Hoover is ready to end production of fridges and vacuum cleaners in the UK if the government continues to keep the pound out of the euro, its managing director warned this week.
Only its most highly automated and efficient plant – the washing machine factory in Merthyr Tydfil, Mid Glamorgan – looks likely to escape what could become a dramatic rationalisation programme.
Hoover’s other two UK sites, which make refrigerators at Bromborough on the Wirral and the vacuum cleaner range at Cambuslang near Glasgow (together employing 900 people) have become the subject of discussions within the Hoover Candy Group over relocating manufacturing at a new plant in the Czech Republic.
‘We are making a decision now,’ said Alberto Bertali, head of the Hoover European Appliance Group. ‘We are completely re-appraising our game.’
Hoover employs 2,400 staff across Europe, with 2,000 of these in the UK. It also has a small facility in Portugal, and a £20m plant in the Czech Republic, which was originally built to serve Eastern European markets and Russia.
Bertali said the pound is now about 35% higher than when Hoover’s Italian parent company Candy Group started a £40m investment programme in the UK in 1996. Volatility of the exchange rate has wiped out profits in a sector where return on sales is typically low.
‘It is very difficult to export, and we have been battling despite these difficulties,’ he said.
The euro obstacle has meant that plans to create a supplier park around the Merthyr site have been scrapped by the company.
This would have seen components manufacturers clustering alongside the main assembly plant to supply ‘just-in-time’ to the line-side, cutting down on inventory and distribution costs.
‘That dream is now over,’ said Bertali. Instead, the company will now aim to source increasing numbers of components from the eurozone as a buffer againstfurther currency shifts.
Ten years ago Hoover was buying the majority of its parts in the UK. Now the company buys less than 10% of its components from domestic suppliers.The solution, he said, is for the UK to join the euro. ‘But if it went to referendum, I think the majority of Britons will say no.’
The currency situation facing Hoover has almost overtaken the Dyson court action – James Dyson sued Hoover last year for a patent infringement over its bagless vacuum cleaner – as the company’s biggest headache.
The majority of Dyson’s European sales are still to UK buyers, which has meant that losing the battle over the patent has hit Hoover hard in the UK retail market.
Next week, the case goes to the Court of Appeal, in a hearing expected to last three days. However, a ruling may not be announced until September.
Bertali added that the ruling of the appeal would have no bearing on whether the company would continue to manufacture in the UK.