Ikea announced last week that it will shut down its only US factory in Danville, Virginia. The closure of the facility, which has been in operation since 2008, will result in the loss of 300 jobs.
Why is Ikea leaving the US?
Counterintuitively, Ikea is shifting production from the US to Europe to meet American demand.
The costs of raw materials Ikea uses to manufacture its furniture is substantially lower in Europe than the US, so Ikea decided to shift production out of the US in order to keep prices down at US retailers.
Management was just following instructions…
“We made every effort to improve and maintain the competitiveness of this plant,” Danville Ikea site manager Bert Eades said in a statement. “But unfortunately the right cost conditions are not in place.”
Just 6 months ago, Ikea laid off 60% of the workers at the facility. At the time, Eades told local reporters that production at the facility was 25% lower than forecast.
Production at the Danville facility will continue through the rest of 2019 to give employees enough time to find new jobs.