As part of its efforts to reduce operational costs, Swedish-founded furniture company Ikea announced that it would be closing its only factory in the United States. Ikea mentioned in a statement this week that it would be halting operations in its facility in Danville, Virginia in December of this year.
The Netherlands-based company revealed that it will be moving its operations to Europe, where it says it can more easily cut costs. The facility's site manager, Bert Eades, explained that they had already done everything to improve and maintain the competitiveness of the US facility.
However, their efforts were simply not enough to justify the cost of having the plant continue its operations.
Ikea's Danville furniture factory was originally opened in 2008. The factory employs around 300 people, most of whom are local residents. The plant mainly churns out wooden products such as storage unit, shelves, and tables. Ikea currently has around 50 manufacturing facilities in nine different countries, employing around 20,000 people.
Ikea justified the decision to close the plant and pointed out that the price of raw materials in the United States was simply too expensive when compared to the prices in places such as Europe and Russia.
This was apparently the main reason why it only had one plant in the United States, which theoretically would have saved the company on logistics for the US market.
Virginia government officials pointed out last year that the ongoing trade dispute between China and the United States may eventually result in the closure of plants in the state due to increased cost for imported products. The statement made by the officials likely had foreshadowed Ikea's closure of its plant in the state.
Ikea stated on Tuesday that its decision to close the plant was not related to Trump's tariffs on Chinese imports. However, experts speculate that the added cost of raw materials such as particle boards, which Ikea imports from China, likely played a part in the company's decision.
The decision to close the US plant is likely not going to be the last one for the company, which has recently shifted its focus on online shopping.
The shift in its strategy towards growing its online presence has resulted in a number of job cuts in several of its departments. In 2017, Ikea made a huge investment and acquired TaskRabbit, an online marketplace for contractual workers. The company also invested heavily in various new digital companies including online pickup services and digital fulfillment centers.
