AJAX, Ontario — Sklar Peppler has filed for protection under the Companies’ Creditors Arrangement Act, the Canadian version of


Chapter 11, to complete an ongoing restructuring and refinancing initiative.

Bob Tweedy, chairman and CEO of the stationary upholstery manufacturer and case goods importer, said the move was driven by competitive pressures made almost unbearable by the rise in the Canadian dollar in the past three years.

Tweedy said in a statement that since 2002, the Canadian dollar has risen some 40% in value against the U.S. dollar. Meanwhile, imports from Asia — “particularly from the Republic of China, which has pegged its currency to the U.S. dollar,” he said, have grown dramatically and ratcheted up competition.

To compete in this environment, the company has to find new cost and production efficiencies without sacrificing quality or customer service, he said.

“We are moving to a revised business model that uses offshore sourcing to complement our core domestic capabilities of designing and supplying high quality products while offering excellent customer service,” Tweedy said. “This restructuring includes the move to a more cost-efficient facility here in Ajax and a significant reduction in people and overhead costs.”

Sklar laid off about 100 production workers last month and entered into negotiations with the United Steel Workers in an effort to achieve cost competitiveness and job stability.

The new factory, replacing an older facility in Whitby, Ontario, is operational and shipping product.

SPFC also owns 100% of Sklar Peppler of America, which operates the Associated Furniture Manufacturers factory in Portland, Ore. AFM is not included in the reorganization and is operating as usual.

Tweedy said the high cost of Canadian labor is the major barrier to competing against imports from China and elsewhere

“We have to solve the problem of cost-competitive labor while ensuring the viability of the jobs that remain in the long term,” he said, adding he anticipates no problem in the flow of goods. Much of the production from the old Whitby factory has been transferred to Portland, at least until the reorganization is complete.

The Creditors Arrangement Act process will take three to four months, and Tweedy believes a stronger, more competitive company will emerge.

“We want to maintain a manufacturing capacity in Canada, particularly in custom,” he said. “But it requires drastic changes to the business model.”

Sklar has arranged for new financing from a group of lenders, including its senior lender, the National Bank of Canada.

“Going forward, we don’t anticipate any disruption to our ongoing business and will continue to provide high quality products and service to its customer base across Canada and the United States,” he said.

Uwe Manski of accounting and consulting firm BDO Dunwoody has been named to monitor the restructuring process.