IKEA Is Closing Its Only Factory in the USA
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IKEA Is Closing Its Only Factory in the USA

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By Duncan Nielsen
This December, IKEA will cut costs—and 300 jobs—by closing its production facility in Danville, Virginia.

Known for its snackable meatballs and flat-pack furniture, the Swedish retailer is moving its only U.S.-based factory to Europe, where it can cut overhead costs on both raw materials and production. The Virginia location, which first opened in 2008, produces wooden goods—like KALLAX shelves and BESTÅ storage units—that are sold in the United States and Canada. These products will now be made overseas, only to be shipped back across the Atlantic. 

The Danville, Virginia, factory employs around 300 people and produces wooden furnishings for the U.S. and Canadian markets. 

The Danville, Virginia, factory employs around 300 people and produces wooden furnishings for the U.S. and Canadian markets. 

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The city of Danville incentivized IKEA to set up shop by offering the company 94 acres in a dollar-a-year lease agreement. 

The city of Danville incentivized IKEA to set up shop by offering the company 94 acres in a dollar-a-year lease agreement. 

"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, Virginia, for the long-term," said plant-site manager Bert Eades. Out-of-work employees won’t see a silver lining, but shoppers in North America can expect shelf prices to drop.

Back in 2008, Danville's city officials struck a move-in deal with IKEA in an attempt to grow the city’s economy beyond its bread-and-butter industries: tobacco and textiles. According to The Wall Street Journal, the furniture company made an investment in the city of $85.5 million, and the city, in return, allowed the company to lease a 94-acre site for $1 a year, with an option to buy for a total of $1, which they did earlier this year.

The factory makes shelving and storage units from wood sourced in the USA, but the costs of local raw materials are too high to continue production in the area.

The factory makes shelving and storage units from wood sourced in the USA, but the costs of local raw materials are too high to continue production in the area.

The facility's production will be moved to Europe, where IKEA can save on the cost of raw materials. 

The facility's production will be moved to Europe, where IKEA can save on the cost of raw materials. 

Unfortunately, the city could do little to further incentivize the retailer to stay, since the costs of raw materials in the USA are simply too high, according to IKEA. Danville will miss the added $500,000 in annual tax revenue, but city manager Ken Larking scores the manufacturer’s 11-year presence as an overall win for the city’s ledger.

IKEA is promising to help local workers find new employment by working with U.S. agencies and labor representatives. "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," said Eades, though it's still unclear how the city plans to keep its footing after the international company ships out.

Related Reading: IKEA to Build Affordable Modular Homes in the UK