IKEA Closes Its Only U.S Factory To Move Production to Europe

IKEA Closes Its Only U.S Factory To Move Production to Europe

July 17th 2019

The globally recognised furniture store, famous for its Swedish meatballs and occasionally not so friendly assembly guides, is leaving the USA. The furniture company, IKEA, is moving its plant operations to Europe, where it says production cost are reasonably lessened. IKEA was quick to gauge the cost of raw materials, as they began to creep up on the high side in relation to production operations in Europe. IKEA’s only plant located in southern Virginia town of Danville was "notably higher" in costs.

The business's Danville, Va., plant will be closing in December, which would subsequently lead to approximately 300 job cuts. The facility in Danville started operations in 2008, producing wooden products like storage units and shelves sold in Canada and U.S. IKEA stores.

The move by the Swedish company to take productions to Europe, where the company says it can cut costs, comes as a justification for its decision. IKEA, already owns other operation plants in nine destinations in Europe, including Sweden, Russia, and Poland. Employing over 20,000.

Democratic Senator, Tim Kaine of Virginia, tweeted about IKEA employees showing concerns about the tariffs. The employees' concerns were about how the tariffs are set to affect the costs of raw material at the Danville plant, which depended greatly on imports. IKEA offered no immediate response when asked if the tariffs held any role in its choice in migrating operations.

IKEA also recently took a move in its retail strategy that sees the furniture powerhouse become accustomed to the growth in its online shopping. The recent steps have also led to job cuts in other sections of the company. The furniture company has regularly made investments in its digital fulfilment centres and online pickup services. A notable plan was the purchase of TaskRabbit, an online market for seeking gig workers, by IKEA in 2017.

Ingka Group, a Swedish holding company, is responsible for the ownership and operation of most IKEA's stores. The Swedish holding company announced last year of its intention to lay off around 7,500 staffs, or 5% of its total labour force, and building 30 smaller stores across major cities around the globe in the coming years. To that effect, IKEA has begun launching small stores across big cities to entice younger shoppers.

The Swedish company said it could, in due course, create jobs for around 11,500 employees as a result of the incoming shift.