, other manufacturers surfaced. "Our emphasis Isn't to Compete in the promotional end of the premium company," one stated.

Ohio Mattress should now decide the level at which Sealy pricing Decisions should be made and the cost changes that will occur with present Sealy products. Wuliger said that no decisions are made on pricing. "We have to figure that out," he explained. "We plan to own Sealy a very aggressive competition"

"We have not addressed the pricing problem," stated Kneeland. "We must be competitive in the market, do what is good for both parties."

Trzcinski noted that "historically, we've set pricing Guidelines and allow the plants decide. Plants don't all take the very same products anyhow--the Northeast, by way of instance, conveys very firm products. I've always felt we were decentralized. We've got ten commandments--the rules they must live "

With almost All the Sealy company under his management, Wuliger now has two national innerspring brands--Sealy and Stearns & Foster--to place. Sealy's wide supply in a host of channels for example non-traditional retailers as warehouse clubs--a supply so wide that merchants have complained they have to discount prices, which cuts in their margins--has abandoned some competitors to speculate Wuliger will position Stearns & Foster over Sealy in the marketplace.

"Stearns is perceived as an upscale line," stated Wuliger. "Leading department stores view it as an upscale line. It's less supply than Sealy."

He explained, however, "They're separate selling organizations, Entirely separate. They compete with one another like any other competitor. I think retailers are making great margins with Sealy. Our task is to make it appealing, whatever it takes."

Wuliger said he will continue to appear on Stearns & Foster Advertisements, and consequently won't perform Sealy commercials.

While the drama of this Sealy takeover may be over, problems may Continue to linger for some time. Litigation continues, but this time with Ohio Mattress because the defendant. Ohio Mattress had suggested that the minority shareholders of Sealy receive an aggregate of about $10.5 million, based upon exactly the same per share amount paid in connection with the acquisition of management of Sealy in December.

In February, Sealy Mattress Co. of New Jersey, Inc., which could Become the sole independent Sealy licensee following the purchase of Sealy Michigan, sued Ohio Mattress, seeking to enjoin the merger which would result in Sealy Inc. getting a wholly-owned indirect subsidiary of Ohio Mattress. Ohio Mattress known as the suit without virtue, and stated it would aggressively defend it.

Looking ahead, Wuliger acknowledged that "the debt from the Sealy acquisition will drain Ohio Mattress profits," but added, "It's premature to attempt to pick a figure for 1987. We expect the very best year ever. We are going to try to do everything better that before. Our priority today is using the plants".

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