La-Z-Boy cuts jobs, moves some to Mexico
by Charles Slat , last modified April 03. 2008 11:08AM
Monroe-based La-Z-Boy Incorporated said it will shut its Tremonton, Utah, plant this summer and move all U.S. cutting and sewing operations to Mexico in hopes of saving $25 million annually. The moves will impact about 1,680 U.S. workers.

The move of the cutting and sewing work will affect about 1,050 La-Z-Boy employees at five other La-Z-Boy plants. The shutdown of the Utah plant will affect 630 workers. The Utah plant production will be shifted to the other five plants and could result in the addition of 400 jobs to the five remaining plants, company officials said.

Shifting the company's domestic cutting and sewing operations to Ramos Arizpe, Mexico, will take 18 to 24 months. The company expects to start production at its Mexican facility early next year.

The company's Utah facility employs 630 people, accounts for 13 percent of the La-Z-Boy branded upholstery manufacturing capacity and produces recliners, motion furniture and stationary upholstery. La-Z-Boy will cease operations at the Utah facility this summer and shift work to the company's remaining five facilities.

"Speed to market for custom orders is a tenet of our brand promise to the consumer and the strength of our U.S. facilities enables us to deliver on that promise," said Kurt L. Darrow, La-Z-Boy president and chief executive officer.

"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."

He said the new Mexican facility will be able to rapidly supply the company's domestic plants with cut-and-sewn fabrics and leather for custom orders and will complement the existing cut-and-sew program from China, which supplies its U.S. plants with kits for its high-volume products.

"Once we made the decision to transition the domestic cut-and-sew operations to Mexico, we analyzed our remaining total capacity," Mr. Darrow said. "With the floor space created by consolidating six cut-and-sew operations into one in Mexico, and with our manufacturing facilities dedicated solely to production, we determined we could service our existing and future demand with one less facility.

"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," he continued. "We regret the impact these moves will have on the families and lives of those employees affected and greatly appreciate the contribution of each employee and thank them for their years of dedicated service.

"With the normal attrition rate at our production facilities and the time with which we plan to transition our cutting and sewing operations, employees working in that capacity will have the opportunity to learn new skills and be considered for other positions within their facilities as they become available, particularly as we shift production from Utah," he said.

When the Utah plant closes, La-Z-Boy will still have 5.5 million square feet of upholstery manufacturing space in North America, including 4.8 million in the United States and 700,000 square feet in Mexico and it will employ approximately 8,000 people in those facilities.

The 675,000-square-foot Utah plant will be put up for sale. As a result of the moves, La-Z-Boy will take a pre-tax restructuring charge in the range of $17 million to $20 million, or 20 to 24 cents a share, spread over the next two years. The company said it should start to feel the full impact of annual cost savings starting in fiscal 2011.
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