La-Z-Boy to cut U.S. jobs
Shifting some work to Mexico
By Joan Gunin -- Furniture Today, April 20, 2008
Monroe, Mich. — La-Z-Boy will move its U.S. cut-and-sew operations to Mexico over the next two years and also will close an upholstery assembly plant in Tremonton, Utah, the company has announced.
The moves eventually will eliminate nearly 1,300 U.S. jobs and are expected to yield an annual cost savings of more $25 million, La-Z-Boy said.
U.S. cut-and-sew operations will be transferred to facilities to Ramos Arizpe, Mexico, in the state of Coahuila. That move will result in the elimination of 1,050 U.S. jobs in five upholstery plants.
Tremonton, the sixth plant, will be closed this summer and its production work will be shifted to the five other plants. The Utah facility employs 630 and represents 13% of La-Z-Boy's branded upholstery manufacturing capacity, producing recliners, motion and stationary seating.
La-Z-Boy expects to add some 400 production jobs at the five remaining plants as the work is transferred from Utah.
The company said the transition will take place over a period of 18 to 24 months. La-Z-Boy plans to begin production in Mexico in early 2009.
"With its proximity to the U.S. and the lower cost structure inherent in a Mexican-based operation, we made the decision to transition our domestic cutting and sewing operations while streamlining the assembly aspect of production in the United States," said Kurt Darrow, La-Z-Boy president and CEO.
He said the Mexican facility will supply U.S. plants with cut-and-sew fabrics and leather for custom orders and will complement the company's existing cut-and-sew program from China.
"Our remaining facilities will be able to increase their capacity utilization as a result of this change," he said. "We are confident this reallocation of resources, combined with the many changes we have made to our production processes, will continue to strengthen our operations."
With the closure of its Utah facility, La-Z-Boy's upholstery manufacturing segment will encompass 5.5 million square feet of space in North America, including 4.8 million in the U.S. and 700,000 square feet in Mexico, and will employ about 8,000 people.
The company plans to sell the 675,000-square-foot Utah site.
As a result of these actions, La-Z-Boy said it will take a pretax restructuring charge in the range of $17 million to $20 million, or 20 to 24 cents per share.
The company plans to take $2 million to $2.5 million in the fourth quarter of fiscal 2008, which ends in late April; $9 million to $10 million in fiscal 2009; and the balance in 2010.
Once these moves are completed, the company expects to realize in excess of $25 million in annual cost savings, with the full benefit beginning in fiscal 2011.
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