Ikea’s contract manufacturer to shut down plant in Finland; production goes to Ikea plants

Local residents in Kostomuksha have been deprived of forests and jobs while villages become deserted

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By Tapio Mainio and Kirsikka Moring in Kärsämäki and Kostomuksha
     
      Incap Furniture Oy, one of the largest manufacturers of pine furniture in the world, has announced that it is to shut down its production unit in Kärsämäki due to the fact that its largest customer, the Swedish furniture retailer Ikea, has decided to discontinue its purchases.
      The last 150 employees will be left jobless.
     
The plant has employed up to 270 persons, but the production has been run down gradually.
      Increasing quantities of Ikea’s ready-to-assemble furniture, including beds, tables, and chests of drawers made of solid pine, are henceforth to be manufactured at Ikea’s own plants in Sweden, Poland, the Baltic States, and in Russia.
     
To secure inexpensive wood for its own production, Ikea’s subsidiary Swedwood leases forests in Karelia.
      In addition, the company has opened a new glued-laminated panel production plant in Kostomuksha in Russian Karelia, supplying semifinished products for the company’s own furniture plants.
      ”The competition has become more intense. The latest burden on our shoulders was the favourable exchange rate of the Polish zloty against the Swedish krona from Ikea’s point of view”, says Managing Director Matti Vahe of Incap Furniture.
      Vahe points out some pieces of furniture in Ikea’s catalogue that have been made in Kärsämäki. Customers do not know the place of manufacture, as all products carry the Ikea quality and price.
      When everything was still fine, around a million furniture packages and some thousand truckloads were transported mainly to Ikea from the Kärsämäki plant every year.
     
The atmosphere at the packing department’s assembly line is gloomy, as the last Ikea products are to be finished and readied for delivery by mid-May.
      Sirkka Hyvälä and Sinikka Vähätiitto are packing the parts of Ikea’s Mandal bed into a box that is moving along the conveyor belt at walking pace. Each employee working on the assembly line has a specific task, for example to pack the two headboards of a bed into a box.
     
”We are likely to have a long summer vacation when we are put out of work”, says Satu Martiskainen, while conducting a random inspection on a bed to identify potential inconsistencies in batch quality.
      Martiskainen has worked at the plant for 11 years.
      ”I worked already at the old factory”, she comments.
      The old factory burned down in a blaze in 2002. It was replaced by a new building that is one of the most modern production plants in Europe.
     
”The plant implements economies of scale. For example, for Ikea we have been able to deliver really large orders cost-effectively and at a brisk pace, packing some 3,000 beds per day. A production plant like this, with a size of some 17,000 square metres, cannot easily be converted into a workshop which produces large numbers of small series for dozens of customers", says Matti Vahe.
      However, the smaller plants owned by Incap Furniture in Haapavesi and Varpaisjärvi will be easier to convert into serial production.
      ”After severe cutbacks, these plants are likely to be able to employ some 30 people each until the end of June”, Vahe estimates.
     
The large-scale production of Finnish pine furniture has come to the end of its road.
      ”Unfortunately, as the best prerequisites for such production in Finland would be here”, says with a sigh.
      As a result of the shut-down threat, Kärsämäki has asked to be recognised as a region undergoing structural change, whereupon it would be entitled to structural funds.
     
Across the border in Western Russia, Ikea’s subsidiary Swedwood Karelia is dominating nearly the entire loggable part of the forests located in the Kalevala national region and the Kostomuksha urban district.
      According to communications officer Ingrid Sten, the company has signed a 25-year lease contract with the Republic of Karelia, covering a total of 450,000 hectares of forests.
      Swedwood has also constructed a production unit with a total area of more than 10,000 square metres in Kostomuksha in order to manufacture glued-laminated panels using local wood as raw material.
      The plan was to construct a new furniture factory as well, but as the profit of the enterprise has been lower than expected, the project will not make any progress for the time being.
     
Director Sten Svensson of Swedwood’s Russian department is unwilling to comment on the situation in Kostomuksha in any way.
      The arrival of Swedwood led to unemployment in the area, as their previous employer, a forest company in Uhtua, declared bankruptcy at the same time.
      At that point, a total of more than 700 men - or most of the working-age men in the village - were left without work.
      Even though Swedwood’s Ingrid Sten says that the company is to employ some 600 people in Kostomuksha, ”most of them being local residents”, the word ”local” does not mean the jobless people in the Kalevala national region.
     
According to local residents, Swedwood promised to offer them jobs in compensation for the lost ones, but the villagers have not had any news from the company.
      Unemployment is a major human tragedy in Karelian villages, as there simply are very few employers - if any.
      The villages are becoming more and more deserted, which means that the Karelian and Finnish languages are becoming extinct and the cultural heritage is under threat of destruction.
     
The Karelian scenery that Finnish folklorists, natural scientists, and artists depicted back in the 19th century remained for an exceptionally long time, but now all is lost.
      According to professor Timo Karjalainen from the Finnish Forest Research Institute, clear felling is the most common method of timber harvesting in Russia, and in the Republic of Karelia the efficient use of forests has been maximised.
     
A new law on forest use was introduced in Russia two years ago, geared to raising the level of utlisation.
      The responsibility for sustainable development passed to the parties renting the forests, but according to Karjalainen this did not necessarily involve any obligation to replant trees.
      "Natural" regrowth is more often than not the order of the day.
      According to the 2007 statistics, clear felling amounted to more than five million cubic metres in the Republic of Karelia.
     
The conservation of old forests is also statutory in Karelia, but it is partly voluntary, while not all forests have been mapped.
      The largest individual protected area is the Kalevala National Park. In total, slightly over six per cent of all forests are protected.
      Environmental activist Aleksander Markovski has examined the protection situation in Karelia together with some Finnish experts.
      He says that initially cooperation between the civil organisations and Swedwood was impossible, but now it has made some progress.
      Markovski notes further that Ikea alone must not be blamed for the loss of jobs in the area, as it is the local administrative body’s duty to monitor the development of local employment.
     
     
Helsingin Sanomat / Edited from an article first published in print 4.5.2009


Previously in HS International Edition:
  Ikea´s Kamprad: Six to eight Ikea stores would suffice for Finnish clientèle (31.10.2007)

Links:
  Incap
  IKEA (Wikipedia)
  Republic of Karelia: the official site of the administrative bodies
  Kostomuksha (Wikipedia)
  IKEA Group corporate site

TAPIO MAINIO AND KIRSIKKA MORING / Helsingin Sanomat
tapio.mainio@hs.fi, kirsikka.moring@hs.fi