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Palliser re-structures into five smaller companies

 11 August 2006      

WINNIPEG, Manitoba - Palliser Furniture, Canada's largest residential furniture manufacturer for the past several decades, has completely restructured itself and will begin operating as five smaller, more focused and entrepreneurial companies.

The move is being driven in part because of the need to transition ownership and management of the company to the third generation of the DeFehr family and in part by the need to create new strategies for growth in an increasingly competitive market.

"The world around us is changing, our family is reaching a transition point and we need to make important decisions to reflect the changing world in which we live and to fully engage the energy and abilities of the next generation of family members," said Art DeFehr, Palliser president and chief executive officer, adding the company's retail partners will notice no difference in service or deliveries.

The five new operating companies are:

Palliser Furniture. The Palliser name will be continued by the upholstery division, which is known primarily for its leather products. This new company will have several factories in Canada, four in Mexico and will import finished upholstered goods from Asia. Art DeFehr will remain president but will work with a new senior management team which includes Carsten Diercks, currently senior vice president as the senior manager.

The sales effort will be led by John Philips, executive vice president of sales aided by Palliser veteran Adrian Price in his new role as vice president of Canadian sales and sales administration. James DeFehr, nephew of Art DeFehr, will continue as senior manager of Palliser's operations in Mexico.

"The Palliser leather business has experienced a significant transformation as the historic pattern of production in Canada (building product here and shipping it to the U.S. market) adjusted to the currency revaluation by focusing Canadian production on Canada and growing the Mexican capability for shipment to the United States and Mexico," Art DeFehr said. "There will be an important initiative in the near future to add Asian capability to this mix."

Blend Furniture. Formerly known as Palliser's World Trade Division, this is case goods import specialist designs and markets in every major category from bedroom and dining room to occasional and wall units/entertainment systems. Palliser veteran Roger Freisen has been named president of Blend. Other members of the senior management team include Philip Klassen, a Palliser veteran with both domestic manufacturing and Asian sourcing experience, as vice president president of operations; and Ben Horch, another long-time company stalwart, as vice president of sales.

Blend is the only new operating company not led by a member of the DeFehr family.

EQ3. This retail-driven concept was launched by Palliser in 2001 under the leadership of Peter Tielmann, son-in-law of Art DeFehr, who will continue as president. EQ3 sources most of wood offerings in Asia but produces its own upholstered products in factories both here and in Mexico. EQ3 product offerings are marketed through a network of franchised stores and in-store galleries across North America.

DeFehr Furniture. This division and its 400,000 square foot factory was sold to the family of Art DeFehr's eldest brother, Frank DeFehr, in 2004. As part of the restructuring, Palliser's other Canadian-based wood operation - known as the Logic division, producers of youth bedroom and other products - will become part of DeFehr Furniture. The new company is led by Andrew DeFehr, son of Frank DeFehr, who has been appointed chief executive officer.

"Andrew has 16 years of wood manufacturing experience and has adjusted the product and customer base to permit this important domestic wood facility to remain profitable in the face of imports and a more valuable Canadian currency," Art DeFehr said.

"Logic is a unique facility in that it is fully integrated, beginning with a sawmill, its own particleboard plant and continuing through a veneer plant, laminating facility and including a European style flat line for finishing," he continued. "The enlarged DeFehr Furniture will consist of one million square feet of domestic wood manufacturing and over 1,000 employees.

Arconas. This specialty contract furniture company is the least known of Palliser's divisions. Arconas specializes in ‘public seating' and recently furnished seating for the new Dallas International Terminal, the Boston Airport and Abu Dhabi, among others. It has been purchased by Dan Nussbaum, son-in-law of Art DeFehr.

Palliser, Blend, EQ3 and DeFehr are all headquartered in Winnipeg, while Arconas is located in Toronto.

Palliser or its shareholders will continue to own and manage the company's other interests including its particleboard factory and packaging operations as well as Kalora Interiors - an area rug supplier - and the 220 Elm showroom facility in High Point, North Carolina and other investments.

Art DeFehr said the nature of Palliser's competition has changed in recent years.

"In the past, many of the leading companies in the industry were conglomerates like Palliser with a broad footprint across the industry," he observed. "This strategy may still work for some but it becomes increasingly difficult as companies move to professional management or further generations of ownership. Given that many of the emerging competitors faced by Palliser are very focused companies in terms of strategy and product range, Palliser has to re-structure itself to reflect the nature of this new competition."

Each of the five new companies will be large enough to be substantial in its competitive segment while being focused and specialized.

"Creating a cluster of smaller, more focused companies also creates opportunity for third generation family members to again be entrepreneurs and re-discover the excitement and opportunity of their parents and grandfather," DeFehr said. "Given the history, relationships and shared locations, the ‘new' companies have the opportunity and freedom to co-operate where that is in their interest but to be flexible and creative where that is required."

He acknowledged that Palliser could have continued as a conglomerate. "But this requires management with an exceedingly wide range of skills and limits the ability of the emerging third generation or senior management from living out their dreams as entrepreneurs," DeFehr said. "A company needs to renew itself from time to time and the changes in the global marketplace were the stimulus for a more dramatic shift from one generation to the other."

All four of new companies - Palliser, Blend, EQ3 and DeFehr - will also continue to share the permanent showroom on the fourth floor of 220 Elm during the April and October High Point markets. They will share common services such a reception and food services but will have their own sales management.

DeFehr also said that since all four also have a common sales force to a large degree, there will be a strong appearance of unity.

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