Popular Home Improvement Store Closes Its Doors – Not Filing for Bankruptcy

Popular Home Improvement Store Closes Its Doors – Not Filing for Bankruptcy

Regional paint company, Kelly Moore Paints, announced on January 12, 2024, that after 78 years in business, the company will be shutting down. The decision stems from an immediate need to wind down all operations due to insufficient funding. This announcement follows the company’s layoff of approximately 700 workers and the temporary halt of operations at its manufacturing plant, with hopes of returning to full business capacity.

Painting A Legacy, Closing A Chapter

Kelly-Moore Paints, an American paint manufacturing company, was founded in 1946 by former Glidden employees William Kelly and William Moore in San Carlos, California. In 2023, the company relocated its headquarters to Irving, Texas, with its manufacturing plant situated in Hurst, Texas.

Source: Wikimedia/Yngvadottir

Source: Wikimedia/Yngvadottir

In January 2024, the company announced the cessation of operations, ruling out bankruptcy as a viable option.

Where Did It All Go Wrong?

One word: Asbestos. For decades, a variety of the company’s products have contained this mineral, which can cause a wide range of health problems, including lung cancer.

Source: Unsplash/SELIM ARDA ERYILMAZ

Source: Unsplash/SELIM ARDA ERYILMAZ

This has led to court battles spanning three decades, revolving around the company’s use of asbestos in cement and texture products. Despite phasing out asbestos use in 1981, ongoing lawsuits have persisted, costing the company millions of dollars.

New Owners Face Legal Challenges

In October 2022, the Flacks group, a private investment firm, acquired Kelly Moore as part of its portfolio of industrial companies. However, they swiftly encountered significant legal liabilities stemming from previous lawsuits related to asbestos use.

Source: LinkedIn/Flacks Group

Source: LinkedIn/Flacks Group

Charles Gassenheimer, a dynamic investment and operating executive, was promptly appointed to salvage the business. However, the lawsuits continued unabated, putting significant strain on their finances.

Asbestos Struggles: Past Payouts, Future Pressures

Between 1960 and 1978, the company sold products containing 5 to 10 percent asbestos for painting, cementing, and filling dry walls. Consequently, tens of thousands of workers and customers filed lawsuits against the company after suffering from related diseases.

Source: Freepik/wirestock

Source: Freepik/wirestock

Kelly-Moore has paid out over $600 million for asbestos claims over the last 20 years. Despite this, a study conducted by the company estimates that its future asbestos liabilities will exceed $170 million.

Payout Chronicles From Kelly-Moore

Workers affected by Kelly-Moore’s products have received millions of dollars in settlements. For instance, one construction worker diagnosed with mesothelioma (a tumor that affects tissue of the lungs and heart), Alfredo Hernandez, was awarded $55.5 million in 2001 after winning a court case.

Source: Freepik/DC Studio

Source: Freepik/DC Studio

In 2004, 60-year-old Robert Tregget won a trial in Los Angeles, receiving 14% of $36.6 million. He had used one of the company’s products to remodel his home in the 1970s.

Kelly-Moore Tries To Fight Back

In 2022, the company filed a $4.1 billion lawsuit against Union Carbide, a subsidiary of the Dow Chemical Company based in Texas. They claimed that Union Carbide duped them into buying Calidria by portraying it as a safe form of asbestos from 1963 to 1978.

Source: Chemical Industry Digest

Source: Chemical Industry Digest

The case was tried in Texas in 2004, and after deliberating for less than three hours, Union Carbide was declared not guilty. “Clearly this was a blatant attempt by Kelly-Moore to duck responsibility for their customers and legal troubles and shift the blame to a minor fiber supplier,” said Peter Bicks, Union Carbide’s lead trial lawyer.

Financial Struggles And Unsuccessful Strategies

The company also explored working with external professionals to improve its liquidity situation. Attempts made for a potential sale, a merger, reorganization, and new capital investments all proved unsuccessful.

Source: Unsplash/Amina Atar

Source: Unsplash/Amina Atar

Kelly-Moore recently sought financial assistance from Houlihan Lokey in hopes of receiving cash injections. However, mounting lawsuits meant that no parties expressed interest. Consequently, the company has become unable to sustain funding for its operations.

CEO’s Statement On Outcome

Kelly-Moore CEO Gassenheimer stated in a news release that closing the chain was the only viable option after exploring other potential avenues. “The ownership group’s commitment from day one was to fix the business if we could,” he said.

Source: Flickr/City Year

Source: Flickr/City Year

He expressed sympathy for the employees, partners, and communities that have supported the brand throughout its history. “Sadly, no matter how great the Kelly-Moore team, products, and reputation for service, we simply couldn’t overcome the massive legal and financial burdens that have been weighing on the company for many years.”

A Key Player In The Paint Industry On The West Coast

The decision to close down is expected to have a ripple effect on those associated with the brand. Adam Meyer, a Bay Area-based architect and designer, mentioned that many contractors he’s worked with are customers of the company. He noted that this was partly due to its establishment in the region and its connection with in-person sales.

Source: Flickr/David Valenzuela

Source: Flickr/David Valenzuela

“They had a stellar reputation,” he said. “Kelly-Moore made it easy for them to open a trade account, and if they needed to get paint quickly for a job, it was easy for them to go talk to the local store.”

What’s Next?

All of the company’s facilities, including its retail stores and manufacturing plant in Hurst, TX, are now shut down. Nevertheless, the company will strive to fulfill previous orders to the best of its ability from its existing inventory.

Source: Wikimedia/ReubenGBrewer

Source: Wikimedia/ReubenGBrewer

Employees will be compensated for their worked hours, and management will persist in collecting receivables to settle accrued entitlements. The company has instructed partners and employees to participate in an orderly wind-down process outside of court.

Competitors To Take Advantage

As anticipated, competitors are already circling. Dunn-Edwards, one of Kelly-Moore’s major rivals, intends to capitalize on the company’s downfall. They plan to recruit former employees of Kelly-Moore and are exploring the possibility of taking over leases of the now-vacant stores.

Source: Flickr/David Valenzuela

Source: Flickr/David Valenzuela

“Our first reaction is to consider how we can assist the people and minimize any disruptions the contractors may face,” stated Kudukis. Mayer, an interior designer, shared his perspective on the matter. He predicted that contractors who previously worked with the company will likely transition to other brands. Additionally, he believes that this event will promote the growth of other brands in the industry.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *