Two capital-area factories are slated for closure as their parent company reconfigures its supply chain to boost profits in the face of slower sales and high U.S. overhead.
- New York-based Griffon Corp. said it plans to close Hampden Township and Harrisburg factories that make garden tools, wheelbarrows and other equipment for The AMES Companies, a Griffon subsidiary and longtime staple of the region’s manufacturing sector.
- Griffon is also closing factories in Grantsville, Maryland, and Fairfield, Iowa.
- Like the local plants, they make products for what Griffin calls its consumer and professional products division. The division’s brands include True Temper gardening equipment, Hunter fans and ClosetMaid storage products.
- In addition, the company said it is closing four wood mills but did not disclose the locations.
- The plant and mill closings will affect about 600 employees overall. A company spokesperson was not able to provide additional details, such as when the plants would close.
Why is this happening: On a conference call with analysts this week, Griffon executives cited slower demand for goods in its consumer and professional products division, known as CPP.
- CPP had sales of $314.3 million in the first three months of 2023, down 24% from the year-ago quarter.
- Profits also fell.
- Adjusted EBITDA — or earnings before interest, taxes, depreciation and amortization — slid to $19.6 million for the first quarter, down from $47.8 million a year ago.
- The executives also cited high overhead costs for U.S. manufacturing and said some of the division’s product lines have become unprofitable.
- As a result, the company is outsourcing production under what it described as an “asset-light structure” offering a “more flexible and cost-effective sourcing model that leverages supplier relationships around the world.”
- Griffon uses a version of the strategy for Hunter fans, which are designed and distributed in the U.S. but made elsewhere, according to company executives speaking on the conference call.
- “So, I view what we’re doing to our CPP business is an evolution of what we’ve done successfully at very attractive margins globally to be able to fix a business in the U.S. that has a very high manufacturing overhead that can’t be supported other than being on an outsourced global sourcing model,” Griffon chairman and CEO Ronald Kramer said on the call, according to a transcript.
- Under the new strategy, products could come from the U.S. but also from South America, Central America and Asia, Griffon CFO Brian Harris said on the call.
When is this happening: Griffon said the transition to its new supply chain strategy for consumer and professional products should be complete by the end of 2024.
- The company is not closing its 1.4 million square-foot distribution center in the Carlisle area, a facility that also does some light assembly. The lease there expires in 2035, according to a regulatory filing.
Is there a cost: Yes.
- Griffon estimated it will spend between $120 million and $130 million to change its strategy.
- The total includes between $50 million and $55 million in costs related to employee retention and severance, operational transition, and facility and lease exit costs,
What happens to the factories: They will be put up for sale, according to Griffon.
- The company owns both capital-area properties and said it hopes to recoup some of its costs from their sale.
- The Hampden Township factory, spanning 380,000 square feet, is at 465 Railroad Ave.
- The 264,000 square-foot Harrisburg factory is at 1500 S. Cameron St.
- The plant, which makes wheelbarrows, served as a backdrop for former President Donald Trump on a visit to Central Pennsylvania in 2017. News reports at the time indicated the plant employed 130-plus people.
- The Maryland plant, which Griffon also owns, is 155,000 square feet, according to company regulatory filings.
- The Iowa plant is leased. It spans 54,000 square feet.
- The company’s most-recent annual filing lists a single wood mill, in Champion, Pennsylvania, near Seven Springs.
The background: AMES is the product of a 1999 merger between Ames Co. and True Temper, which had moved to the Camp Hill area in 1981. The merged business was known as Ames True Temper before becoming The AMES Companies in 2014.
- The business has had many owners over the years.
- Griffon is the latest, having bought AMES in 2010 for $452 million.
- AMES was owned before that by New York-based private equity firm Castle Harlan, which bought it in 2004 from Wind Point Partners, a Chicago-based PE firm.
- Ames traces its roots to 1774, when a Capt. John Ames began making metal shovels in Massachusetts, then a British colony.
- The True Temper name was coined in 1949 but its corporate origins in the U.S. stretch back to the early 19th century.