Furniture Sector Coming Apart
Southern California’s furniture makers, who enjoyed a renaissance in the mid-1990s, are now getting crushed by the slumping economy and a fresh wave of imports from Asia.
Dozens of furniture producers in the region have closed, laid off workers or shifted production overseas in recent months, according to the California Furniture Manufacturers Assn. The industry was hit particularly hard by the terrorist attacks, and its troubles illustrate why manufacturing across the country is deeply mired in recession, with no immediate recovery in sight.
The slowdown in consumer spending has hurt real estate, retail sales and tourism, and those industries have cut back on furniture orders.
Between September and mid-October last year, Steve Galerkin, a fourth-generation furniture maker with Galerkin Design & Manufacturing Inc. in Gardena, received $250,000 worth of orders from customers such as Nordstrom Inc. and the Bentley Hotel in New York. His orders in the same period this year: $50,000.
Galerkin recently dismissed 25 workers, more than 40% of his staff, and fears he may have to cut more. “My business is drying up,” he said.
Statewide, employment in furniture production has dropped by almost 4% to about 59,000 in the last 12 months, a slightly larger decline than for manufacturing overall. Nationally, the picture looks even grimmer. In a sharply lowered forecast released Thursday, the American Furniture Manufacturers Assn. projected a 13% drop in shipments of home furniture this year, the first decline in 10 years.
The nation’s top furniture production center, the High Point area of North Carolina, has been beset by layoffs and cutbacks as companies such as Thomasville Furniture Industries, Council Companies and Lexington Furniture Industries have shuttered factories and laid off thousands of workers.
“Furniture’s a major purchase, and when times get tight that’s one of the first things people hold off on,” said Todd Crannell, an economist at the Bureau of Labor Statistics in Washington.
California’s industry is concentrated in the Los Angeles area, which is among the nation’s leading furniture production centers. Many are clustered in South-Central Los Angeles, where entrepreneurs revived old businesses that languished during the last recession, focusing on creating fashionable products for upscale customers.
Other larger manufacturers, once based in Los Angeles, moved to the Inland Empire to take advantage of cheaper real estate and labor and less-stringent environmental regulations.
But the faltering economy, coming on the heels of higher energy costs and rising labor expenses, has been too much for many of them.
For mass producers, major customers such as Montgomery Ward are no longer in business. Small shops that make customized cabinets and dining sets are still getting orders, but even they are feeling the effects of the stock market bust and deterioration in household wealth.
David Mocarski, a downtown Los Angeles furniture maker, said he still has a six-month backlog of work. But he sees new orders tapering off as the economy slides further. “I’d finally have the time to go into my studio and do some experimental work,” he said.
That isn’t an option for many others.
Chino-based Great American Oak Co. will close its doors for good in mid-November, putting 190 workers on the street. For 12 years, the company made entertainment centers and other home furnishings for retailers such as Good Guys, Wickes and Circuit City.
But Great American’s sales were projected to fall by 20% this year to $14 million, and company owners concluded it was time to call it quits. “Customers wouldn’t buy from us; they went to China,” general manager Ray Espera said.
Imports, of course, have long been a factor for domestic furniture makers. But in the last couple of years, as the quality and turnaround time have improved at overseas factories, foreign makers have taken a bigger chunk of the U.S. market.
Last year, imports accounted for one-third of U.S. wholesale furniture shipments, up from about 28% two years before, said Jerry Epperson of Mann, Armistead & Epperson, an investment bank in Richmond, Va., specializing in the furniture industry.
Not only has the quality of imports improved, he said, but entertainment centers and dressers from China, Malaysia and Indonesia often cost up to 30% less than domestically produced goods.
“Furniture manufacturing in America is going the way of consumer electronics and the garment industry--away,” said Bruce Masterton, vice president of Blackhawk Furniture in Riverside. He said business has been so tough lately that his 18-year-old firm instituted a wage freeze, scaled back hours and shed 125 jobs, 20% of the work force, through layoffs and attrition.
Blackhawk itself is turning to China for help. Although the company has been importing parts from Asia since 1996, it just started to buy complete bedroom sets from China.
In South-Central, Jon Lintvedt, president of Farmhouse Furniture, also is planning drastic changes in his business.
Ten years ago, he and his wife, Sherry, started Farmhouse in a 3,000-square-foot factory, with little more than a table saw and some hand tools. Business flourished as they crafted stylish beds, dressers and other furniture for Eddie Bauer, Pottery Barn and Neiman Marcus.
Since Sept. 11, Lintvedt has laid off 10 workers, or 9% of his staff. Although business overall remains strong--he said it will rise 10% this year to $5 million--Lintvedt will soon begin importing pieces from China. And within four years, he predicts, his factory will be turned into a warehouse, his Made-in-the-USA product line gone, along with most of his employees.
Dan Kush, who 25 years ago borrowed $1,000 to found Kushwood Manufacturing in Ontario, said he expects to lay off 100 of his 400 workers by the end of next year as he increases imports and cuts back on production. He said he could be completely out of manufacturing in four to five years.
“I’ve built this business with my blood, sweat and tears, cut my hands and splintered my hands to make it work,” he said. “Making furniture is part of my soul. It’s hard to let it go, but I have no choice.”
