Elliott's Designs plans restructure
September 28, 2005,
RANCHO DOMINGUEZ, Calif. -- Metal beds manufacturer Elliott’s Designs says that increased insurance and workers’ compensation costs are forcing it to restructure.
The company will close sometime in November and reopen shortly after Jan. 1 as a smaller business with a smaller product line.
Elliott’s now operates out of a 125,000-square-foot manufacturing and warehouse facility in Rancho Dominguez. It has sold that facility and will move into a 30,000 square-foot building it has purchased a half mile away. The new operation will employ 15 to 20 people compared with about 40 today.
The company will lay off most if not all of its workers, and rehire some when it reopens.
“We will have a down period of a month or two, but by the first of the year, we will be up and running,” said company President Elliott Jones.
The new company will continue to be called Elliott’s Designs, but will be in the form of a limited liability entity, as opposed to an incorporated business. It will continue to make Victorian reproduction metal beds, but expects to have only about 15 in the line, down from 40 today.
It also will serve a group of smaller, one- or two-store customers rather than larger accounts.
Jones said the restructuring was caused in large part by increased health insurance and workman’s compensation costs. He estimated health insurance costs alone have risen 30% to 40% in the past year for younger workers and have doubled for older workers.
Those costs, along with the size and upkeep of its plant, originally caused Jones to consider closing the business entirely. Just over three weeks ago, it sent out a letter to its dealers announcing those plans.
In response, he received calls from other companies looking to produce its designs. However, many of those companies backed away when they found out what was involved in the process, he said.
Some dealers also encouraged Jones to keep the company running, he said.
The company started in 1979 and soon became recognized as a leading source of Victorian-style metal beds. Except for a brief stint importing a small amount of product a few years ago, it has made its beds in Rancho Dominguez. Today, it remains one of a handful of domestic metal beds makers left in the United States.
Jones purchased its existing facility in 1981 and expanded it in 1987 and 2000.
At its peak about seven years ago, the company employed more than 100 workers. Two years ago it was down to 60 and in the past six months, it fell to about 40.
Although a challenge, rising steel costs were not a major factor in the current restructuring effort, Jones said. Instead, he cited rising insurance and workman’s compensation costs as well as competition from overseas factories that only pay workers $150 to $200 a month. With insurance costs factored in, his workers earn between $15 and $20 an hour.
Jones has informed his workers of the change and plans to slowly close the business down between now and November.
“It’s never easy,” he said. “I don’t like to admit defeat. It just hasn’t worked out.”
While he is saddened at the idea of losing long-time workers, he is optimistic about the future of his business, which currently does about $4 million in annual sales. Jones predicts that will probably drop to about $2 million in its first full year of operation.
“By trimming down the line, that will make it more efficient too,” he said.
Along with sales to smaller dealers, the revenue will likely come from a limited amount of Internet sales. The company’s bestselling beds are in the $599 retail range in queen size, but Jones hopes to do more business in the $999 to $1,199 range.
Elliott’s also will offer powdercoat finishing services for other metal parts or components manufacturers.
Kelly Ramirez, executive director of the California Furniture Manufacturers Assn., said rising insurance costs have been a plight of many California furniture makers. While workers’ comp costs are not as bad as they once were, he said the higher costs of running a business has caused some to go bankrupt or shift to an all-import model.
“The furniture business is not fun right now,” he said, adding that he was glad to hear Elliott’s would reopen after the first of the year. “For the most part, it’s a hard time.”