Ikea selected Danville Virginia to build its first U.S. factory. Residents could hardly believe their good luck when it opened. Ikea is known worldwide for manufacturing stylish and affordable furniture. To lure the company to Danville the state and local government offered 12 million in incentives.
Danville had watched many of its former textile jobs flee overseas. It was a welcome event when a foreign company opened in Danville to provide jobs. But three years later the mood has changed. Workers complain about working conditions and there have been several racial discrimination complaints as well. Workers have tried to organise a union and the company has tried to prevent this.
Workers complain of eliminated raises, a frenzied pace and mandatory overtime. .Some of the Virginia plant's 335 workers are trying to form a union. The International Assn. of Machinists and Aerospace Workers said a majority of eligible employees had signed cards expressing interest. The company for its part hired a law firm which specialises in keeping unions out of companies.
Swedwood spokeswoman Ingrid Steen in Sweden called the situation in Danville "sad" but said she could not discuss the complaints of specific employees. She said she had heard "rumors" about anti-union meetings at the plant but added that "this wouldn't be anything that would be approved by the group management in Sweden."
In the U.S. there is very little attention paid to the conflict and problems in the Danville facility whereas in Sweden it is given a great deal of press coverage.
Per-Olaf Sjoo, the head of the Swedish union in Swedwood factories, said he was baffled by the friction in Danville. Ikea's code of conduct, known as IWAY, guarantees workers the right to organize and stipulates that all overtime be voluntary.
Sjoo said:"Ikea is a very strong brand and they lean on some kind of good Swedishness in their business profile. That becomes a complication when they act like they do in the United States," "For us, it's a huge problem."
Laborers in Swedwood plants in Sweden produce bookcases and tables similar to those manufactured in Danville. However, the Europeans enjoy a minimum wage of about $19 an hour and a government-mandated five weeks of paid vacation. Full-time employees in Danville start at $8 an hour with 12 vacation days - eight of them on dates determined by the company.
But the situation in the U.S. is even worse, as one-third of the workers at the Danville plant have been drawn from local temporary-staffing agencies. These workers receive even lower wages and no benefits, employees said.
Swedwood spokesperson Steen said the company is reducing the number of temps, but she acknowledged the pay gap between factories in Europe and the U.S. "That is related to the standard of living and general conditions in the different countries," Bill Street who is attempting to organise a union said that Ikea was taking advantage of weaker protection laws in the U.S. Street said:"It's ironic that Ikea looks on the U.S. and Danville the way that most people in the U.S. look at Mexico,".
Local city managersaid:"They've definitely given jobs to people that desperately needed them here," Swedwood says it chose Danville to cut shipping costs to its U.S. stores. The plant has been run mostly by American managers, along with some from Sweden.
Even though Ikea remained profitable during the downturn at Danville last fall Swedwood eliminated regularly scheduled raises and made cuts to some pay packages. Starting pay in the packing department, for example, was reduced to $8 an hour from $9.75. Steen said the changes were made to free up more money to pay incentive bonuses to top performers. This is far below the median hourly wage in Danville of $15.48 an hour.
Companies world wide have tried to take advantage of lower cost sources of production. This is what Ikea is doing in Danville. However, Ikea has a reputation both as a producer of quality products but also as a good employer in Sweden. If Ikea wants to keep its image of quality it had better improve the quality of working conditions and wages in the United States.