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Steelcase To Close Grand Rapids Area Locations

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Steelcase announced plans to continue consolidation of its North America operations as it moves to a more efficient industrial system.

The company expects to close several manufacturing facilities in the Grand Rapids, Michigan area over the next two years. Production will shift primarily to other Steelcase manufacturing facilities, including other locations in the Grand Rapids area. The company anticipates a net reduction of approximately 100 salaried and 500 hourly positions and approximately 2.6 million square feet of manufacturing space in North America related to these actions.

The company expects to incur net pre-tax restructuring charges totaling $25 to $30 million from these actions over the next two years, with a cash cost of $20 to $25 million. Net restructuring charges include net costs of employee terminations, asset impairments and production move costs. In addition, the company expects to incur an estimated $4 to $7 million of pre-tax disruption costs related to the project. These actions are designed to reduce overhead related to excess capacity and to improve production efficiency. When this plan is fully implemented, annual pre-tax savings are expected to be in the range of $35 to $45 million.

The combination of these actions and other projects, including implementation of lean manufacturing and reduction of product complexity, are essential in helping the company achieve its previously communicated 35 percent long-term gross margin target.

As these actions are implemented over the next two years, the company will explore options to sell or redevelop land and buildings that will no longer be needed in the business. The net book value of this real estate is approximately $30 to $35 million. Although it is too early to provide a meaningful estimate of market value, the company believes it is likely the net proceeds from such a sale would be at or above book value, and therefore the charges listed above do not include an impairment charge for the real estate.

“We’ve emerged from difficult economic times a stronger company, determined to continually improve every aspect of our business,” said James P. Hackett, president and CEO. “These changes reflect our ongoing commitment to build a new and more flexible industrial system that will ensure our competitiveness. We continue to execute our strategy of implementing lean manufacturing, reducing complexity and developing a world-class global supply chain.”

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Steelcase To Close Grand Rapids Area Locations
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