Ikea closing its only U.S. factory

By Aimee Picchi

/ MoneyWatch

Citing the cost of raw materials in the U.S., Ikea plans to close its only American factory, located in Danville, Virginia, and will shift production to Europe.

The plant, which opened in 2008, employs 300 people and produces wood-based furniture for Ikea stores in the U.S. and Canada, the company said in a statement emailed to CBS MoneyWatch. Production will be shifted to its factories in Europe. Ikea said the factory will continue to produce furniture until December.

The decision comes amid a push from the Trump administration to promote manufacturing in the U.S., which includes efforts to boost sales of products "Made in America." But there's little evidence that companies are adding factory jobs in the U.S., with new research from A.T. Kearney finding that American manufacturing growth still lags that of Asian countries. The consulting firm cited the Trump administration's tariffs as creating "backfiring" policies.

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Ikea said tariffs weren't to blame for its decision, but rather pointed to what the company describe as higher production costs at the Danville factory than those in Europe.

"This was an extremely difficult decision to receive. We made every effort to improve and maintain the competitiveness of this plant, but unfortunately the right cost conditions are not in place to continue production in Danville, VA for the long-term," Bert Eades, site manager, IKEA Industry Danville, said in the statement. "We will do everything we can in the coming months to support our co-workers through this change as they look for new jobs and training opportunities."

The city of Danville will lose about $500,000 in annual tax revenue from the plant shutdown, a Danville official told The Wall Street Journal. Ikea had received about $3.8 million in state and local incentives, and leased the factory's 94-acre site for $1 a year, with the right to buy the land for $1. It made the $1 purchase earlier this year, the Journal reported.

First published on July 16, 2019 / 4:17 PM

© 2019 CBS Interactive Inc.. All Rights Reserved.

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