Regional paint company, Kelly Moore Paints announced on the 12th of January 2024 that the company will be shutting down after 78 long years in the business. A quick guess about why they’re doing this?
The company has announced an immediate, orderly, out-of-court wind-down of all its businesses because they’re currently unable to continue funding operations. This comes after the company laid off about 700 workers, and put a temporary stop to its operations at its manufacturing plant in the hope of returning to business fully.
Painting A Legacy, Closing A Chapter
Kelly-Moore Paints was an American paint manufacturing company. Founded in 1946 by William Kelly and William Moore, former Glidden employees in San Carlos, California. In 2023, its headquarters was moved to Irving, Texas, and its manufacturing plant was located in Hurst, Texas.
In January 2024, the company announced a cessation of operations with bankruptcy not 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.
This has resulted in court battles that spanned three decades. These court battles have involved the company’s asbestos use in cement and texture products. Although the company phased out asbestos use in 1981, continuous lawsuits have continued costing the company millions of dollars.
New Owners Find Themselves In Legal Trouble
In October 2022, the Flacks group, a private investment firm acquired Kelly Moore as part of its portfolio of industrial companies. However, they quickly found themselves in serious legal obligations due to previous lawsuits regarding asbestos use.
Charles Gassenheimer, a dynamic investment and operating executive was quickly appointed to salvage the business. However, the lawsuits didn’t dwindle but their finances most certainly did.
Asbestos Struggles: Past Payouts, Future Pressures
From 1960 to 1978, the company sold products containing 5 to 10 percent asbestos for painting, cementing, and filling dry walls. As a result, tens of thousands of workers and customers have filed lawsuits against the company after suffering diseases.
Kelly-Moore has paid out over $600 million for asbestos claims over the last 20 years. Despite this, a study by the company estimates that its future asbestos liabilities will surpass $170 million.
Payout Chronicles From Kelly-Moore
Workers affected by Kelly-Moore’s products have received millions of dollars in settlement. 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.
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 it into buying Calidria by portraying it as a safe form of Asbestos from 1963 to 1978.
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.
Kelly-Moore recently sought financial help from Houlihan Lokey in the hope of cash injections. Yet, mounting lawsuits meant that no parties indicated interest. This has resulted in the company being unable to continue funding its operations.
CEO’s Statement On Outcome
Kelly-Moore CEO Gassenheimer said in a news release that closing the chain was the only option left after exploring other potential options. “The ownership group’s commitment from day one was to fix the business if we could,” he said.
He sympathized with 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 set to have a ripple effect on those associated with the brand. Adam Meyer, a Bay Area-based architect and designer said a lot of contractors he’s done business with are customers of the company. He reported that that this was partly because it was established in the region and has a connection with in-person sales.
“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 the company’s facilities including its retail stores and manufacturing plant in Hurst, TX, are now shut down. Regardless, the company will continue to fulfill previous orders to the best ability from its existing inventory.
Employees will be paid for time worked. While the management will continue to collect receivables to settle accrued entitlements. The company has informed partners and employees to shut down in an orderly, out-of-court wind-down process.
Competitors To Take Advantage
As expected, the wolves are gathering already. Competitors are set to take advantage of Kelly-Moore’s demise. Dunn-Edwards, one of the company’s major competitors is planning to recruit the company’s former employees. Dunn-Edwards is also looking at taking over leases of the now-empty stores.
“Our first reaction is what can we do to help the people, and what can we do to break any interruption the contractors are going to have,” Kudukis said. Mayer, an interior designer gave his view on things. He claimed that contractors working with the company will be heading to other brands. He also says that the event will be good for the growth of other brands.
