CB makers feel the squeeze
Once limited to truckers and their Smokey Bear antagonists on highway patrols, Citizens Band radio has grown to the point where about 20 million American "good buddies" have CB rigs in their cars or homes. Yet despite the boom in the industry, a lot of firms that tried to capitalize on the craze are going bust. A case in point: Hy-Gain Electronics Corp. of Lincoln, Neb., one of the largest U.S. makers of ham radio and CB gear. Burdened by $31 million in debts and a $24 million earnings loss in fiscal '77, Hy-Gain has filed for bankruptcy and told 1,000 employees at its plants in Lincoln and Puerto Rico to go home.
"We ain't dead yet," insisted Andrew Andros, 53, who with his brother Ted founded Hy-Gain 29 years ago as a television antenna installation company. "We think we can reorganize and stay in business." But hardly anyone else believes that Andros can pay off creditors, pay the three weeks' back wages he owes to some of his workers and once again start turning out the marine, military and amateur radio antennas Hy-Gain was known for.
What did the company in was the CB craze, and a bit of incredibly bad timing. Hy-Gain began making the compact communications units about four years ago, and raced to sales of $96.8 million in 1976. Responding to public interest in CB, the Federal Communications Commission in July of that year authorized new 40-channel sets that could be sold after Jan. 1, 1977. Hy-Gain and other makers slashed prices on the old 23-channel sets, but the public preferred to wait for the new models. Result: Hy-Gain had to buy back from dealers $12 million to $14 million worth of 23-channel equipment. It converted many of those to 40 channels, says Andros, but by that time the market was saturated. Hy-Gain's sales were cut in half, to $50.4 million, and the company's stock — a record $28 in 1976 —plummeted to about 50¢.
Andros blames the demise of his company primarily on a swamp of cheap CB sets imported from — where else? — Japan.
He even went to Japan to plead with CB makers there to trim production, but to no avail. Reports Andros: "They thought I was misjudging the marketplace and decided to increase production instead of cutting back."
Along with other U.S. makers, Andros has petitioned the Government for some sort of relief, in the form of either import quotas or higher tariffs. But CB sets were not covered by the U.S.-Japan trade agreement signed in Tokyo last week by Special Trade Representative Robert Strauss. Moreover, such restrictions are opposed by other firms in the industry like Fort Worth-based Tandy Corp., which imports large numbers of CB radios and sells them through its Radio Shack retail outlets.
Few U.S. CB makers, however, are in so fortunate a position, and more are expected to follow Hy-Gain into bankruptcy. In April, Gladding Corp. of Boston, maker of the Pearce-Simpson CB brand, filed for protection under the bankruptcy laws, citing the same 40-channel switchover problem that wrecked Hy-Gain. Johnson American Inc., the CB radio unit of E.F. Johnson Co. and the largest U.S. CB maker, posted a loss of $4.4 million on sales of $10.3 million during the third quarter of 1977.