A court in Klagenfurt has appointed Gerhard Brandl as the receiver of Gallus Marketing, which filed for the Austrian equivalent of Chapter 11 bankruptcy protection a few days ago, asking for a freeze on its liabilities of more than €9 million. Under the local legislation, the company has three months to come up with a financial recovery plan, but the management is putting pressure on all the parties involved to come up with a solution much earlier in order to ensure smooth deliveries of the Spring/Summer 2005 collection.

Gallus is still one of the leading players in the Germanic men’s shoe market, which has been declining sharply over the last couple of years. In spite of that, the Gallus brand achieved an increase of more than 20 percent in the volume sold during the financial year ended last March 31, reaching about 600,000 pairs, with an even higher increase in revenues, and the upward momentum is still on. On the other hand, the company stopped selling the lower-priced Master John line, entailing a reduction in the overall turnover.

According to reports, the withdrawal of an unnamed foreign investor, who had promised some financing to Gallus’ owner based in Belgium, Gerhard van Spaendonck, precipitated the bankruptcy proceedings, but it was apparently only a drop in the bucket. Gallus has been investing heavily over the past few years on R&D, on new manufacturing methods and information technology systems, on marketing and on merchandising. The insolvency of Garant made things worse, reducing the amount of liquid cash at its disposal to keep operations going.

The most likely scenario is a further reduction in the workforce at the company’s manufacturing facilities in Austria, which now employs 180 persons. The company still had about 1,000 production workers in Germany and Austria back in 1997, when Gallus was acquired by van Spaendonck, who also owns the Dutch Van Lier brand separately. Two years later Gallus closed down its German factory near the Dutch border, which still employed 160 people. Employment at the Austrian plant was reduced from 340 in 2002 to 300 and the beginning of 2003 and 250 later in the year.