GRAND RAPIDS — Reduced demand brought on by the COVID-19 pandemic has led to a significant workforce reduction at Steelcase Inc.
The Grand Rapids-based furniture maker announced measures Tuesday to reduce the cost structure for the company’s corporation functions and Americas segment.
A combination of early retirements and both voluntary and involuntary separations shed the company of 300 salaried employees, or 8 percent of Steelcase’s salaried workforce in the Americas and corporate front office.
Another 65 salaried employees have shifted to a part-time role within the company while others have accepted a temporary layoff for three to six months.
Steelcase also accepted early retirements of roughly 160 hourly employees within the company.
The measures will save Steelcase an estimated $10 million per quarter.
“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,” Steelcase president and CEO Jim Keane said in a statement. “Throughout this crisis, our customers have sought us out for our research and knowledge, and our employees have served our customers while receiving significantly reduced pay.”
Steelcase also announced that it would be restoring most of its salaried workers to their full base pay after extreme pay cuts in March. The move means Keane and other executive officers, including the board of directors, will now receive their normal annual retainers.
In March, Keane’s base pay was reduced to $1 and other executives took a 60 percent pay cut as part of drastic cost-cutting measures as the COVID-19 pandemic took hold and industries around Michigan temporarily shut down.
At that time, Steelcase also temporarily laid off all hourly manufacturing and distributing employees in Michigan except those working in the health care industry.
Restoring salaries will cost the company $20 million per quarter and Steelcase will also incur around $30 million in restructuring costs in its second and third quarters due to the workforce reductions.
Steelcase’s senior vice president and CFO Dave Sylvester detailed in today’s statement the dire outlook on demand and how it may only get worse before it gets better.
“Order patterns in the Americas continued to reflect significant year-over-year declines, averaging approximately 35 percent during the second quarter, while order declines in (Europe, the Middle East and Africa) and Asia Pacific moderated to approximately 20 percent,” he said.
“Due to the large order backlog going into the quarter, our revenue declined by only 15 percent 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.”
Sylvester also predicted that the revenue decline for August and the third quarter as a whole will be even greater, but he was hopeful that long term demand will eventually improve.