Haworth Is Hitting A Big 'Home' Run

July 16, 2004
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HOLLAND — For once, the news was about the jobs that were coming to the area, not disappearing.

And with a decision to relocate work to the area, Haworth Inc. joined its competitors in consolidating operations in West Michigan, not only moving jobs back but furthering the clustering of office furniture industry facilities in a region where building office furniture has been part of the culture and heritage for generations.

“This is our home. We like being here,” company Chairman Richard Haworth said last week in announcing that Haworth Inc. will close production and distribution facilities in Arkansas, Texas, North Carolina and Pennsylvania and move the work to plants in West Michigan.

The move will directly create up to 200 jobs in the region within six months, up to 1,000 over the next 12 years, and has the potential for indirectly creating more than 1,400 spin-off jobs over the same period, according to an economic analysis from the state.

In consolidating more of its operations in West Michigan, Haworth is following the route taken in the past year by competitors Steelcase Inc. and Herman Miller Inc., which early this year completed the shutdown of a plant in Canton, Ga., and transferred the work and nearly 400 jobs to its Spring Lake campus, which now employs nearly 1,600 people.

Industry analyst Mike Dunlap sees the moves by all three companies as part of a small retrenchment in West Michigan that puts more operations closer to their headquarters, research and design functions, supply base and a highly capable work force where making office furniture is ingrained in the culture.

“It speaks volumes for the confidence they have in the work force,” Dunlap said of the Haworth move. “What it comes down to is the West Michigan locations will be more productive and it’s a better economic decision for them than remaining in those other locations.”

Local officials greeted last week’s announcement with enthusiasm. Having more of Haworth’s operations back in the region is sure to benefit businesses that support the office furniture industry, said Randy Thelen, president of the regional economic development group Lakeshore Advantage.

“This will certainly solidify Holland’s position for future growth with Haworth for years to come,” Thelen said.

State economic incentives and a “steadfast” and “loyal” work force back home made the difference in Haworth’s decision to consolidate operations in West Michigan, rather than Arkansas.

By choosing to close plants elsewhere and move the work to facilities in Michigan, Haworth bit on a generous incentive package that enabled the state to overcome a “difficult financial challenge” in competing with a state that carries a lower labor cost and tax burden, Richard Haworth said.

The Michigan Economic Development Corp. and local officials put together “a solid business case for putting the business in West Michigan” that will allow Haworth to embark on a $42.7 million expansion in Holland and a major reconstruction of its corporate headquarters, he said. Without the incentives, Haworth would have consolidated the manufacturing and distribution operations in Arkansas.

“The hurdle was big enough that without the help from the state, the jobs would have gone the other way,” Haworth said. “Now we have to make the plan work within the company.”

Beyond the incentive package, which was put together in a mere 30 days, Richard Haworth credited a cooperative atmosphere between the public and private sectors and the quality of the West Michigan work force with swaying the decision over Arkansas, where the company will close a plant in Jonesboro that opened just five years ago.

“We like the kind of people that we hire,” he said. “They’re steadfast, they’re loyal and they help us to improve our business. They spend every day helping us to create better products and better services for our customers.”

In competing against cheap labor states in the south and overseas, the capability of the work force in Michigan that’s attuned to manufacturing is a strength that the region and state can play up, said economist George Erickcek, a senior analyst with the Upjohn Institute for Employment Research in Kalamazoo.

While labor costs in Michigan are higher than southern states, so is the capability of workers, Erickcek said.

“You get what you pay for and our workers do produce,” he said.

That benefit is magnified with office furniture makers in West Michigan, where a good part of the economic, labor and manufacturing base is geared toward serving the industry, Erickcek said. The industry in West Michigan is a classic example of a manufacturing cluster that can leverage the region’s expertise within that economic sector, he said.

“This is the power of having a cluster,” Erickcek said.

In consolidating operations, Haworth will vacate some 1 million square feet of manufacturing and distribution space in four states and move those operations to facilities in Holland, Allegan and Big Rapids, Chief Financial Officer Cal Kreuze said. Haworth also has facilities in Douglas and Ludington, with an overall West Michigan work force of about 2,500, about 8,500 worldwide, and 2.5 million square feet of capacity in the region, Kreuze said.

The harsh downturn in the office furniture industry the last three years that eroded 40 percent of sales volumes and the implementation of lean manufacturing necessitated the move to reduce capacity and consolidate operations, Kreuze said.

While the industry is finally rebounding and sales are growing again at a modest rate in 2004, “in such an environment, cost containment and operating efficiencies are essential,” he said. “We retained excess capacity in the event that the industry recovery would be more robust, but now we must adjust to market conditions.”

Haworth, after posting sales of $1.23 billion in 2003, is seeing modest sales growth this year and a significant upturn in activity such as customer visits and inquiries, Richard Haworth said.

Sales are “up a little bit, in the neighborhood of a couple percent,” Haworth said. He wishes the rebound for the company were better, but is satisfied that the sales slide that began in 2001 is over.

“At least it’s not going down anymore,” Haworth said. “All the indicators are in the right direction.”    

Package Deal

Here are the specifics of what the state offered Haworth Inc. to consolidate operations in Michigan:

  • An $11.8 million Single Business Tax credit.

  • A $12 million state property tax abatement of 100 percent for 12 years.

  • $913,100 in local property tax abatements in Holland, Allegan and Big Rapids.

  • A $300,000 Economic Development Job Training grant.

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