ERT Article

Re: ERT Article

You obviously missed the point Martin, read it again. 😉

Anyway, full article unedited is as follows…

K.

Waiting On The Punchline

I have had several discussions with various people in the industry over the past few weeks and, almost invariably, it gets around to the industry news, the state of the industry and where it will be in six to twelve months or so. That conversation, again almost invariably, leads to a request for some good news, you know some nice upbeat appliance stories about manufacturers doing well.

It’s a fine idea, just with one small snag, there really aren’t many feel good stories to tell.

Sure, there’s a few people out there doing okay and not having to ask for government bail out cash but, not too many. And anyway, if governments around the globe are handing out free cash wouldn’t you try to grab some and blame the big bad banks, the collapse of currencies or even that people just aren’t spending any money? Could it be that some companies are using this current “economic crisis” to hide bad news inside other bad news and, effectively, attempt to blackmail governments into offering a handout with people’s jobs as the leverage?

Of course Hans Strabeg the CEO of Electrolux didn’t actually say that just as he didn’t actually say that governments that did hand cash to the companies that begged for it would gain a competitive advantage. But, that was what came across.

You know what though, he’s right.

Why should any government prop up a company that can’t make its ends meet? And, if these governments can see fit to prop up some big manufacturer then why can they not help prop up smaller companies as well? This is another question that I have had shot across my bows over the past few weeks and, really, the answer is relatively simple.

The fact of it is that government will try to help small business through “other means” rather than offer cash handouts. Where it is a retailer you are unlikely to see any government support at all for two main reasons. The first is that if you hand out to one then you set the president and you have to then look at bailing out all the others. The second is, as so admirably displayed in the case of Woolworth and MFI, that the businesses were not actually worth pumping money into other than to keep a few thousand people in a job.

Big picture stuff says that others should spring up to replace them when the going gets a little easier and the economic barometer swings away from stormy weather.

So there’s no point, it’s likely a futile gesture in the end and the jobs will probably be recreated elsewhere somewhere down the road.

Manufacturing is different.

If you lose your manufacturing base, as we in the UK have over the past four or five decades, it is almost impossible to regain and as many economies have shown, certainly not possible to regain the same strength in the same areas. Manufacturing industries also tend to provide an awful lot of employment concentrated within one business.

Then add to that the depletion of a country’s morale, especially when it’s an “iconic” brand and the negative media impact of thousands of job losses from the XXXXX Corporation, it stings politically.

So, manufacturers have a bit of a shield and tend to have more chance of direct support.

Brand owners fall into the “retailer” category.

The rights and wrongs of this are largely irrelevant, it is what it is.

But the whole UK manufacturing thing is our own stupid fault really.

I had a call the other day from a TV reporter that was looking into the UK manufacturing of appliances and, other than a spattering of mostly small scale production, there isn’t any real whitegoods manufacturing in the UK anymore. Before someone picks me up on that, I do realise that GDHA make a few cookers in the antique factory at Presot and that Crosslee make a lot of dryers as well in the UK but, outside of those since the closure of Merthyr and almost all of Hotpoint (or Indesit Company’s) UK facilities, what’s left?

Answer, virtually nothing on any scale.

How many UK owned brands are around? Virtually none.

It really is pretty disgraceful that not one of the top selling brands in the UK is a UK company or even remotely UK owned and hasn’t been for decades. All the appliances are pretty much made elsewhere and most of the profits will ultimately flow out of the UK. What has been “made” here is more likely “assembled” here from parts sourced all over the globe.

The laugh and, I guess part of the funny side to this story in some ways, is that this is a situation that we helped to create decades ago. Many of the manufacturers of today don’t seem to have read their history or at least, learned from it.

At one time, in the dim and distant past, the UK was one of the most respected manufacturing bases in the world and, as you will understand in a moment I’m not reminiscing here about some bygone age of greatness when the Empire spanned the globe. No, more pointing out a lesson of history.

We went through two world wars and were a key component of each one. To a degree we won both punch ups but then went on to lose the economic battle, miserably. This happened because the wars, especially the second one, utterly destroyed both Germany and Italy’s infrastructures and manufacturing facilities. They built new ones that were more efficient, better, faster and ultimately cheaper to run. All that in turn meant that they could knock out better quality appliances for less than we could build them.

UK consumers (among others) lapped it up. Cheap appliances that everyone could have.

Now though even these behemoths that were created in the post war era are losing to the cheap labour available in the former Soviet states, to China and other low cost Far Eastern production facilities.

They buy the old tooling in many cases and knock out copies for less than even the ultra efficient Germans and Italians can. Either that or they just copy what’s out there, even if it’s not a very good copy, it’s cheap and that’s something, price, that this whole industry is seemingly obsessed with.
It’s not the whizz bang all singing funky new technologies or even as efficient as newer models from the large manufacturers, but it is cheaper.

But even with that considered, surely paying and indeed showing an emerging economy how to manufacture your goods cheaper than you can isn’t exactly the smartest business plan in the world? You may as well just give them money to go into competition with you as that’s exactly what will happen down the road and, almost what gave rise to the might in the appliance industry of the Germans and Italians.

How long will it be until the Chinese, Koreans or one of the former Soviet factories gathers up enough cash to buy out some decent brands? And who have we to blame for all this, the brands that went out seeking the lowest possible cost to get the cheapest possible prices and will almost certainly end up paying the ultimate cost for that policy. And, no government bail out package will help them when that happens.

It all seems a little surreal and like a bad historical joke but, I would expect that as the title of this piece states, that we will all be awaiting the punchline for some time to come and, if many of these companies aren’t careful, it won’t be them laughing at the joke either.