Siebe warns soaring pound will cost UK jobs
Wednesday 03 June 1998
The value of shares in Siebe were slashed as the British engineering group announced plans to spend pounds 100m over two years, cutting 4,000 jobs worldwide as competition increased.
Allen Yurko, chief executive, said 400 jobs would go in Britain in the first wave but more positions could be lost if, as expected, the pound continued to soar and damage exports.
Falling demand in the Far East, price deflation and localised problems like the embargo on Indian trade were also putting the squeeze on exporters.
Siebe's share price lost 126p to 1377p as profits rose 14.7 per cent to reach record levels of pounds 486.4m but failed to meet City expectations. The high pound knocked pounds 40m off the bottom line but organic growth failed to impress.
Siebe said it would introduce automation to its manufacturing plans but would gradually export jobs away from the US and Britain in favour of countries like Mexico, Malaysia and China.
Some 25 per cent of Siebe's plants now are based in low-cost regions and it aims to locate 40 per cent of its manufacturing in those countries by the turn of the century. Wage costs of $3 per hour in developing countries compared with $15 in the UK and US, the company said.
Siebe had previously been bullish about the prospects for the Far East but admitted yesterday that things were much tougher and it would "refocus" part of its interests elsewhere.
Siebe's position in that region has not been helped by a nasty dispute involving its 50.6 per cent holding in a Tokyo-listed switching company, Nemic-Lambda.
Siebe has put a temporary restraining order on other shareholders to stop them issuing shares that would dilute Siebe's stake. Mr Yurko said it was a "corporate governance" problem that was taking up more of his management time that he would like.
But he said he was confident of victory in the courts and insisted it had not permanently damaged Siebe's enthusiasm for Japan. "We have been there for 30 years and this is the first real problem we have had," he said.
Other problem areas in Asia include India, where Siebe had been expecting to build up its presence. The engineer has been selling software and intelligent automation products along with cold controls for fridges and automotive fluid controls for the new Mahindra Ford car.
Siebe's Indian manufacturing plans are untouched. But exports from important subsidiaries like Foxboro in the US have been stopped dead since President Clinton embargoed trade over India's nuclear testing.
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