Waterford Crystal's iconic status has saved it in the past, but can this once great Irish company survive in the face of mounting debts, crashing markets and the Government's recent refusal to underwrite its loans?
FIVE MONTHS AGO, above an exhilarated and down-counting throng in midtown Manhattan, the Waterford Crystal Times Square Ball made its annual descent to mark the arrival of the New Year.
The 550kg orb made from 672 crystal triangles was a glittering symbol of the promise of 2008. But, with mounting debts and crashing markets, the company behind its design is finding little cause for celebration in a year which is fast becoming another annus horribilis for the crystal manufacturers.
With debts to the tune of €470 million, and a refusal by the Government to underwrite loans of €39 million more, 2008 has already lost its lustre for a company that was once one of Ireland's most recognised brands. The problems didn't start with the new year, however.
With losses of €260 million in the two years up until March 2007, Waterford Wedgwood announced last November that it was cutting 490 jobs at its crystal manufacturing plant in its birthplace, Waterford. Things got worse again during the all-important Christmas period when Waterford Wedgwood suffered from a shortage of its own products. With the remaining 550 jobs in its Irish plant now under serious threat, the company that was a rare exemplar exemplar of the glories of Irish industry during an economically benighted era may be forced into exile because the rest of the country has finally caught up.
It's not the first time that the Waterford-based glass-making company has run into serious problems. Founded in 1783 by George and William Penrose, Waterford Crystal, or Penrose Crystal as it was known then, developed a reputation for quality cut crystal and thrived for decades before running aground in 1851 when tough British excise taxes coupled with capital shortfalls led to the doors closing on the once esteemed company.
It took almost one hundred years and the arrival of Czech immigrant Karel Bacik, grandfather of Senator Ivana Bacik, to revive the Waterford Crystal glass-making tradition. With the help of a craftsman from his homeland, Miroslav Havel, Bacik set up a new business in Waterford in the hopes of building on the historical reputation of the area's glassware. As the company expanded, Havel became its chief designer and, by the time he retired in 1987, the company was back on top.
Yet, while the brand had been clearly established both at home and abroad, cracks in the crystal company were already developing. For a while, they were concealed with profits from Wedgwood, the English fine bone china manufacturer which had been acquired by the company in 1986. While sales continued to rise, high labour costs and low productivity were taking their toll, and questions were being asked about management. Though the Wedgwood acquisition appeared to be generating financial results, the New York Times was already calling the Waterford Wedgwood marriage a mismatch within three years of their union, saying the English company had taken over the corporate show while the Irish parent company was producing "nothing but losses and headaches." With suggestions that the problem lay in applying methods of industrial management to a traditional craft business, the company's local workforce grew concerned and hundreds availed of a voluntary redundancy package that was offered as a way to help pull the company out of difficulty.
THE ARRIVAL OF Sir Anthony O'Reilly, the group's current chairman, who headed up a group of investors offering a cash injection for further redundancies, pay-cuts and a serious overhaul in work practices, staved off disaster for the flagging crystal company and this new lease of life brought with it a whole new look.
Along came the Marquis brand, a mid-range collection made in Austria and intended to provide an alternative to the high-end Waterford Crystal pieces that made for expensive retirement gifts or wedding presents. While these were still popular they were proving impractical at dinner tables and in dishwashers as the day of display cabinets and overly ornamented furnishings gave way to minimalism and practicality.
But the real change came in 1997; Waterford Crystal received a much-needed infusion of modern cool when it teamed up with clothing designer John Rocha for a contemporary crystal collection. The sleek new designs helped broaden the appeal of a company that was failing to attract a growingly prosperous young market with an increase in income and a decrease in living space. For a while, Rocha appeared to have turned things around, his simple designs replacing the elaborately cut crystalware that was routinely presented to American presidents or moulded into sporting trophies, but was of little interest to Celtic tiger cubs or their American counterparts.
The Rocha line helped boost a dated image, and, as the Times Square ball dropped on a new millennium, things were looking up. "The company traded well in the late 1990s and around the millennium," recalls one respected financial analyst. "But it has been consistently difficult since then. The demand for the product did get boosted by the millennium but that factor fell out of the mix."
With its heavy reliance on the all-important US market, signs of an economic slowdown there were bad news for Waterford Wedgwood, according to this analyst. "The global economy slowed and that was obviously exacerbated by the 9/11 attacks". With a steadily weakening dollar, the labour costs of an Irish manufacturing plant were becoming increasingly difficult to sustain. "The issue they have is mismatch," he says. "They make a lot of product in Europe and sell a lot in the US, whereas other companies selling in the US would make their product in the US as well, so there's a kind of hedge there."
The weakening dollar is only one of a number of trials facing the company in a changing global environment. "There are challenges from the cost base, there are challenges from currency, and there are challenges because the business had a high level of debt," according to the analyst. "It had been cash negative over the years. The high level of debt means it has got a very high interest burden so it's having to run to stand still." Combine this with a slowdown in overseas markets and it's clear the company faces increasing challenges to keep afloat.
In a sluggish market, crystal may not be the easiest product to offload, although the rise and rise of the Swarovski brand, which specialises in crystal jewellery and accessories, appears to contradict this logic. For many, the problem is Waterford's mid-range approach, producing goods that are not high-end enough for the Tiffany shoppers, but not affordable enough for those just looking for quality kitchenware.
Despite the growth in wine consumption both in Ireland and in the US, Waterford Crystal failed to capitalise, and lost out to competitors.
"The kind of glasses they were making became very dated," says wine critic John Wilson. "They did come out with replacements but probably a little bit too late, and they were too big and too heavy. The replacements were aimed at the top end, and they were massive big glasses that were like goldfish bowls. There is an Austrian company called Riedel who took over the market in five years because they had glasses specially designed for wine.
"Waterford Crystal should have come out with wine-friendly glasses at an early stage. They had about 10 years to do it, and they didn't."
The once highly-prized brand is also losing out on the collectors' market. According to Jill Cox, an expert on Irish glass and owner of Beaufield Mews antiques in Stillorgan, Co Dublin, early Waterford glass is highly prized, but there is less of a demand for the modern pieces.
"Nowadays, they import glass ready-made and modelled so that all they do down in Waterford is carve it, which takes away from the 'Irishness' of it," she explains.
THE LOSS OF ITS singularly Irish identity will be further compounded if the threatened closure of the company's Irish plant goes through. Once a tourist attraction and vital money earner for the southern Irish county, the loss of the glassware company's Waterford operation would be a major blow to the area.
Waterford Crystal chief John Foley has compared its situation with that of Northern Rock and Bear Stearns, claiming it is "such an iconic brand and company and so much a part of the Irish psyche, not only in Ireland but internationally, that it is every bit as important to us as those other situations in other countries."
Yet his appeal for Government intervention appears to have fallen on deaf ears, and it looks like the countdown is on in earnest. With time running out for the ailing brand, those whose jobs and livelihoods are at risk once again will be wondering who dropped the ball.
WATERFORD CRYSTAL
What is it?
Irish crystal-making company based in Waterford that
was once one of the country's most recognised brands
internationally
Why is it in the news?
The Government has rejected its appeal to guarantee
loans of up to €39 million, amid mounting fears for the
future of its Irish plant, and the 550 people who work there.
Most appealing characteristic:
Its success as a standard bearer for the country
during hard times and a source of national pride when those were
thin on the ground.
Least appealing characteristic:
A slowness to adapt to changing tastes means
synonyms like luxury and elegance have been replaced by fussiness
and old-fashionedness.
Most likely to say:
I promise I'm good for it.
Least likely to say:
People living in glasshouses shouldn't throw
stones.