<!doctype html public "-//w3c//dtd html 4.0 transitional//en"> <html> Friends, I thought you might be interested in this.  Here is a headline article from the April issue of the Music Trades.  It sounds pretty grim.  I have strong doubts Baldwin will survive until the day that their present CEO departs, but here are the details. Rob Goodale, RPT Las Vegas, NV ------------------------------------------------------------------------------------------------------------------- KAREN L. HENDRICKS has announced her intention to step down as chairman and chief executive of Baldwin Piano & Organ Company in November 2001, ending a five year stint at the head of the venerable keyboard manufacturer.  Duane Kimball, formerly Baldwin's chief financial officer, has been promoted to the post of president, and the search for a new chief executive is underway. Over the past 11 consecutive quarters Baldwin incurred cumulative losses of nearly $20 million, which prompted the sale of assets and operating divisions to pay down mounting debt.  Last year the company sold its profitable Finance Division, which provided consumer finance for piano purchases, and last month its contract electronics division was sold. Disappointing financial performance has also been reflected in the stock price.  At the time Hendricks joined the company, Baldwin's stock was trading hands at $12.50 per share.  As of this writing, the price is hovering around $2.50 per share, <<It is at $1.82 as of 11:45 AM EST on 4/25>>. A former package goods executive who held high level management posts at Procter & Gamble and Dial Soap, Hendricks' management style was controversial from the start.  Retailers complained that she "didn't understand the piano business".  Internally, she presided over a period of high management turnover.  In five years, the company went through a succession of personnel managers and chief financial officers while experiencing an exodus of long standing Baldwin sales and marketing executives.  Turnover at key manufacturing posts took a toll on Baldwin's production efficiencies. As operating losses began mounting at Baldwin in late 1998, Hendricks blamed problems on an "Asian financial crisis."  In a letter to shareholders in early 1999 she wrote, "The flood of lower-priced vertical piano imports began to enter the U.S. market in March as Asian manufacturers stepped up exports to offset the collapse of their own domestic markets...(and) they sharply reduced Baldwin's profitability in 1998."  With the assistance of an Ohio Congressman, she even persuaded the U.S. International Trade Commission to launch a "332" investigation into unfair trade practices by Korean and Chinese piano makers. Representatives from Kawai, Samick, Yamaha, and Steinway were called to testify in Washington in February 1999, where they politely dismissed all claims of a "flood of Asian pianos."  Having collectively spent hundreds of thousands of dollars in legal and accounting fees to comply with ITC requests for information, the piano executives were markedly less diplomatic speaking off the record.  While different manufacturers offered differing perspectives on the world piano market, they all concurred with one who called the hearing "a witch hunt designed exclusively to help Baldwin management save face." The final ITC report ultimately undermined Hendricks' charges against Asian competitors.  A series of charts showed that employment levels, output, and dollar sales increased in the U.S. piano industry in 1997 and 1998, despite an increase in piano imports from China and Indonesia. Discontent with Hendricks' leadership came to a head in October 1999 when 20 of the company's largest retailers declared that they "had lost confidence in the current Baldwin management" in a sharply worded letter to the board of directors.  The letter went on to call for her prompt removal. Inexplicably, the board's response to the dealer plea was to give Hendricks a sweetened employment contract, complete with a golden parachute.  A clause in the contract provided that if Hendricks sold off two of the company's three divisions, she would receive a bonus equal to 2.99 times her average salary and bonus over the past five years.  Having sold off the finance and electronics divisions, according to the contract, she stands to pocket approximately $1.0 million upon her exit from Baldwin in November. This employment contract sparked outrage among some of the largest shareholders.  Kenneth Pavia, who now controls approximately 14% of Baldwin shares, wrote Hendricks, "How does a CEO with your track performance justify her fiduciary obligations to the company in light of the abysmal performance of the company?  Wouldn't it have been more equitable to have crafted a severance package that was based on the company's performance?  If the sale of the two divisions is necessitated by your inability to successfully operate the company as presently configured, why should you be rewarded?"  Another major shareholder, Herbert Denton, was even stronger in his criticism, writing, "Faced with all of this, the board ought to ask for your resignation, appoint an interim CEO... and be thankful there is still a semblance of a fig-leaf for their personal reputations." *  *  *  </html>