A second prominent Triad home furnishings manufacturer, Klaussner Furniture Industries Inc., has immediately shut down operations and is letting go of 893 employees following an inability to access additional funding from its lender.
Klaussner, based in Asheboro, had been in business since 1963.
Klaussner posted on its website Monday that the shutdown is “the result of challenging and unexpected business circumstances impacting our operations.”
In a WARN Act notice filed with the N.C. Commerce Department, Klaussner said the job eliminations began Monday and are slated to continue through Aug. 21.
The manufacturer listed 893 employees with the following breakdown per facility: 558 at its 405 Lewallen Road plant in Asheboro; 127 at its 905 N.C. 49 South, Asheboro plant; 64 at its 440 U.S. 220 South plant, Asheboro; 58 at its 58 Industrial Road, Candor plant; 38 at its 907 N.C. 49 South plant, Asheboro; 26 at its 2206 Dumont St., Asheboro plant; and 15 at its 4402 U.S. 220 South, Asheboro plant.
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The majority of companies going out of business, or conducting job cuts affecting at least 50 employees, typically file a WARN notice in which they agree to pay 60 days’ worth of wages and benefits to affected workers.
The filing also serves to alert local and state employment agencies to begin providing assistance to workers who will be unemployed.
Klaussner said the tipping point for the decision was that its lending source “unexpectedly refused to continue to fund the company’s operations. This outcome was not reasonably foreseeable, but due to these unexpected circumstances, Klaussner can no longer sustain its operations.
“As a result, Klaussner has made the difficult decision to permanently cease operations and is providing as much notice as possible.”
Klaussner said it is working to provide information and resources to assist with next steps for displaced employees as it becomes available. The information “will be communicated directly to employees via the contact information we have on file.”
Consumers with existing orders are asked to email to Consumers@Klaussner.com.
“What we are seeing is an unfortunate side effect of tighter credit standards emanating from the raising of interest rate targets by the Federal Reserve to fight inflation,” said Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University.
“High levels of consumer debt will reduce purchases of goods that can be delayed, such as furniture, as we slide into a probable recession toward the end of this year and continuing into early next year.
“The entire furniture manufacturing sector is seeing these effects, and it is especially problematic for companies with high levels of existing debt.”
Klaussner was acquired in 2017 by private investment firm Monomoy Capital Partners. Terms of the deal were not disclosed.
Bill Wittenberg, Klaussner’s president and chief executive at the time of the sale, said it “will provide further operational capabilities and instant capital for major growth, which is what we have been positioning the company for over the past six years.”
In 2020, the manufacturer conducted a sale-leaseback of three Triad facilities and more than 265 acres. It received $50.6 million in the deal from the buyer, asset manager AR Global of New York.
Not alone
The Klaussner shutdown decision comes nine months after the abrupt and stunning closing of United Furniture Industries Inc.’s Triad facilities in November as United also was unable to secure additional financing.
United made promotional- to mid-priced upholstered furniture in the U.S. under its brand and the Lane Home Furnishings brand. The manufacturer also imported wooden bedroom and dining furniture.
After more than eight years of operations at the historic Weeks plant in northwest Winston-Salem, United unexpectedly shut down all of its plants on Nov. 22, ending employment and health insurance benefits for 530 Triad employees and about 2,700 companywide. At that time, United had a combined 245 employees in Archdale and Trinity, 220 in Lexington and between 50 and 70 in Winston-Salem.
After facing pressure from creditors, led by Wells Fargo & Co., for an involuntary bankruptcy filing, United submitted in February its Chapter 11 federal bankruptcy filing, citing between 200 and 999 creditors and between $1 million and $10 million in assets and liabilities. Wells Fargo filed on Dec. 30 a motion for Chapter 7 liquidation of the manufacturer’s assets and the appointment of a bankruptcy trustee.
On Jan. 18, Judge Selene Maddox issued a ruling giving United owner David Belford and the company the opportunity to direct the sale of its assets in a Chapter 11 bankruptcy protection motion.
Maddox said in her memorandum and order that Belford and the United board of directors did not “rise to the level of bad faith” in their decision to shutter operations.
However, she wrote that “its management made serious errors in business judgment and displayed clear financial incompetence.”
A federal bankruptcy judge approved Aug. 1 the sale of United’s assets portfolio for $65 million to Phoenix Acquisition.
Phoenix, based in Milwaukee, specializes in buying and renovating manufacturing plants. Phoenix has three N.C. properties, including a 100,810-square-foot building on a 33-acre site at 8425 Triad Drive in Greensboro.
Meanwhile, 12 former United employees, including five from North Carolina, have filed an amended complaint in their attempt to force the defunct manufacturer to meet WARN Act requirements for final compensation and benefits for about 2,700 employees.