Posted on 07/27/2005 1:41:42 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
MARTINSVILLE, Va.--(BUSINESS WIRE)--July 27, 2005--In a move to better match domestic manufacturing capacity to demand, Hooker Furniture (Nasdaq:HOFT) announced today that it plans to close its Pleasant Garden, N.C. plant by October 2005.
For several years, the Company has experienced decreased order and shipment rates for its domestically produced wood furniture and increased demand and sales for its imported wood and metal furniture. This mirrors an industry trend that has forced many U.S. wood furniture manufacturers to curtail operations. The Company also closed its Maiden, N.C. plant in 2004 and its Kernersville, N.C. plant in 2003.
The 300,000 square foot plant, one of three wood furniture manufacturing facilities operated by Hooker in Virginia and North Carolina, employs approximately 280 employees, representing about 16% of the Company's total workforce, and produces some of the Company's home entertainment and home office furniture. The products currently manufactured in Pleasant Garden will be shifted to Hooker's wood furniture plants in Martinsville and Roanoke, Va.
With the closure of the Pleasant Garden facility, Hooker will operate 2.8 million square feet of factory and distribution space, including two wood furniture production plants, three upholstered furniture plants, two supply plants, a distribution center and several warehouses, all located in Virginia and North Carolina. The Company also utilizes a 210,000 square foot distribution center and warehouse in China that is owned and operated by two of the Company's vendors.
"While we deeply regret having to displace a group of loyal, hard-working employees, the dynamics of the furniture industry today dictate an increasing reliance on offshore manufacturing in order to meet customer expectations and deliver the greatest possible value to consumers and retailers," said Paul B. Toms Jr., chairman and chief executive officer.
"As we 'right-size' our business to better match manufacturing capacity to demand, our operating efficiency should improve as we specialize our domestic production around the niches in which Hooker has historically excelled, especially home entertainment and home office," said Toms. "As the product lines now made in Pleasant Garden are shifted to Roanoke and Martinsville, we expect the efficiency of these remaining plants to benefit from increased volume levels following the 4-6 month period expected to complete this transfer." Based on current volume levels, the Company expects to realize savings from reduced fixed operating expenses of $2.0 to $2.5 million annually once the transfer of Pleasant Garden production is complete.
In connection with the closing of the Pleasant Garden facility, Hooker expects to record restructuring and related asset impairment charges of $4.2 to $5.4 million pretax ($2.6 to $3.3 million after tax, or $0.22 to $0.28 per share) to write-down certain assets at that facility, for severance benefits to be paid to terminated employees and other restructuring expenses. Approximately 85% to 95% of these charges are expected to be recorded in the 2005 third quarter. The Company expects that the cost of disassembling and relocating equipment and realigning production will not be significant.
"Hooker will offer a severance package to the affected employees expected to total approximately $1.4 to $1.8 million," according to Jack Palmer, vice president of human resources. In addition to the severance package, eligible Pleasant Garden employees will be entitled to receive distributions from the Company's retirement plans including Hooker's Employee Stock Ownership Plan. Hooker also will apply for job placement counseling under the trade act programs that provide assistance to trade-affected workers. The Company has no plans to transfer any of the Pleasant Garden employees to other locations.
"Our remaining wood furniture plants in Roanoke and Martinsville are well positioned to competitively produce stylish home entertainment and home office furniture of quality and value," Toms continued. "The Roanoke plant will specialize in executive home office, modular systems and high-end wall units, while the Martinsville plant will focus on entertainment centers, theater wall systems, computer armoires and bedroom furniture. Both plants offer a highly skilled and experienced workforce, fine finishing capabilities and the ability to complete small production runs of the Company's broad product lines."
The Company expects little impact on delivery schedules to dealers as a result of the plant closing. Shipments of all domestically manufactured wood furniture products should continue on a timely basis.
Toms said that Hooker continues to see the advantages of a 'blended' manufacturing and sourcing approach combining imported and domestically produced products. "We believe our retail customers stand to benefit from advantages of domestic manufacturing such as quicker product development cycles, shorter lead times, quicker deliveries and the ability to produce and deliver smaller quantities more frequently to serve a broader product line."
Headline:
"Pleasant Garden less pleasant after Hooker takes a walk."
Economic analysis consists of examining ALL of the consequences of an action, both good and bad, both immediate and future, for both producers and consumers.
The "action" here is a reduction of the taxes imposed on imported furniture, and the elimination of "import quotas" from countries with a lower cost of labor.
That means that North Carolina producers will either lower prices or quit making things that Off-shore producers can make for less. Bad for them. Bad for the cities where the producers currently reside. Highly visible.
That means a consumer can buy one of those fancy chests for $100 less than the current prices charged by North Carolina manufacturers. Good for them. Not highly visible, because the consumers are spread nation wide, and there are no interviews with the newly satisfied consumers.
So, like most proposed government interventions into the economy, there are some highly concentrated high visibility losers showing real pain, and advocating the intervention; while the proposed winners don't even know there is an issue until they walk into a furniture showroom and look at the prices.
The end result is, if they were going to buy anyhow, they now have money to buy something else that might be manufactured here. So they wind up with "more total stuff" for the same amount of spending, and that is very good for them.
It appears to me that the North Carolina mill workers are claiming the "divine right of stagnation" -- if they have a job now, they should have that job for the rest of their lives; and that the government should enforce that right by using force. That is not something I, as a consumer, am prepared to agree to.
I just want more "stuff".
As you should be well aware by now, our nation's furniture and associated wood products and textile industries have been decimated by unfavorable trade policies. While the impact has been the hardest in Virginia and the Carolinas where much of the industry was located, there are MANY examples of similar furniture/wood products/textile facilities being shutdown throughout the United States.
On the eve when CAFTA is being debated in Congress, this article is a legitimate vehicle for forum participants to discuss this issue. Please restore this thread to its original placement in News/Activism. It does not belong in "Chat".
Excerpted and condensed from:
Of Restraints upon the Importation from Foreign Countries
of such Goods as can be produced at Home
"There seem, however, to be two cases in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry...
- The first is, when some particular sort of industry is necessary for the defence of the country....
- The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry is, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former....
Federal regulations (OSHA, EPA, etc.) impose and economic burden on domestic industries that place them at competitive disadvantage in the global market. According to Adam Smith, it is appropriate to "level the playing field" by imposing a tax on imports.
The Bush Administration is pursuing the opposite: it is encourageing imports while federal regulatory burdens are still intact. It is a tyrannous act of economic warfare waged against our own domestic industries.
"The second case, in which it will generally be advantageous to lay some burden upon foreign for the encouragement of domestic industry is, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former...."
An interesting point of view.
Let's see --- The fair tax guys have studies that conclude that the average cost of complying with US tax regulations (accountants, tax attorneys, FICA taxes, corporate income taxes, etc.) is abouty 22% of the product price. So this justifies a 22% import duty on all imported products???
I have seen a study that concludes that about 50% of the cost of ladders is due to the cost of defending lawsuits by people who have accidents on them. How about a 50% import duty on ladders?
I would love to see a study that estimates the total cost of the EPA, OSHA, etc. regulations on the ultimate product cost. These costs are usually dismissed as "negligible" by the liberals who pass the legislation -- they never come right out and say -- pass this legislation to make the workers and environment safer and it will only raise prices by 30%. But I digress.
As a consumer, I want more stuff for the money I spend. Your thesis is that I should pay $100 more for a chest in order to keep these North Carolina furniture makers in business. As a consumer, I don't care why it costs $100 more -- I want more stuff. Don't underestimate the power of wanting more stuff -- Walmart is the biggest corporation in the world because they give consumers more stuff.
If lowering the import taxes puts North Carolina producers out of business, maybe their representatives will vote to eliminate the regulations with high cost and literally no effectiveness. Congress and it's agencies have never carried out cost-effectiveness analyses of their regulations -- after all, they don't have to pay the costs.
I know how stupid the OSHA guys can be -- they walk into a factory, wouldn't recognize dangerous stuff if they saw it, but give you a huge fine when they measure your guard rails and decide that they are 1/2 inch too short, and then make you tear it up and replace it. And I know how counter productive the EPA guys can be (see Vin Suprynowitz's 'Send in the Waco Killers'). But North Carolina congressmen and senators supported all this regulation, so don't cry to me when it bites them in the ass. They voted for it, they support it -- they live with the consequences.
Don't try to make me pay for it. I want more stuff.
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