Ikea will shut down its operations at Cane Creek Centre industrial park in December, forcing its nearly 300 employees to find work elsewhere.
The company announced the decision Wednesday afternoon, citing high costs for raw material in the United States.
Production will move to existing Ikea Industry manufacturing sites in Europe to meet demand for affordable furniture in North America, company officials said in a news release.
"Conditions are not in place to run competitive production in Danville," site manager Bert Eades said. "Despite many efforts to improve, the cost structure for production in Danville is still too high, especially, when it comes to raw materials. This results in pricing significantly higher than for other existing Ikea plants making the same products."
He said the ongoing tariff wars between the United States and other countries do not play into the high costs.
The plant opened in Danville to much fanfare in May 2008, with then-Gov. Tim Kaine sawing a log in half as part of the ribbon-cutting ceremony.
"Three hundred people are out of work and it's obviously going to be a huge challenge for them," Danville City Manager Ken Larking said. "Fortunately, they have five months to find other job opportunities."
Larking pointed out that the high costs for raw material would have affected Ikea if the company were anywhere else in the U.S. It's not unique to Danville or Virginia or North Carolina, he said.
The company came to the Dan River Region to make "functional and affordable wood-based products," according to the news release. The site at Cane Creek Centre — which is jointly owned by Danville and Pittsylvania County through the Danville-Pittsylvania Regional Industrial Facility Authority — produces Kallax shelving units and Besta living room storage units for Ikea U.S. and Canada.
"It's disappointing news," Danville Economic Development Director Telly Tucker said, adding that his office will work with Ikea and state and local officials to make sure affected employees have options for other jobs and re-training where needed.
The announcement comes just six months after the Danville plant laid off about 90 employees. High inventory and lower-than-expected sales led to that decision.
Ikea Danville’s production for 2018 had been about 25% less than what was anticipated in its budget, Eades said during an interview in December 2018, when the January layoffs were announced. The facility produces about 3 million pieces of furniture per year.
Ikea Industry is part of Inter Ikea Group, headquartered in Luxembourg, and is the world’s largest producer of wooden furniture. Ikea Industry has 24 sites in 9 countries with about 20,000 employees. The Danville unit is the only Ikea production site in North America.
Pittsylvania County Economic Development Director Matt Rowe also expressed disappointment.
"All of our thoughts and prayers go out to families and employees affected," Rowe said. "Our number-one concern is to do our best to contain the fallout, [and] make sure employees can work with Ikea and other employers to land on their feet. Thankfully, we're in an economy now with a lot of job openings."
Tucker and Rowe plan to work together to replace those lost jobs.
"We are going to do everything in our power to make sure we back-fill those jobs with other new employment opportunities," Tucker said.
Eades said the company will focus on helping its workers find new jobs, providing career guidance and working with federal, state and local officials to offer support and job-search assistance.
He added that Ikea will offer "an extended support and benefits package for our co-workers [employees]."
"We will detail this support package together with union leadership," Eades added, referring to the employees' union, the International Association of Machinists and Aerospace Workers.
Officials said in the news release that production will run through December to allow time for employees to find new jobs and training. Including the time it takes to dismantle the plant, Ikea will be in Danville until spring 2020, according to the news release.
The company's departure will leave a nearly 1 million square-foot building vacant, and city and county officials hope to find another industry for the site.
"We're already reaching out to potential clients who are looking for buildings of that size," Rowe said.
Danville Mayor Alonzo Jones agreed that sites offers amenities for interested companies.
"We feel like that million square feet of space and proximity to rail will make it an attractive site for potential prospects," Jones said.
Larking said Tucker and Rowe will visit the Cane Creek site Thursday to get it ready to be marketed.
Rowe just happened to be at Cane Creek Centre on Wednesday afternoon when cars were leaving the Ikea site.
"It's heartbreaking to see all the cars rolling out of the parking lot," Rowe said.
He was at Cane Creek Centre to talk about two new 100,000-square-foot shell buildings planned for construction there to attract companies.