Kelly-Moore Paints is going to close down all its operations and will put into process a slow and orderly winding down of all its operations and business. CEO Charles Gassenheimer broke the news and said that the company had exhausted all options to turn the situation around. He expressed gratitude to all employees associated with the company and conveyed regret about the closure.
Many facilities of the company including its manufacturing plant in Hurst are being shut down immediately. The company also said it will try its best to fulfill previous orders from existing inventory. Compensation for work done and payment of accrued benefits, including Paid Time Off, will be provided to all employees. The company had last week ordered 700 workers to go on furlough and stopped production at all its manufacturing plants.
“I’m extremely disappointed and saddened by this outcome, as the entire Kelly-Moore team made incredible efforts to continue innovating and serving the unique needs of professional painting contractors,” said CEO Charles Gassenheimer. “The ownership group’s commitment from day one was to fix the business if we could. 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.
“I could not be prouder of what our talented team accomplished under extremely challenging circumstances,” continued Gassenheimer. “My deepest sympathy goes out to our loyal employees, customers, industry partners and the communities where we do business, who have supported Kelly-Moore throughout its long history. Unfortunately, this was the only viable alternative remaining for us after evaluating all other potentially feasible options.”
“Our owners took on significant financial risks in the acquisition last year,” continued Gassenheimer. “Unfortunately, despite their extraordinary efforts after acquiring this distressed business, they simply couldn’t overcome the unexpectedly large challenges, and will be exiting the business.”
Kelly-Moore Paints had been in trouble in the past 30 years as it had to pay more than $600 million as damages for using asbestos in its paints in the past. The practice was stopped in 1981 but the lawsuit continued to pile up draining the company’s capital. Over the past 30 years, the company had to grapple with thousands of lawsuits.
Asbestos is a carcinogenic substance and has been prohibited since the seventies when its harmful effects were discovered. Although the company has paid over $600 million in the last 20 years, but it still faces liabilities exceeding $170 million in future asbestos-related litigation.
Additionally, the company also faced supply issues after the COVID-19 pandemic. Kelly-Moore was acquired by Pleuger Chemicals in October 2022 and it also inherited the financial liabilities which included millions of dollars of unpaid sales and use taxes. Pleuger Chemicals had appointed Charles Gassenheimer as CEO and tried to bring in strategies to improve the financial health of the company. The company also shifted its headquarters from California to Texas and tried to negotiate a major portion of asbestos litigation claims.
Despite exhausting all alternative options, including neither bankruptcy reorganization nor an in-court liquidation, the company lacks the finances to continue operations. Furthermore, it lacks hard assets that can be sold to provide finances pumped in to be paid to the creditors.
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