The looming threat to 500 jobs at the Procter & Gamble plant in Nenagh comes only six months after the US consumer products giant moved to make 157 workers redundant at its Braun factory in Carlow.
The group has indicated that it will not be closing its operation in Co Tipperary, but a significant number of staff are likely to be told this morning that they will lose their jobs. Although Procter and Gamble has yet to offer an explanation for the redundancies, it is safe to assume that at least some of the work will transfer to a location in which labour and production costs are cheaper than in Ireland.
The job losses in Carlow last September set a precedent for such a move. Workers at the Braun plant lost out when that division of Procter and Gamble decided to transfer its dental floss production to Mexico. The Nenagh case follows a Procter and Gamble review of its European plant requirements, so production may well shift to eastern Europe.
Yet the Nenagh plant is profitable. The latest accounts for R-V Chemicals Holdings Ireland, which operates the business, show that it made pretax profits of $10 million (€7.63 million) in the year to June 2005 on sales of $66.8 million. Accumulated profits stood at $137.15 million. But in the eyes of P&G, the world's largest consumer products group, it would appear that the factory is simply not profitable enough.
The operation in Nenagh - which makes products sold under brands as big as Hugo Boss, Oil of Olay and Max Factor - amounts to only a tiny part of Procter and Gamble's global network. Procter and Gamble , which also owns Head and Shoulders shampoo and Pringles crisps, merged in late 2005 with Gillette, owner of the eponymous razor-blade brand, Duracell batteries and the Braun dental care range.
If the $57 billion value on that deal underlines the very size of Procter and Gamble's business, organisations of such scale can move their production operations around the globe with relative ease. That was to Ireland's advantage for as long as "economic" production costs delivered easy access to the vast EU market. The relentless upward creep of business costs here in the boom years means that Ireland is no longer an attractive location for such production. No matter how hard staff work in Nenagh, Procter and Gamble will find thousands of others in numerous alternative locations to do the same job at a small fraction of an Irish wage.
There is another important strand to this story. Just as globalisation gives big international groups the opportunity to move their manufacturing activities to low-cost economies, they can move money around the world with equal flexibility. Procter and Gamble is no exception, as official filings for its other Irish units prove.
In the same year as the Nenagh plant made profits of $10 million, a Dublin-registered vehicle called Procter and Gamble Financial Services paid $120 million in dividends to the parent group.
In common with many other US groups, Procter and Gamble locates such operations in Ireland to take advantage of the relatively low 12.5 per cent rate of corporate tax. This incentivises groups to locate as many financial operations here as possible.
Two other Irish-registered units in the Procter and Gamble group prove the point. In 2005, the Dublin-registered Procter and Gamble Holdings booked pretax profits of $633.4 million on the disposal of investments in Procter and Gamble to other group entities. In the same period, another Dublin holding vehicle called Procter and Gamble Investments made a profit of $519 million on similar business.
If all of that suggests Ireland will continue to play a highly profitable role in Procter and Gamble's international business, it will not be of any comfort to staff in Nenagh. With the general election only weeks away, it raises fundamental questions about a Government inward investment strategy that encourages global organisations to funnel billions through Irish holding companies while hundreds of workers lose their jobs.
