Wedgwood's China move jars nerves in Waterford

Decision to shut two Johnson Brothers plants in Britain will do nothing to reassure workers at Waterford Wedgwood's crystal operations here, writes Siobhán Creaton, Finance Correspondent, and Stephen Houghton, in Stoke

Redmond O'Donoghue says June 4th, 2003, will go down as one of the worst days in his working life. That morning, the Waterford Wedgwood group chief executive directed his team to tell 1,058 people at two of its Johnson Brothers manufacturing plants in Stock-on-Trent that they would lose their jobs.

Over the coming months, production of middle-of-the-range crockery from these two plants will transfer to facilities in China where they can be made for 70 per cent less. A small part of its operations, the production of Wedgwood-branded earthenware, will transfer to nearby Barlaston.

The news has done nothing to reassure workers at Waterford Wedgwood's crystal operations in Ireland, where short-time working has seen just 100 of the 1,700-strong workforce on duty this week, about their future.

"People feel threatened but they felt threatened long before this latest news from Stoke," says AT&GWU regional organiser Mr Sean Kelly.

In Stoke the news, and the manner in which it was imparted, was met with despair and anger. Johnson Brothers has had a presence in the heartland of British ceramics for 120 years.

Mother-of-two Julie Hall, from Burslem, confirmed workers had heard rumours about the factories closing. She said: "They have not even had the decency to tell us there was a meeting until this morning. We have just been thrown on the scrapheap."

Mr Ian Jackson, a senior economics lecturer at Staffordshire University, claimed the closures could spark a further 2,000 job losses in the wider Potteries area of North Staffordshire, taking at least £40 million sterling (€56 million) out of the local economy.

Mr Jackson said: "We could see up to two jobs directly lost for every worker made redundant at Wedgwood. The communities in which these factories are based will be hit very hard, although it will also sweep across the region as a whole."

Mr O'Donoghue says the decision was sad but necessary. "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 suggests 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."

Stoke-on-Trent Central MP Mr Mark Fisher denounced Waterford Wedgwood's decision.He claimed the company could have highlighted the problems at an earlier stage. "I would have expected Wedgwood to do everything it could to keep those jobs in Stoke-on-Trent, but they haven't sought help."

The closures come as Waterford Wedgwood continues to cope with weak demand for its products, particularly in the US, with the slide in the value of the dollar eroding profits earned on those sales.

If the group can reduce production costs in the earthenware business by up to 70 per cent with a move to China, people working for other parts of its operations must be concerned about their own job security.

Mr O'Donoghue believes the low-cost Chinese economy is a huge threat to every 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 is keen to emphasise Waterford Crystal will continue to be made largely 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 per cent of all Waterford Crystal is produced in Waterford with a further 35 per cent 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 €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.

For Mr Kelly's part, he says the workers want to see the repatriation of as many currently outsourced products as possible to Waterford. "We want a recall of people who are currently laid off as well as guarantees for the future security of workers."

While talks are still ongoing on this issue, Mr O'Donoghue says China does have a tradition for producing earthenware but it does not have a skills base in producing crystal or ceramics - another reason why it would be difficult for the group to transfer production of such high-quality products to this emerging economy 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 weathered financial crises in the past and is using that experience to navigate its way out of the current one. Mr O'Donoghue says he has learned that you should take tough, painful action at an early stage because it is a lot less tough and painful than if it is 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 $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 where the numbers employed in ceramics, the core local industry, have halved in the past decade. After the closures, Wedgwood will employ a total of 2,300 people in the area, 1,400 of them shop floor workers. Just a decade ago, it employed around 6,500 in its home city.

And, despite the company's reassurances, those workers and their Irish colleagues are far from certain that thelink between the company's brands and where they are produced will be enough to safeguard their jobs. - Additional reporting by Carol Duffy, in Waterford