Wood-Mode Closure Reverberates Industrywide
authors Eliot Sefrin | May 16, 2019
KREAMER, PA — The abrupt, unexpected closure of Wood-Mode is sending reverberations through the kitchen and bath industry, its ripple effect impacting dealers, designers, consumers, sales reps and others on virtually all levels of the industry’s supply chain.
This week’s sudden closure of the iconic, 77-year-old custom-cabinet manufacturer dealt a blow to approximately 1,000 laid-off workers and created a shroud of sadness, chaos and uncertainty among community officials and the company’s extensive network of dealers, many of whom have multiple projects in the manufacturing pipeline.
Cabinet orders in various stages of production have been left, at least temporarily, in a state of limbo. Suppliers are reportedly coping with unpaid invoices. Consumers left in the lurch are wondering about the uncertain status of their projects. Hundreds of dealers in the U.S., Canada and South America, many of whom have had long-term, exclusive relationships with Wood-Mode, were left pondering the fate of their own businesses – some contemplating potential closure, others scrambling to find new cabinet vendors. Most were simply lamenting the fact that Wood-Mode, for decades an industry pioneer and long considered the gold standard for custom cabinetry in America, is apparently out of business.
“Wood-Mode has been a yardstick by which an industry has been measured,” said Alan Zielinski, a past president of the National Kitchen and Bath Association and a long-time Wood-Mode dealer with Better Kitchens, Inc. in Niles, IL. “I’m attending an industry event out in California, and when I got off the plane, my phone just lit up with the news.”
Zielinski, whose connection to the company goes back more than 50 years to his father’s ownership of Better Kitchens, said his immediate focus is on six projects in production with Wood-Mode, including one order in transit from the factory. From there it’s the question of what to do with several other completed orders that are ready to be submitted. According to Zielinski, other dealers he spoke with also had many orders in the pipeline expressing the sense that the closure was not about a lack of demand.
“Looking at this from a 35,000-foot standpoint, maybe there is the opportunity for someone to come in and purchase it now, or perhaps give it a shot of financing to get it started back up again. However, if that does not occur, then we have to evaluate what products we want to represent as quickly as possible so we can continue paying our bills and look to our survivability in the industry,” said Zielinski, who visited Wood-Mode last fall for training. “Being part of Wood-Mode was being part of a family. We had family at the factory. We had family in the production area. We had family in the offices.”
Wood-Mode employees were notified of the abrupt closure via a hand-delivered letter, and were escorted from the company’s 1.3-million-sq.-ft. Kreamer, PA facility by state, county and local police. Administrative employees were permanently laid off, while production workers were reportedly being laid off in phases, so that select cabinet orders could be completed.
Employees and cabinet industry insiders had long been aware that Wood-Mode was experiencing financial challenges. Employees in recent years had faced salary cuts, elimination of bonuses, cash-flow shortfalls and a variety of cost-cutting moves, according to a former corporate executive. There were also periodic layoffs and early retirements at the company, which once employed more than 2,000 people. Several employees interviewed by local media said the company was still receiving a steady flow of cabinet orders, but was having difficulty paying bills.
In 2017, SSG Capital Advisors, a Pennsylvania-based investment firm, was retained to assist Wood-Mode with a multi-tiered financial package that enabled the company to restructure existing debt and generate liquidity to support ongoing operations and future initiatives. A financial turnaround team was also put in place to assist with operations. In the midst of all this, rumors about a potential closure had been circulating for months, although many people believed the rumors were simply conjecture.
Still, most people did not anticipate that the privately-held company would shut its doors so abruptly, particularly amidst fleeting hopes that the iconic brand would somehow be able to continue operations.
Over the past several months – and intensifying during the weeks prior to the company’s closure – Wood-Mode officials said they had been seeking financing and other options, including an injection of capital and a potential transaction that would have enabled the company to continue operations, according to V.P./Human Relations David Scarr.
Those efforts collapsed, however, when an unidentified party with which the company had entered into a letter of intent to acquire the business “decided abruptly to not proceed with the transaction,” Scarr said. Several days later, Wood-Mode learned that its prime lender was “unwilling to provide normal funding” that would have enabled the company to continue operations while seeking other potential buyers, including one that submitted a letter of intent days before the closure, Scarr added. As a result, he said, Wood-Mode was left “with no choice but to make the difficult decision to wind down its operations.”
“After 77 years of business, the company and ownership truly regret the impact of this action to our employees, the community and our loyal customers and suppliers,” Wood-Mode said in a prepared statement. “We are extremely appreciative of everyone’s commitment and service to Wood-Mode throughout the years.”
Wood-Mode management issued no additional comment. And it remained uncertain – as of press time for Kitchen & Bath Design News – whether the company could possibly be spared through either an acquisition or an injection of financing.
Even Pennsylvania officials, who’d been working with Wood-Mode on its financial challenges, were reportedly caught unaware that the company was closing, until the state received a certified letter on the day of closure. Literally days earlier, Pennsylvania Gov. Tom Wolf, accompanied by an entourage of state, country and local officials, toured the Wood-Mode factory to tout job-training programs being offered by the company.
EMPLOYEE ASSISTANCE OFFERED
According to Pennsylvania legislators, state resources are being made available to laid-off employees, who will be provided with access to unemployment compensation, health and pension benefits, financial counseling, job training-and-search activities and social service programs.
The company employed nearly 1,000 people, with an average length of service reportedly about 20 years. However, many employees worked at Wood-Mode for far longer than that – the company’s workforce encompassing, in some cases, three generations of family employees.
Local, county and state legislators last week initiated the state’s Rapid Response Coordination Services, designed to aid workers affected by plant closures. Charitable organizations are also working to assist with the needs of laid-off employees. Food banks, job fairs and other initiatives are also reportedly underway. In addition, a local attorney was meeting with furloughed employees to discuss potential legal issues concerning the Wood-Mode closure.
Although the company said that its notice of closure was official pursuant to the conditions of the Worker Adjustment and Retraining Notification (WARN) Act, there was uncertainty over whether the company complied with the WARN Act, which requires that employers with 100 or more workers (with few exemptions) provide at least a 60-day advance notice of a plant closure or mass layoff. The company said it was unable to provide more notice because management believed that a company sale would go through and that its lender would continue to provide financial support.
The penalty for violating the law mandates that a company provide aggrieved employees with up to 60 days of back pay and benefits. Enforcement of WARN, however, is handled not through federal officials, but through the district courts, placing the burden of legal action on workers and their representatives.
A LEGACY OF INNOVATION, EXCELLENCE
Known for decades for its innovation, quality and craftsmanship, Wood-Mode – formally known as “Wood-Mode Fine Custom Cabinetry” – began operations in 1942 as Wood-Metal Industries. With wartime scarcities of steel limiting the sale of residential cabinets, the company turned to supplying cooks’ tables, pigeon coops, shell cases, ladders and other products for the military. The post-World War II housing boom, coupled with burgeoning cabinet demand, enabled the company to begin producing kitchen cabinetry, using custom-production techniques that soon set the standard for the industry.
During the 1950s, Wood-Metal Industries introduced the concept of customized cabinet doors, and began experimenting with a widening range of finishes and materials. The company eliminated the word “Metal” from its name in 1956, and became the more family-friendly “Wood-Mode Kitchens.”
During the ’60s, and in the decades that followed, Wood-Mode became an iconic cabinet brand widely known for its commitment to product quality, customer service and craftsmanship and, along with other custom-cabinet suppliers, helped usher in an entirely new concept: a one-of-a-kind “custom-designed” kitchen that revolutionized the way cabinetry was manufactured, marketed and sold – no longer solely through lumber yards and mass-merchandising home centers, but through a national network of independent kitchen and bath dealers who offered personalized, professional design and installation service. In the process, Wood-Mode became a true nationally distributed custom cabinet brand, in contrast to most custom-cabinet suppliers who market their cabinetry in a narrower geographic region.
In subsequent years, Wood-Mode expanded the use of its cabinetry from kitchens and bathrooms, to closets/wardrobes, entertainment areas, offices and other areas of the home.
The company marketed its products under two brand names: Wood-Mode and Brookhaven, a limited line of lower-priced cabinetry aimed at making Wood-Mode available to a wider audience of customers. The company’s product mix included a diverse collection of wood species, door styles, finishes and custom-design elements.
“Wood-Mode has been a Valley institution and generous community partner for nearly 80 years,” said Seth Joseph of the Greater Susquehanna Valley United Way, adding that he was “extremely saddened” to learn of the company’s closing.
“The company has provided thousands of jobs, and not just philanthropically supported many organizations and projects, but provided decades of inspired vision, leadership and volunteerism across our community,” Joseph observed.
“Hundreds of working families,” he said, “are hurting right now.”
Wood-Mode dealer Alan Zielinski says he’s keeping his options open. He’s hoping that a white-knight steps in to re-start Wood-Mode so that his firm can continue placing orders through the company. If that does not happen soon, he’s ready to find a new supplier.
“We will continue to service our clients because, when it comes down to it at the end, it is our name and our reputation on the building. And it should not matter to the client what product we are recommending.”
— Eliot Sefrin, KBDN Publisher Emeritus