DETROIT (Jan. 12, 10 a.m. EST) — Jim Hackett does not mince words.
While the rest of the North American economy has been suffering through a recession during the past few years, the president and chief executive officer of Steelcase Inc. said the office furniture industry has been suffering through nothing short of a depression.
The U.S. office furniture market dropped from production worth nearly $13.3 billion in 2000 to an estimated $8.2 billion in 2003 as companies closed, curtailed and cut back on both expenses and personnel.
In 2002, the industry saw sales of $8.9 billion.
While the economy improved slowly overall through the latter half of 2003, those improvements so far have not translated into increased spending on office furniture.
“There is news that the economy is starting to improve, but there is a normal lag in responses to that [in office spending],” Hackett said during a Dec. 19 conference call with analysts.
“We are seeing several positive signs in the overall economy,” agreed Jim Keane, Steelcase's senior vice president and chief financial officer.
“But as expected, most spending has been on technology, rather than office furniture.”
But there are signs of gradual improvements in overall job numbers, and those are the kinds of increases needed if furniture makers like Grand Rapids, Mich.-based Steelcase and its competitors are to see any real growth.
“The economic recovery is moving slower than we'd hoped, but it is moving,” said Michael Volkema, chairman and chief executive officer of Herman Miller Inc. of Holland, Mich.
“The economic news is mixed. Corporate profitability, gross domestic product and consumer and business confidence continue to trend up, yet some of the key areas that drive our sales, like employment levels and construction, are less than encouraging.”
Analysts with Global Insight predict a 3 percent improvement in office furniture sales for 2004, but expect no growth until the middle of the year.
Steelcase's estimates are trending slightly higher for internal growth. The firm expects a 5 percent improvement for its coming fiscal year, with slow but positive growth in the single digits for the two years after that, Keane said.
The Business and Institutional Furniture Manufacturer's Association also is holding out hope for improvements in the coming year, if its supporters can push through a reform to the bidding process for Federal Prison Industries. FPI, the manufacturing group of the federal prison system, uses inmates as inexpensive labor.
BIFMA has called for Congress to eliminate a process that now permits the FPI an inside track on federal contracts for a variety of components, including office furniture.
Rep. Pete Hoekstra, R-Mich., a former Herman Miller executive, shepherded a reform to a 350-65 vote approval in November, but it still requires action in the Senate. Voting is slated for Feb. 11.