Page last updated at 15:26 GMT, Tuesday, 16 June 2009 16:26 UK

A tale of two factories

Berck staff

By Fiona Blair
BBC Money Programme

The West Midlands is still Britain's industrial heartland. One in five jobs in the region is in manufacturing and most of those are in small to medium sized firms, like the two we visited for this week's programme.

Manufacturing has been hit very hard in this recession and as a consequence the unemployment rate in the West Midlands, is rising faster than anywhere else in the UK. There is also an unusually high proportion of people here working short time to try and save their jobs and the companies where they work.

Through the experience of two factories in this region during the recession it is possible to see what beleaguered companies all over Britain are having to do to hold on during this recession, stay afloat and minimise job losses.

'Heartbreaking' decision

Berck Ltd is a small family-run company in West Bromwich. It says 45% of its products end up in cars and most of the rest end up in household electrics.

It's a long-standing company with sons, daughters, mums and dads who work here. So for us to get rid of people is a very emotive thing here
Brian Yates, Berck chairman

Its sales dropped in November from a turnover of £550,000 a month to £200,000.

The money going out of the company was more than that coming in and the company had not got enough cash in the bank to fund the difference in the medium term.

If they didn't cut costs, they would end up insolvent.

The managers made the decision to cut 11 jobs in the firm, which at the time employed 90 people. It was heartbreaking for the company chairman, Brian Yates.

"It's a long-standing company with sons, daughters, mums and dads who work here. So for us to get rid of people is a very emotive thing.

"The other important thing is you're losing skills which is dreadful."

The other measure they took to reduce costs at Berck was a cut in working hours. Brian and his management team found that their employees were very flexible when asked to take a reduction in pay in order to help the company through the crisis.

"I think its better to have a job with insufficient money coming in at the moment than to have no job at all," purchasing manager Chris Mason explained.

Cash crisis

Despite staff working fewer days to cut its wage bill, the cash crisis at Berck continued. For the managers it was a day-by-day, week-by-week battle to stay afloat.

Berck workers

Making more redundancies was no longer an option at Berck because redundancies themselves cost money.

Any company making staff cuts initially takes a hit financially by paying off employees, only to make a saving in the longer run. At Berck, they couldn't afford the initial hit.

For the firm, the only option was to go to the bank and ask for help. On the bank's suggestion the company underwent a full audit - including a valuation of the factory buildings.

The bank took many months thinking about the application from Berck for a loan. Eventually it agreed, but only with conditions.

Conditions

The loan would be secured against the factory buildings, so the bank knew that in the event of default it would get the money back. However it was still concerned about the company's ability to pay back its monthly instalments.

For this reason they asked the directors to take a salary break of two years, and put in some of their own money. They also wanted the Department for Business, Innovation and Skills to get involved and help the company with money for the redundancies.

In early June, Berck and the bank were still negotiating on these proposals.

Mr Yates desperately wants to find a way to get the money into the company as this is the only way he can keep the business going in the long term.

However, he knows that when the money comes in, some of it will be put towards redundancies amongst his workforce, who have served him and the company so loyally in the past months.

There will probably be 12 job cuts amongst his 69 remaining employees and making those cuts will not be easy for Brian.

He told the BBC: "I am very positive for the future but we've still got a lot of heartache to go through."

Another firm cuts jobs

Wild Springs and Wireforms in Redditch also found itself struck by the recession in November.

A worker at the Berck factory

They make wire frames, which can form the base for car seats. For Wild, it wasn't just that orders were being cancelled months in advance, but that orders the company had already been preparing to deliver were suddenly being turned off at one or two day's notice.

Howard Nuttall, the manager at Wild Springs and Wireforms was able to cut what he was spending on labour quite swiftly.

His company had been experiencing a boom in orders right up to October.

He had people working overtime, something he swiftly cancelled and he had temporary staff on the factory floor that could also be let go.

But it wasn't enough. There is no union structure at the Redditch factory - but there is a works council, where representatives from each section get together with management and discuss matters which might affect working hours or conditions.

No regrets

It was at these meetings that Mr Nuttal first raised the possibility of short-time working.

"Our employees here saw that we've got to take action. We can't just accept taking a full salary with a 40-50% reduction in the sales," he told the BBC.

The staff agreed first to go down to four days and then to three days a week. Both cuts in hours helped Howard Nuttall avoid making redundancies, which was the least-favoured option for the employees and their representatives on the works council.

However two months in to short time, sales were still dropping. Significantly for Wild Springs and Wireforms, Honda, the car manufacturer decided to shut down their production line until the summer. That effectively shut off one of the products at Wild, albeit temporarily.

Redundancies could no longer be avoided. Mr Nuttal cut 15 staff including skilled operatives.

In three months, including temporary staff, he had lost 25% of his onsite workforce.

He doesn't regret the decisions he has made.

"We've cut heads across the whole of the business, not just in direct employees, but in some indirect areas. And it also makes you think whether we need some of the indirect people when we come back? So there is an element there that we will be stronger and fitter coming out the other side of the down turn."

Money Programme: In the Firing Line. Broadcast 2200, BBC2, Tuesday 16 June 2009.



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