Tuesday, March 29, 2005

Steelcase cuts slam western Michigan

The furniture maker will keep headquarters in Grand Rapids but end production at plant.

By Tenisha Mercer / The Detroit News

Steelcase Inc. Headquarters: Grand Rapids Employees: 14,200 Operations: Designs and manufactures office furniture, including file cabinets, desks and chairs, in 35 locations and distributes its products in more than 900 locations around the world. Steelcase also sells staples such as tables, desks and lighting. Products: Steelcase brands include Brayton, Designtex, Details, Leap, Lightoiler, Metro, Polyvision, Steelcase, Turnstone and Vecta. History: Founded in 1912 as The Metal Office Furniture Co. in Grand Rapids. Source: Hoover's Inc., Detroit News research Video report on job cuts From WZZM13, Grand Rapids Comment on this story Send this story to a friend Get Home Delivery

Steelcase Inc. announced Monday it will end all manufacturing at its sprawling Grand Rapids headquarters, closing 2.6 million square feet of plant space and eliminating 600 jobs during the next two years.

The announcement comes as Grand Rapids and western Michigan reel from huge job cuts in the office furniture industry, which dominates the region much as auto manufacturing defines Metro Detroit.

Steelcase eliminated about 6,000 positions in recent years, on top of job cuts at rival furniture makers including Herman Miller Inc. The industry has struggled to recover from a slumping market and excess capacity, but has lately been starting to rebound.

"It continues to show that the office furniture industry isn't as healthy as they'd like you to believe," said Steven Cole, a Grand Rapids retail analyst.

Steelcase is Grand Rapid's largest taxpayer and employer, and the world's largest manufacturer of office furniture.

The restructuring plan calls for laying off 500 hourly workers during the next two years and cutting 100 salaried employees in the next 30 days. The company will shift production to other facilities in North America, including plants in nearby Kentwood and Gaines Township. About 30 jobs will be moved to Mexico, the company said. The company will keep its headquarters in Grand Rapids.

Employees will be given the option of early retirement, buyouts or severance packages. Blue-collar job cuts will be based on seniority. Steelcase has about 14,000 employees worldwide.

When manufacturing operations in Grand Rapids close, it will mark the first time since the company's founding in 1912 that it will not produce furniture there.

"We want to move forward to become more competitive and flexible. It's important that we maximize our global supply chain to become more nimble and strategic," Steelcase spokeswoman Jeanine Hill said. "This gives us a chance to look at becoming a more lean business model we can use more strategically."

The job cuts will save $35 million to $45 million annually. Selling and redeveloping land and buildings also could earn the company $30 million to $35 million. The restructuring will cost the company $29 million to $37 million in pre-tax charges. Despite the cost savings, the restructuring could prove costly if it distracts Steelcase from grabbing its share of the recovering office furniture market, said Morningstar analyst Anthony Chukumba. "It doesn't make sense to keep these plants open if you don't have the volume to keep them running, but competitors like Herman Miller are done with (cuts) and they aren't spending all this time worry(ing) about closing down factories," he said. "They can spend more time coming up with new, innovative products."

Steelcase reported earnings of $674.1 million for the third quarter ending Nov. 26, 2004, up 9.7 percent from $614.5 million in the previous quarter. The company will release fiscal 2005 earnings Wednesday.

But Steelcase CEO James Hackett said Monday's job cuts have nothing to do with the company's economic performance,

"The company is starting to develop a rhythm of results," he said. "This is not the crisis management of the recession."

The Associated Press contributed to this report. You can reach Tenisha Mercer at (313) 222-2401 or tmercer@detnews.com.