Sauder acquires key O'Sullivan assets; Lamar plant to close

Tuesday, April 17, 2007

By Crystal D. Hancock

Nevada Daily Mail

The waiting is over, but for most employees of O'Sullivan Industries' Lamar plant, the worries are anything but over.

Rumors and uncertainty reported by the Nevada Daily Mail on Friday have been replaced by a formal announcement, and it's not good news for employees.

Many will find themselves immediately out of work; others could keep their jobs for a few months, no more.

O'Sullivan Industries has announced it is officially shutting down its Lamar plant, having sold key assets and portions of its product line to Sauder Woodworking Company.

A press release from O'Sullivan indicated that some of the plant's employees will be let go immediately; others will lose their jobs some time between July and October 2007.

During a short transition period following this sale, O'Sullivan plans to manufacture products for Sauder, which Sauder will then sell to O'Sullivan's customers.

Discussions with other potential deal partners have ended, so O'Sullivan is focusing all of its attention on winding down its operations in an orderly manner with the lowest possible impact on the company's vendors, customers and employees, according to a press release from O'Sullivan.

Specifically, Sauder is purchasing all intellectual property, the O'Sullivan name, the Coleman garage license, plus select drawings, patents and raw materials.

According to the Sauder news release, Kevin Sauder, president and CEO, said, "We did not buy the company outright. But after studying O'Sullivan's business, we acquired selected portions we felt added value to Sauder's operations and customer relationships. The O'Sullivan plant will eventually have to close, but the Sauder-O'Sullivan operating agreement allows O'Sullivan employees a few months of income while they seek other employment and it keeps product flowing to important retail customers."

Sauder indicated that global factors such as imports, as well as the cost of materials, have hit the ready-to-assemble market hard. Cutbacks at one of Sauder's other facilities, in Ohio, means that production of the O'Sullivan line purchased will be moved to that location. Sauder did not purchase O'Sullivan's local buildings.

In an e-mail interview, Sauder added, "Unfortunately, there is too much capacity in the domestic RTA (ready to assemble) furniture industry. With a strong recent push from imports and prices of particleboard rising 50 percent in the last few years, we have all suffered. Sauder also had a decrease in sales over the last few years, and consequently, we have enough capacity in Archbold (Ohio) to absorb the business from O'Sullivan. So once the transitional plan is complete, we will move the production to Archbold, a town in northwestern Ohio very similar in size to Lamar."

The end result will leave hundreds without jobs. O'Sullivan has provided notice of layoffs to the employees and appropriate state and local agencies as required by federal law.

O'Sullivan emerged from Chapter 11 bankruptcy protection in April 2006 and later closed its smaller plant in Virginia while appointing new CEO Rick Waters. However, financial problems continued and in January, O'Sullivan came within two hours of defaulting on a $219,000 utility bill to the city of Lamar. However, since that close call, O'Sullivan has been current on its bills according to Lamar city administrator, Lynn Calton.

Between the rise in particleboard costs and the loss in demand Sauder referred to, O'Sullivan ran out of money, and has since been searching for a solution to its financial problems. However, the only answer they could find is selling the company.

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