One of the world’s largest manufacturers of furniture leather, Sweden’s Elmo Leather, is to close its Danish subsidary before the end of the year, the company said in a statement yesterday.
Elmo cites over-capacity and deteriorating profitability for the decision. “Rectifying the problem requires more than a normal rationalisation scheme,” commented Nalle Johansson, President and CEO. “We must make closures and concentrate production at our main facilities in Svenljunga in Sweden.”
The European and US furniture leather markets have slowed dramatically in the past year while competition from Asia, particularly China, has intensified, squeezing margins throughout the industry. The German market has been particularly badly hit while in the US there are now no domestic manufacturers of furniture leather left, the market having been taken by Chinese and South American tanners. In the US, the furniture itself is is now mostly produced by Chinese subcontractors.
“Even as business conditions improve we predict a noticeable part of the market will disappear. An increasing share of leather furniture is being exported from manufacturers in Asia. We must adapt our production capacity to this situation,” says Nalle Johansson. Elmo Leather acquired its Danish subsidiary (formerly Swewi A/S) in October 2000 with the aim of increasing its automotive leather output. In the following summer it was authorised to increase production at Svenljunga, but was unable to do so because of the by then declining demand for furniture leather.
By mid 2003 the liming process at Dronningemaen in Svendborg had been closed and since then, manufacturing in Denmark has been run at the plant at Vestergade in Svendborg. This plant will also be shut down by the end of the year, slightly more than three years after its acquisition.
The announcement co-incides with the opening of a new Elmo production plant at Wismar on the Southern Baltic coast in Germany, for cutting leather for automotive interiors. Production at Wismar will be run by a wholly-owned subsidiary, Elmo Trim GmbH, and employ around 50 people. Around 90 jobs will go with the closure of the Danish subsidiary.
