The tractor-trailer that pulled into the Southern States Landfill last April dumped a load of unsold desks, chairs and file cabinets. The trip was the first of 16 for the rig hired by Business Furniture Liquidators.
Jerry Taylor, owner of the Atlanta-based company, didn't mind paying US$4,000 to haul off the 90 tons of what had evolved into junk. A warehouse that held the pieces was costing him US$3,000 a month. With business off by more than half, the trash heap gained appeal.
"I just didn't see any light at the end of the tunnel," Taylor, 57, said. "So we loaded it on the trailer and turned our backs on it."
US businesses reduced their inventories at an annual rate of US$121 billion in the fourth quarter of last year, the fastest pace on record, the Commerce Department reported last week.
Taylor's example shows some of the extremes to which companies went to clear stockpiles as the US tried to pull out of the first recession in a decade. Throwing out perfectly good stuff -- or bartering it, or selling it at giveaway prices -- does make economic sense.
"At some point, the value of the inventory is less than the cost of holding on to it," said Mark Zandi, chief economist at Economy.com in West Chester, Pennsylvania. "The sooner they sell it off or junk it, the better the economy will ultimately be because they're clearing the decks for future production."
During the 1990s, Taylor bought from growing companies trying to reshape their image, moving from classically designed desks to more modular furnishings such as cubicles. Starting in late 2000, businesses began accepting lower bids. In some cases, furniture was free as companies went under.
"They'd say, `I'm worried about honoring my lease and being out of here on time,"' said Taylor, who was only too happy to oblige them.
Taylor acquired faux stone conference tables and black leather chairs instead of oak credenzas. After an Internet advertising company closed its Atlanta office, he obtained his prize possession: a glass palm tree that shoots pink and blue water bubbles up its trunk.
Companies keep unloading. Wholesale stockpiles of furniture fell 8.4 percent in December, compared with a year earlier, the Commerce Department said today. Sales fell almost 10 percent.
Wholesale inventories of all goods fell 5.3 percent year over year, and sales fell 1 percent, both record declines.
More publicly traded US companies sought bankruptcy protection last year than ever before, according to Boston-based BankruptcyData.com. The 251 filings broke the previous record of 176 in 2000. Involved assets totaled US$258.5 billion, compared with US$94.8 billion the year before.
A lot of that had to be sold. The breakup of Montgomery Ward & Co put US$1.6 billion worth of discounted merchandise on the market early last year, a record for liquidation specialist Gordon Brothers Group of Boston.
"It's not every year that a Montgomery Ward closes its doors," said James Schaye, a principal and managing director at Gordon Brothers, which has handled US$10 billion in liquidated goods worldwide over the past two years.
Such housecleaning has its benefits, Zandi said. "Economy-wide garage sales are a net-net plus" because consumers save money on the discounted goods and retailers that survive the downturn emerge with fewer competitors, enabling them to increase prices later on, he said.
Cisco Systems Inc, the largest maker of equipment to link computers, designated as "scrapped" US$555 million of US$2.25 billion in excess inventory it reported as a charge against earnings in the quarter that ended April 28, the company said in a regulatory filing with the Securities and Exchange Commission.
Telecommunications manufacturers and their contractors wrote off US$4.5 billion in excess inventories by the end of 2001, close to a third of the US$14.9 billion in stockpiles that remained on their balance sheets, said Joseph Osha, an analyst at Merrill Lynch & Co.
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