The J. L. Wickham Co. built its reputation on finding innovative solutions to industrial problems. Now Chairman Richard P. Sullivan has another goal for the Baltimore machine tool company -- making a profit.
"By the time we finish 1993, I think we should be able to turn a profit. That's our plan," he said.
That would be a dramatic turnaround for the 10-year-old company, which began as a symbol of Baltimore's high-tech manufacturing future. Wickham captured the imagination and money of investors, including the city's quasi-public Enterprise Development Fund and the Abell Foundation, before slipping to the brink of extinction last year.
And it would provide a sharp contrast between the two men most responsible for the company's fortunes: founder John L. "Jack" Wickham, who left last October, and Mr. Sullivan, the investment company executive tapped to lead a turnaround.
The company, situated in a nondescript, one-story cinder block building on Belair Road, produces multimillion-dollar machines that make parts for other machines. Its machine tools can make a greater variety of parts, producing them faster and with greater precision -- qualities that have brought orders from manufacturers such as General Motors Corp., Chrysler Corp. and Deere & Co.
It was the brainchild of Mr. Wickham, a former Black & Decker Corp. engineer who helped develop prototype machines for the tool and appliance maker to solve productivity problems.
His plan, to bring high-tech solutions to traditional manufacturing,captivated investors and held special appeal in Baltimore, which was losing more than 1,000 manufacturing jobs annually. The Enterprise Development Fund, which lends and invests money for start-up companies, bought $100,000 worth of stock in December 1987 and an additional $17,580 in early 1991, said fund director Ellen J. Wiggins.
Acclaim for the company and its founder continued as Wickham's revenues grew. In 1990, when Mr. Wickham received the Entrepreneur of the Year award from the state Department of Economic and Employment Development, he launched into what one observer called a sales pitch, complete with a sample of what his machines can make.
"He was like the proud father," said John C. Weiss, who was at the awards ceremony. "It was a wonderful experience."
But while the company received accolades, it was chewing through millions of dollars in capital without showing a profit. From its founding until mid-1992, the company ate up $6 million in capital, ending up with a negative net worth.
Mr. Weiss, managing director of the Maryland Venture Capital Trust, a state-supported investment fund, praises Mr. Wickham as a "genius" able to quickly find solutions to industrial problems. But Mr. Weiss, who has known Mr. Wickham for about nine years, says that strength -- particularly his personal involvement in the company -- was also his weakness.
"I don't know that Jack ever effectively delegated the management responsibility," -- a common problem, he said, among companies founded by visionaries.
Last May -- just a year after a cash infusion of $3.3 million from investors -- Wickham was again short of money. And the board of directors was forced to confront an unpleasant option: closing -- down the company.
They turned to Mr. Sullivan, president of the investment firm Ferris, Baker Watts Inc., which was one of the major stockholders in the privately held company. He was named president and chief executive officer, leaving Mr. Wickham as chairman.
Mr. Sullivan had plenty of background in manufacturing. He served as a top executive at Easco Corp., a Baltimore-based manufacturer of hand tools, for more than two decades -- including 12 years as chairman and chief executive officer before it was sold to Washington-based investors in 1985. (Before going to Ferris, Baker in 1987, he had made an unsuccessful bid for the U.S. Senate against Sen. Barbara Mikulski.)
When he came in May, he looked over the company with the eye of an investment banker. The key question: "Are the problems solvable?"
At that point, the company could not continue without another infusion of capital. "We came to the conclusion it was worth trying to fix [the problems]," Mr. Sullivan said. But he also came to the conclusion that Mr.Wickham had to go.
"It was a very tough decision," Mr. Sullivan said. "His name is on the sign and the machines."
NB Efforts to find Mr. Wickham another role in the company didn't
work out. "He wanted to have total control . . . and the history was it didn't work," Mr. Sullivan said.
So in October, Mr. Sullivan assumed the title of chairman and Mr. Wickham left (though he remains a major shareholder). And in late January, Mr. Sullivan resigned from Ferris, Baker Watts to devote his efforts to Wickham.
To hasten the turnaround, Mr. Sullivan slashed overhead. He decided to buy components from contractors, instead of producing them internally -- a move that should save $1.5 million a year. That also required paring the work force from 100 to 50 people, eliminating jobs in production, engineering and administration.
"They had geared up to do everything themselves and didn't have enough volume to cover that overhead," he said.
Those cuts, coupled with another $2 million from a recent stock offering, put Wickham on more stable financial ground. Today, the company has a positive net worth. And with its reduced costs, it should be profitable if it can generate $7 million in sales this year, Mr. Sullivan said.
Wickham is now working on three machines -- two for Chrysler and one for a Canadian company -- and has submitted bids for 30 other contracts.
And while Mr. Sullivan has jettisoned some of the former management's practices, he wants to maintain its reputation for quality and pull in repeat customers. The key: combining the best qualities of two types of traditional machine tools.
Machine tools generally break down into two categories -- transfer machines and computer numerically controlled (CNC) machines. Transfer machines can produce parts quickly, but they are inflexible and hard to retool to make other parts. CNC machines are flexible, but slow.
Wickham has developed a machine tool that can do a variety of operations quickly, controlled by a computer, Mr. Sullivan says.
The company has continued to improve that concept and plans to unveil a new type of machine soon, though he declined to describe it for competitive reasons.
In recent months, Mr. Sullivan has become a large stockholder. He won't give details about his holdings, except to say that his investment, combined with Ferris, Baker's share, amounts to 27 percent of the firm.
Mr. Wickham, meanwhile, won't talk about his removal or his future plans. Still, he has faith that the company can prosper without him.
And even though the company was launched on Mr. Wickham's inventiveness, Mr. Sullivan says it retains the needed creativity. "We certainly have come up with creative solutions for customers since he's gone. We see that as something that can be continued. Time will tell."
Those should be comforting words for major investors, including the Abell Foundation. The Baltimore-based charity agreed in April 1992 to guarantee a $5 million line of credit for Wickham, as part of the foundation's economic development efforts. Such financing is crucial for the company, which must invest millions of dollars in a piece of equipment before it receives payment for
In exchange for the guarantee, Abell was granted warrants that can be converted into common stock. Those warrants, combined with a more recent $200,000 investment in the company, give Abell control over 25 percent of Wickham's stock.
Still, Wickham remains an unproven company -- one that needs to significantly boost sales to meet projections for profitability.
Broken promises already have affected at least one investor, the Enterprise Development Fund, which declined to provide more money when Wickham was having its latest cash crunch. "We felt we had done our part and it was becoming a riskier investment," Ms. Wiggins said, noting that other investors were coming forward.
And previous Wickham forecasts have proven overly optimistic. In a 1991 prospectus for a private stock sale, for example, the company forecast a small profit that would grow to $1.5 million in 1992. Instead, Wickham continued to lose money.