News review: Better times loom for Vauxhall and JJB
WHILE the recession overshadowed the economic landscape in 2009, two stories dominated the North West business headlines this year – the future of Vauxhall at Ellesmere Port and the crisis at retail chain JJB Sports.
Both sagas share common themes – intrigue, unexpected twists and turns and (hopefully) positive outcomes.
Vauxhall’s issues were more related to the woes of its parent company – aiiling automotive giant General Motors.
Forced to seek a multi-billion dollar bail-out from the US Government debt-ridden GM, said in autumn 2008 it may sell its European businesses – Opal, Saab and Vauxhall.
A formal sale process began in April, with several parties, including Fiat and Chinese bidders reported to be looking at Vauxhall – which has around 12% of the UK car market.
The next three months saw a shortlist of bidders being drawn up. At the same time the 2,200 staff employed at the 440-acre site in Cheshire were gearing up for the autumn launch of a new Astra model
.
By September the field of bidders for GM Europe had been whittled down to two – the favourite, Canadian car parts specialist Magna, and a Belgian industrial group RHJ Holdings.
Trade union Unite. led by the combative and plain-speaking Tony Woodley, warned of massive job cuts if Magna’s bid won the day due to the amount of financial support offered to it by the German government, and the liklihood that as a result fewer German jobs would be cut in the ensuing restructuring programme.
On September 9, the union’s worst fears were realised when General Motors announced sale of a controlling stake to Magna.
Speculation over the scale of the job losses across Europe and in the UK moved up a gear. Tony Woodley slammed the Magna deal as an “enormous stitch up” which would eventually lead to the closure of both the Ellesmere Port and Luton plants.
Negotiations began in earnest with Magna bosses, trade unions and the Department of Business over the scale of the restructuring here.
In the midst of the process came the launch of the new Astra at Ellesmere Port.
After initially seeking around 800 job losses at the Cheshire plant – one of the most productive GM factories in the world – Magna was persuaded by unions and management to think again.
Doubts remained over the long-term future though – what would happen after 2014 – when the current production cycle of Asta ended.
Shock news on November 4 saw General Motors – which had by this time emerged from Chapter 11 Bankruptcy in the US – perform a dramatic U-turm and decide to keep its European business.
While there was fury and protests in Germany – where there majority of the Opel plants are located – there was relief in the UK.
Relief turned to joy by the end of the month as new GM Europe boss Nick Reilly – who’d worked at Vauxhall earlier in his career – announced that not only would there be no job losses at Ellesmre Port, but that he was upping production there.
The news got better still as Mr Reilly said the factory was well-placed for the next generation of Astra and also for the new electric car, Ampera.
If Vauxhall was a dramatic story, then the goings-on, fallings-out and near tragic collapse of JJB Sports was almost worthy of a soap opera.
The Wigan-based retailer’s descent from a solid but rather unspectacular seller of soccer shirts and trainers to a business on the critical list was rapid.
Mistakes made by the management – not least an ill-judged and expensive attempt to move up-market in 2008 – set the scene for a turbulent 2009.
Poor trading performance. fears over breached banking covenants, and the recession were nothing in comparison to the civil war that erupted.
Chief executive Chris Ronnie was suspended and then dismissed after losing control of a 27.5% stake in the business.
Mr Ronnie, who had been backed by an Icelandic bank when he bought into the business in 2007, hadn’t realised his shares had been lost to the liquidators of Kaupthing, the collapsed Icelandic bank.
His replacement at the helm of the business, one-time friend and former Next boss Sir David Jones – ordered an investigation – and Mr Ronnie was dismissed for gross misconduct.
Enraged at being made a scapegoat for all of JJB’s ills, there then began something of a PR war between Mr Ronnie and JJB.
Then there was controversy over a personal loan Sir David had accepted from Mike Ashley, founder of JJB’s biggest rival, Sports Direct.
While dirty linen was washed in public – in an manner which did little to enhance the reputation of anyone involved – JJB was fighting for its life.
A sale of its profitable gyms business raised £80m, but there was still the issue of onerous leases of closed-down stores.
A Creditors Voluntary Agreement – CVA – the first of many to be reached between retailers and landlords this year – was agreed, inching JJB closer to safety.
The next twist in the tale was a revelation that the Serious Fraud Office was investigating JJB and Sports Direct in a probe into alleged criminal price-rigging and fraud.
With trading still tough – and with low stock in many stores after suppliers withdrew credit lines fearing the business was going bust – JJB still needed to raise cash.
Attempts in October to do so with a £100m rights issue were initially threatened after false rumours circulated the City of London about Sir David Jones’ financial affairs.
After an investigation into the rumours and had found them to be “totally unfounded”, the rights issue went ahead.
More progress was made this month when JJB hired Keith Jones, retail director of DSG International, as its new chief executive, a move which will allow Sir David, pictured, to become part-time chairman from next year.
A week later the retailer’s half year results revealed a 52% slump in sales in the 20 weeks to January, tempering hopes of a recovery. The company said its major issue was a lack of stock, which would not be remedied for several months.
After a truly memorable year – mostly for the wrong reasons – JJB now looks to have a future, and like Vauxhall can look ahead to 2010 with some degree of optimism.
