Waterford Wedgwood: group CEO aims to calm nerves

Defending the decision by Waterford Wedgwood group to shut its two Johnson Brothers plants in Britain and move their production to China, CEO Redmond O“Donoghue said “Johnson Brothers had been a loss…

Defending the decision by Waterford Wedgwood group to shut its two Johnson Brothers plants in Britain and move their production to China, CEO Redmond O“Donoghue said “Johnson Brothers had been a loss-making business for many years. We had tried everything to make it profitable but it continued to make losses. It could have endangered the jobs of the other 2,400 people we employ in Britain.” He hinted the Irish-based luxury goods manufacturer would have been delinquent if it had decided to maintain Johnson Brothers. “If there is an opportunity to yield a dramatic cost difference and turn a loss-making business into a profitable one, then you have to take it.” The closures come as Waterford Wedgwood continues to battle weak demand for its products, particularly in the US, with the falls in the dollar hitting profits earned on those sales. Given that the group can reduce production costs in the earthenware business by up to 70% with the China move, employees elsewhere in the group are concerned about their own job security. Mr O“Donoghue believes the low-cost Chinese economy poses a threat to every manufacturing industry. But he suggests that strong brands, such as Waterford Crystal and Wedgwood, will be able to withstand such pressure. “If a product is a commodity, it can as easily be made in China as anywhere else. Johnson Brothers was half a commodity and half a brand whereas brands that are highly regarded have a much better chance of surviving that threat.” He stresses that Waterford Crystal will continue to be produced mainly in the south-east of Ireland and Wedgwood will continue to produce fine bone china in Britain because of the strong ties to those locations which support the brands. Some 65% of all Waterford Crystal is produced in Waterford with a further 35% outsourced from producers in Germany, Hungary, Slovenia and Italy. “Waterford and Wedgwood are both good margin businesses. We have invested 50 million over the past five to six years in Waterford and will invest a further EUR 12 million in the next three months. For as far as the eye can see, Waterford will be the centre of growth and the heartbeat of the business,” Mr O“Donoghue says. In Waterford, AT&GWU regional organiser Mr Sean Kelly says the workers want to see as many currently outsourced products as possible return to the city. “We want a recall of people who are currently laid off as well as guarantees for the future security of workers.” While talks continue on this point, Mr O“Donoghue says that although China does have a tradition for producing earthenware it does not have a skills base in crystal or ceramics, so it would be difficult for the group to transfer production of such high-quality products to China in the short term. “There is a great tie between such strong brands as Waterford and Wedgwood and their spiritual homes in the minds of some consumers. You would disconnect them at your peril,” Mr O“Donoghue says. The company has come through financial crises in the past and is using that experience to work its way out of the current one. Mr O“Donoghue says he has learned to take the difficult decisions early as they are less painful than when taken too late. “We went through the same thing in the early 1990s. There were days when you didn“t want to get out of bed and then suddenly you get a call to say we have shipped an order for USD 1 million. Things change, orders come back, but I don“t know when that will happen.” Whenever it is, it will be too late for the Johnson Brothers workers in Stoke, UK where the numbers employed in ceramics, the main local industry, have been cut by 50% in the past ten years. After the closures, Wedgwood will employ a total of 2,300 people in the area, 1,400 of them production workers. Only a decade ago, it employed around 6,500 in Stoke.