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Hooker closing local plant
280 jobs will be eliminated
The Hooker Furniture manufacturing plant in Martinsville will close in March.
Thursday, January 18, 2007
By GINNY WRAY - Bulletin Staff Writer
Hooker Furniture will stop manufacturing wood furniture domestically in March, idling one of its original plants in Martinsville and eliminating 280 jobs.
The Martinsville plant is part of a 760,000-square-foot manufacturing and warehouse complex next to the company's headquarters on Commonwealth Boulevard. It has been in operation since the company began in 1924, and now produces bedroom and home entertainment furniture.
Employees were told of the plant's closing Wednesday afternoon, according to Paul B. Toms Jr., chairman, chief executive officer and president.
"They were disappointed but not surprised," Toms said. "It was not unexpected."�
Since 2003, Hooker has closed a domestic wood furniture plant each year as its product mix has increasingly shifted toward imported wood and metal furniture, it stated in a release announcing the closing.
"The reality is that we've continued to bring products from overseas and domestic facilities. We never had a strategy of moving offshore. We had products from both areas. Unfortunately for our domestic employees, products (made) here were not as well received as imported products," Toms said.
He attributed that to the desire for value - hand carving and painting, for instance, on imported pieces. "It's not better quality; it's more detail for the money," he added.
Hooker had introduced the Simply American line at the April market to try to boost production at the plant. "It was a departure for us," made of different materials and construction and sold at a higher price than other Hooker lines, Toms said.
"But unfortunately that product hasn't retailed as well as we would have liked," he added.
The trend at Hooker of shrinking domestic production reflects the shift of furniture production offshore throughout the industry, Toms and the company's release stated.
Hooker will offer a severance package to the affected employees, said Jack R. Palmer, vice president-human resources. Those employees represent about 27 percent of the company's total work force.
"In addition to the severance package, eligible Martinsville employees will be entitled to receive distributions from the company's retirement plans, including Hooker's Employee Stock Ownership Plan (ESOP). Employees also will be eligible for placement counseling under Trade Act programs that provide assistance to trade-affected workers," he said.
Severance and benefit costs will total $2.2 million to $2.5 million, based on employees' weekly earnings and length of service, Toms said.
The ESOP - a company-funded retirement benefit - will provide a cushion or safety net for employees, Toms said.
He could not put a value on that benefit for Martinsville employees but said it would be larger than for those at other Hooker plants because the local employees have been in the plan the longest. An employee's holdings would depend on how long he has been with Hooker, since shares are given each year, he added.
Typically, Toms said, the ESOP has been a larger amount than the severance package.
The company has no plans to transfer any of the Martinsville employees to other locations, the release states.
"It's difficult," said Toms. "These are great employees. Our loss is somebody else's gain. ... We hate to sever the working relationship we've had with them. Many are second-, third-generation employees who have close ties with others in the company - spouses, children, parents ... in distribution and administration. We're all tied through the ESOP; there's a lot of history."�
Hooker will continue to have its headquarters in Martinsville and about 2 million square feet of warehouse operations in the Henry County area, North Carolina and China.
"From that standpoint, we'll employ about 350 (locally) in administration and distribution after the plant closing," Toms said. "Due to current inventory levels, the company expects no impact in the near term on delivery schedules to dealers."�
Also, there are 411 associates in Hooker's upholstery subsidiary, Bradington-Young, based in Cherryville, N.C.
It will look for a buyer or alternative uses for the Martinsville plant. "It could be subdivided into multiple businesses. That is something we'll have to look at going forward," Toms said.
"The company overall is doing well. We're in the best financial condition in its history in terms of cash, debt, we have relatively little debt, the highest sales level we've ever been at. Profitability is strong," Toms said.
"We think we're in the top quartile of publicly reporting furniture companies in sales growth and profitability," he added.
But in the last few weeks company officials realized they could not keep the plant open, he said. "Up to Christmas we were still hoping we could make a go in it. We invested in machinery in the last six months, offered training for employees, had a full complement introduced at the October markets. We had high hopes for Simply American, which was shipped to retailers in September and October," Toms said.
The retail market remains sluggish, he said. "These are not particularly robust times for anyone who publicly reports in our industry," he added.
Toms said the March closing will end the company's transition to importing 100 percent of its wood business. That has occurred during the past five years, he said, adding that last year, imported wood furniture accounted for 85-90 percent of Hooker's business.
"We believe it is in the best long-term interest of our shareholders, customers and remaining employees to focus on what we do well. Our transition to a marketing, logistics and global sourcing business model for wood and metal furniture is now complete. We can head into the future concentrating on what we do best, what we are known for and what we can do most profitably, and that is offering high-value imported wood and metal furniture and domestic and imported upholstered furniture," he said.