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Diageo taskforce response (uncut)

News and announcements from the Whisky Magazine team

Diageo taskforce response (uncut)

Postby Rob Allanson » Wed Sep 09, 2009 11:35 am

Diageo has announced its response to proposals submitted by the Scottish Government led Taskforce set up to find an alternative to Diageo's own plans for the restructuring of its Scottish business.

Having examined the proposals presented to the company on 3rd September by Scottish Government Finance Secretary John Swinney, Diageo has indicated to Mr Swinney that the Taskforce proposals do not provide a sound basis on which Diageo could build and develop a sustainable business in Scotland, safeguarding 4,000 jobs.

The Taskforce proposal suggested the closure of the existing Hill Street packaging plant in Kilmarnock and the construction of a new plant on a greenfield site near the town. It was also suggested that the closure of the Port Dundas grain distillery in Glasgow could be delayed pending a change in market conditions.

David Gosnell, Managing Director Diageo Global Supply, said: "We greatly appreciate the effort by all concerned in the Taskforce and the leadership of John Swinney through this very difficult situation.

"We examined the alternative proposals thoroughly. They don't deliver a business model that would be good for either Diageo or Scotland. We need a sustainable Scottish operation that supports our international spirits business and provides a future for the 4,000 people we would employ in Scotland after this restructuring is completed. I appreciate their efforts but the Taskforce has no workable alternative to deliver what Diageo needs."

There are three key reasons for rejecting the Taskforce proposal:

There would still be a significant economic gap. This would embed inefficiencies - that Diageo's plan recognises and deals with - and would put at risk further investment across our packaging operations in Scotland.

For Port Dundas Distillery no alternative was presented other than us delaying our action.

There would still be a net loss of around 500 jobs through a reduction in the Kilmarnock workforce and the closure of Port Dundas. There would be no investment at Leven and minimal job creation there.
David Gosnell added: "The Taskforce proposal does not address the basic economics of our business, current developments in the marketplace or funding for the suggestions it does advance.

"Diageo has never sought public funding for our proposals. We would prefer public money to be directed to the economies of Kilmarnock and Glasgow while we focus our own investment on sites critical to the future sustainability of our operations in Scotland. Regrettably, we must reject these proposals.

"We fully understand the need to address the impact of our proposed restructuring and at the appropriate time we would plan to engage with Scottish Enterprise and other agencies to discuss the regeneration of impacted communities."

In its response to the Scottish Government, Diageo has emphasised that it now regards the dialogue on its business case with the Scottish Government and the Taskforce as closed. The company will now re-focus on the formal consultation process with the unions representing its employees.

Bryan Donaghey, Managing Director Diageo Scotland, explained: "We now need to focus on the dialogue with our employees that will continue through the formal consultation process.

"This has been an extremely difficult and lengthy period for all concerned, with continuing uncertainly for our employees across Scotland and it has been particularly hard for people in Kilmarnock and Hurlford and at Port Dundas. I fully appreciate that the decision that we cannot take forward an alternative will be another blow to their hopes, but I believe we now need to continue our engagement with our employees and their unions about how we move forward from here."

Diageo's proposals - backed by a £100 million investment in the Scottish business - would see an overall reduction of up to 500 jobs. The closure of Kilmarnock and Port Dundas would lead to the loss of up to 900 jobs over the next two years while around 400 new jobs would be created through the expansion of the Leven packaging plant in Fife. A new coopering centre would be created in Clackmannanshire.
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Re: Diageo taskforce response (uncut)

Postby Anster » Mon Sep 14, 2009 11:11 am

What is your analysis of this news Rob? Anyone?
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Re: Diageo taskforce response (uncut)

Postby Novice Scotch Fan » Mon Sep 14, 2009 1:13 pm

My impression of Diageo is fairly dim. They are enormously profitable, yet keep cutting costs. It seems their business plans are very short sighted, being driven by showing shareholders increased revenue/profit every financial quarter.

They are free to do so, as it is a free market, but there are other business enterprises that make a strong profit, but not at the expense of cutting everything to the bone, which always involves layoffs of people (not related to those making the decisions).
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