John D'Addario III

APRIL 6, 2020  I D'ADDARIO I PANDEMIC STORIES
D'Addario Battles COVID-19 Fallout

The Long Island-based manufacturer deals with shuttered factories and furloughs during the pandemic and seeks to help by supplying medical masks to New York.

J. D'Addario & Co., headquartered in Long Island, New York, has had a long, storied history of manufacturing everything from guitar strings and drumheads to mouthpieces, reeds and other accessories in the U.S. But, the Covid-19 pandemic has forced the company to shut down factories and make difficult decisions affecting staff, meaning furloughs for some 1,000 employees.

On April 2, John D'Addario III, the company's president and CEO, spoke with Music Inc. to discuss how the coronavirus has impacted his company's business, how D'Addario is operating at this moment and some bright spots developing during difficult times.

Music Inc.: OK, what's the situation for you guys right now?
John D'Addario III: We've been shut down, or at least our factories have been shut down, for the last couple of weeks. That includes our factories in New York, California and Texas.

The only part of our operation that's up and running right now, and deemed an essential operation, is our distribution center.

So we've been continuing to run that facility for the last couple of weeks with a small crew considering the fact that, obviously, order volume is suppressed severely.

But they're still processing orders, and we're taking deliveries of some source goods. But the thing that really stinks is that our inventory levels are depleting rapidly because we have no factories running.

Interestingly, you know we have distribution companies all over the world. For example, in Australia, they're still running. Business has slowed a little bit, but they have no mandatory shutdowns there. So, they're still up and running.

Our China division is fascinating. They were shut down for two or three weeks due to the virus. And now they're that back full bore. And, this is stunning, our business in China was up in the first quarter by 23%.

[EDITOR'S NOTE: In January, the coronavirus exploded in China, disrupting that country's economy and daily life in a way similar to what began to happen in the U.S. in March.]

And that, to me, that's kind of a sign of hope that you know things that are going to turn around.

But here's the thing, what makes China unique is that our business there is predominantly done online with online retailers. So, obviously, they weren't as impacted as brick-and-mortar. So, channel shift was already happening there, in a big way. Now, it's [happening in] an even bigger way, which is really interesting.

Then, you have Europe. Europe is a disaster. We've got offices and a warehouse in the U.K. We have sales and marketing offices in France and Germany. Everybody's working from home. We're barely shipping any orders.

Here, in the U.S., we're still processing some orders. Other orders are still coming in at a pretty healthy level in spots, like Japan, for example.

Obviously nothing really is going on in Europe and other parts of the world. And here in the U.S., we started getting some dealer orders here and there, small ones and some national account orders.

Amazon hasn't been placing any orders for the last month because they're focused on essential goods. But, evidently, they're going to start sending orders in next week.

Music Inc.: So, how did you handle the shutdown? Did you furlough or lay off?
D'Addario: We immediately furloughed all of our factory workers as well as the majority of our office staff. I mean you're talking about roughly 1,000 people, which was gut wrenching.

What we're doing though is through the various relief bills we're paying everyone two weeks full salary, and also continuing their medical benefits through the month of April, at the very least, until we know more about the Cares Act and potentially other benefits we might get that would put us in a position to provide benefits for a longer period of time. So we're in the throes of studying all that right now.

Music Inc.: It's tough. You want to take care of your people. D'Addario: The way I rationalized it in my mind was that this is actually better for everybody because this helps us keep the heartbeat of the business going so that we can quickly rebound and be stronger than ever and provide people opportunities. That's how I looked at it, and I explained that to our employees, particularly our furloughed employees.

[What] has really helped in in terms of everybody's understanding, [is that] I was relentless in my communication everyone about what was going on. And I continue to be, even with the furloughed employees. It's really important to do that because they still feel connected to the business even though they're not technically working right now.

Music Inc.: So, 1,000 employees. What percentage of your staff
is that?

D'Addario: Roughly speaking, about 90%. We've got a small crew just handling essential things like accounts receivable, accounts payable, customer service. Obviously, the warehouse staff is operating at a reduced level.

Music Inc.: Challenging times for sure.
D'Addario: I want to just mention one interesting project, if you don't mind. Our engineers are actually working on a pretty exciting project. As you probably know, with drum heads we use various Mylar films, most of which are clear. So, our engineers have actually already designed a unique face shield for medical purposes.

So we have an application to manufacture them in with New York State right now. We're still waiting for an answer to get exemption to open our drum head factory to specifically produce medical face shields.

Music Inc.: Get out of here!
D'Addario: Yeah. We're working day and night trying to get somebody's attention at the state to get this fast-tracked so that we can get to work. We already have the design in place. And we're already looking at sourcing some other material that would support the Mylar that we use. So, the ball's in motion. We're just waiting for the green light to send a very small crew in to get going with the production of face shields for the state.

Music Inc.: How long do you expect that approval to take?
D'Addario: The problem is that New York State is inundated with requests like this from manufacturers trying to help. We've got some talented engineers on staff. We might as well put in use for a good cause.

Music Inc.: You're in New York, it's a hotbed. Are you seeing any rays of hope?
D'Addario: It's pretty widely publicized that most people feel like the apex is weeks away, which is pretty scary. That's the reality what we're dealing with right now. We've been very fortunate. Obviously, we've been in touch with our employees. And, of course, there are HIPAA laws that prevent you from inquiring about whether or not somebody is infected. But we had minimal infections up to this point. Hopefully, that will remain the case. But it's hard to say if that's the reality at this point because we're not seeing everybody every single day.

I've got to be honest with you, I don't think we're going to be in a position to reopen until, at the very least, early May based on things I'm reading.

Music Inc.: In the meantime, for that staff that is working, what are you doing during this time.
D'Addario: We have a task force team that we put together that's managing the whole situation. We meet every single day at 2 p.m., and in those meetings we go through different safety protocols for the for the warehouse, and if we get up and running with face shields, we're going to put in safety protocols around what we do in that facility.

And then, we also talk about needs. And every single week, we're going to identify different needs that require different resources. And we'll bring people back, hopefully, as we see things starting to fall out, in terms of the outbreak. We can't just turn the faucet on and start up again overnight. It will be a process.

—Frank Alkyer

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