GRAND RAPIDS, Mich. - Steelcase, the largest contract furniture in North America, announced that 300 salaried employees - or 8 percent of its total workforce - will leave the company through "early retirements, voluntary separations, and involuntary separations."
65 salaried employees will transition to a part-time role or be laid off temporarily, and 160 hourly employees will retire early.
Most of the remaining salaried workers will see their pay to return to their normal, pre-COVID levels. This includes the salaries of the CEO and board of directors.
The move is part of a major cost structure change the company is making to help get things under control after the impact of COVID.
“Making these types of permanent reductions to our cost structure is something we hoped to avoid, but they became necessary as demand levels in the Americas have continued to reflect the impact of the COVID-19 pandemic,” said Jim Keane, president and CEO.
The company estimates the cost of reinstating salaries in the U.S. of approximately $20 million per quarter will be partially offset by savings of approximately $10 million per quarter related to the salaried workforce reductions. The company estimates it will incur restructuring costs totaling approximately $30 million during its second and third quarters in connection with the workforce reductions.
“Order patterns in the Americas continued to reflect significant year-over-year declines, averaging approximately 35% during the second quarter, while order declines in EMEA and Asia Pacific moderated to approximately 20%,” said Dave Sylvester, senior vice president and CFO. “Due to the large order backlog going into the quarter, our revenue declined by only 15% in June and July compared to the prior year, and we posted better than expected operating income for those months, which was also higher compared to the prior year as a result of the significant temporary cost reduction actions we took.
"We expect to report larger revenue declines in August and the third quarter, driven by the Americas. The workforce reductions we are announcing today are less severe than the current declines in demand levels in the Americas, as although our near-term visibility remains limited, we continue to believe demand levels will improve over the longer-term.”
In late March as a response to state orders, Steelcase temporarily laid off nearly all of its hourly manufacturing and distributing employees in Michigan. The only hourly workers to remain were those serving the healthcare industry. It also slashed the salaries of all salaried workers. CEO James Keane received a base pay of just $1, while other executives saw a 60 percent pay cut, and the pay of all other salaried workers were cut by 50 percent.
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