Over the past several years, the political mantra has been that jobs are now coming back to the United States – particularly manufacturing ones.
That may well be. But this past week we’ve learned that IKEA plans to close its last remaining U.S. production facility. The iconic home furnishings company has announced that it will be closing its manufacturing plant in Danville, Virginia by the end of the year.
The Danville plant makes wood-based furniture and furnishings for IKEA’s retail store outlets in the United States and Canada.
The reason for the plant closure, as it turns out, is a bit ironic. According to IKEA, high raw materials costs in North America are triggering the move, because those costs are actually significantly lower in Europe than they are here. Even accounting for other input costs like labor that are higher in Europe, shifting production to Europe will keep product prices lower for U.S. retailers, IKEA claims.
So much for the notion that imports from Europe are overpriced compared to domestically produced ones!
The Danville plant isn’t even that old, either. Far from being some multi-story inefficient dinosaur left over from a half-century ago, the manufacturing facility opened only in 2008, making it only about a decade old. At its peak the plant employed around 400 people.
IKEA made staff cuts or around 20% earlier in the year, before following up with this latest announcement that will wipe out 300 more jobs in a community that can scarcely withstand such large economic shocks.
With the closure of Danville, IKEA will still have more than 40 production plants operating around the world. It employs around 20,000 workers in those plants (out of a total workforce of ~160,000, most of which are employed in the company’s vast retail and distribution business activities).
So, it doesn’t appear that IKEA will be exiting the manufacturing sector anytime soon. It’s just that … those manufacturing activities no longer include the United States.
As a certain well-known U.S. political leader might say, “Sad!”