Stoves finds the right recipe: In the last of our survivors series, Nigel Cope looks at a firm rising from the ashes on Merseyside

KNOWSLEY in Merseyside is one of the UK's unemployment blackspots, with an average jobless rate of nearly 20 per cent and male unemployment nudging 30 per cent.

It is not the place one would expect to find one of the country's industrial renaissance stories. But on an industrial estate in Prescot, a town a few miles outside Liverpool, one company is gradually making a name for itself in Britain's squeezed white goods sector.

Stoves makes upmarket ovens and free-standing cookers. Domestic appliances have been made on the Prescot site for nearly 70 years, yet Stoves is as much a story of revival as survival.

Four years ago, when a part of Yale and Valor (now owned by Williams Holdings), the business was on the brink of collapse. With a reputation for poor quality, it was managing to lose pounds 4m on sales of just pounds 17m.

But a management buy-in has turned the company's fortunes around. The business has been re- named Stoves - its original 1920s name - and is now operating in a revamped factory under re-vitalised management.

In a sector that has lost 30 per cent of its sales since sales of white goods peaked in 1989, Stoves edged into the black last year, making pounds 190,000 profits on sales of pounds 32m.

Its cookers and ovens are back in stores such as John Lewis and Selfridges, 200 extra jobs have been created in the past four years and the company, which was heavily backed by venture capitalists in 1989, plans to seek a listing on the stock exchange next year.

'The venture capitalists would like an exit and we will need new money to grow,' says John Crathorne, chief executive. 'But we plan to grow organically. There is still a lot of imported product we feel we can replace.'

Stoves' revival makes it one of the few remaining white goods companies that is truly British.

Creda ovens and Hotpoint fridges and washing machines are made in Britain but are now part of a joint venture between GEC and General Electric of America. Servis is essentially an importer of fridges under a British brand name. And Belling, whose flame has flickered as badly as Stoves', is feeling its way back to health under the Glen- Dimplex umbrella.

The secrets of Stoves' survival lie in its innovative approach to manufacturing, marketing and working practices. 'Since the buy-in Stoves has introduced systems which, at the time, were quite radical,' says Ray Taylor, editor of ERT, the sector's trade magazine. 'They have introduced new designs, new technology and have a refreshing approach to marketing.'

The changes have been championed with some zeal by an enthusiastic management finally given its own show to run. For John Crathorne, formerly chairman of Thorn EMI's domestic appliance division, the buyout represented the opportunity to put some long- cherished ideas into practice.

The rest of the board, which includes a former Lowe Group advertising director, lends a mixture of white goods experience and fresh ideas from outside. Only one of the old Yale and Valor management, manufacturing director Jeff Kane, is still on the board. They had a lot of incentive - the management has invested pounds 150,000 of its own money for a 34 per cent stake in the business.

But the incoming management faced a grim situation. The factory is an old First World War munitions site and was in dire need of investment.

Quality was poor, and the flow- line production system was unwieldy. But what often happens in buyout situations did not happen at Stoves. There were no redundancies and no management layers were stripped out.

'It wasn't their fault,' says Mr Crathorne. 'There was a lack of strategic vision from above. They didn't know where they were going or what they should be producing.'

A big market research programme was commissioned to find out what customers wanted.

'The market for cookers is not the same as washing machines or fridges,' explains Mr Crathorne. 'It is not global. People in Britain want slightly different things from their cooker than customers in France or Germany.'

An important shift was the name change from Valor back to Stoves, last used in the late 1950s.

'Back in the 1920s and 1930s, cookers were built to last,' Mr Crathorne explains. 'They were simple, sturdily built and reliable. They were the values we wanted to promote.'

In the factory, the old flowline system has given way to a system of team building where groups of workers work in cells. There is no batch production and nothing is produced for stock.

The number of suppliers has been reduced from 250 to less than 50 and many parts are now delivered straight to the cell. A pounds 10m investment programme has introduced much-needed new technology into the factory, including state of the art enamelling machines and electronic data interchange with customers.

A system that was slow and inflexible can now produce small orders of cookers or even one-off models. Stoves has introduced 400 new models in the past four years and protects its product by applying for a fresh patent every two months. Production is now up to 220,000 cookers a year from 98,000 four years ago.

Flexible working has helped the company adapt to the seasonal nature of the business. Stoves now operates with a core of 650 workers, augmented during the summer with seasonal workers who increase production ready for the popular winter selling season.

In Merseyside, a region where labour has often been criticised for union-inspired rebeliousness, Stoves seems to have wrought a huge culture change among its workforce.

'People say those things but we have had no problems with our workers here,' says Mr Crathorne.

High local unemployment may be a useful deterrent to industrial disputes of course, but Stoves has moved hourly workers on to the full-time staff and encouraged workers to become equity holders in the business. If and when Stoves takes a stock market listing, there could be a few new motors in the Prescot car park.

Training is a priority and all Stoves staff are encouraged to take NVQs (National Vocational Qualifications) as well as other courses, such as language training.

Stoves has performed something of a magician's turn by re-inventing itself during the pit of a recession and in a declining market dominated by larger, wealthier competitors.

The next problem for Stoves is to make the transition from being an upmarket niche producer waving the 'made in Britain' flag, to becoming a larger player that can take on the likes of AEG, Miele and Bosch. That represents a tough challenge. Such competitors are unlikely to sit by and watch someone eat away at their market share.

(Photograph omitted)