With the economy for institutional furniture manufacturers improving, Torrance-based Virco Manufacturing Inc. is shutting down its 25-year-old, 700-employee plant in Sonora, Mexico, and shifting production back to Los Angeles.
The move comes because the 600 workers already in Torrance have $15 million worth of new equipment to work with enhancing their productivity while transportation and other logistical costs of Mexican production were eating into profits, said Robert Virtue, president of Virco.
"A lot of people are asking us why we are moving from there to here," said Virtue. "But institutional and educational furniture is bulky, difficult to transport, and we wanted to be closer to our Western markets." (Virco also operates a factory in Arkansas, to serve the East and South.)
All the workers in Mexico will lose their jobs, and none will be transferred to Torrance, Virtue said. He declined to speculate about how many workers will be added at the Torrance plant, but said there is plenty of room in the existing facility for expansion.
Virtue said his company spent a quarter-century learning to manufacture in Mexico.
"We did it as well as anybody," he said. "But with currency fluctuations, different national holidays, electrical brown-outs, what have you, we decided to come back here."
Virtue was quick to add that his employees in Mexico were and are hard-working, but the chronically chaotic governmental, economic and infrastructural conditions of the country rendered it less valuable as a manufacturing platform. The plant, which once employed 1,700, will be completely shuttered this year.
Publicly held Virco is a national leader in producing chairs and tables used in schools, convention centers, churches, community centers, hotels and motels, and other commercial settings.
Roughly 60 percent of Virco production is for schools, and 40 percent for commercial uses.
Virco controls more than half of the U.S. market for educational furniture, and an even higher fraction of the California market, according to a recent research report from Wedbush Morgan Securities Inc., the downtown Los Angeles-based securities brokerage.
"If you went to school in the U.S., the chances are one in two you sat on one of our chairs," said Virtue.
Virco managed to post annual black ink through the 1990s, a very tough period for furniture makers, but both profits and revenues tended to be fairly flat.
But in its latest fiscal year ended Jan. 31, Virco posted record net income of $9.3 million on all-time revenues of $236.3 million. Profits were up 80 percent from the previous fiscal year.
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