O’Reilly walked on broken glass in his costly effort to save Waterford

PRAISE for Tony O’Reilly is in short supply in Waterford these days but the workers at the city’s near-doomed crystal manufacturer should be inclined to offer a word or two of thanks to their former chairman for his efforts to save the company.

The idea may seem ludicrous to some. After all, O’Reilly has presided over the near destruction of a traditional giant of Irish manufacturing. Waterford Crystal — or at least the Waterford Wedgwood group of which it is a main part — has accumulated enormous debts and losses, has made thousands of workers redundant in recent years, overseen the dilution of the Irish identity of the brand and left a massive deficit in the pension fund.

However, O’Reilly deserves considerable credit for his efforts to make Waterford Wedgwood a viable business. He and his brother-in-law, Peter Goulandris, invested more than €400 million in new capital for the group over the past five years and almost certainly have lost nearly all of it. They also guaranteed company loans amounting to something like €100m, almost one-fifth of the total, and will have to cover those repayments too.

This level of investment was an extraordinary commitment, especially as so much of it was made at a time when the share price of Independent News & Media was falling from its heights.

Of course it could be argued O’Reilly only invested this money because he believed he would get it back with a large profit on top. But why else would he have done it? He is not a charity. He hoped to put the company back on a footing that would make his previous investments worthwhile — and which in doing so would provide useful employment to those who could make a contribution.

But he knew he was taking a huge risk and, unfortunately, it has cost him enormously, as well as hurting workers and pensioners. O’Reilly’s loss is something others in Waterford should acknowledge.

The workers can argue he has other jobs and other forms of income to sustain him — and he won’t have to worry about how to pay the mortgage, as some of them might — but O’Reilly’s experience must be painful to him. Not only has he lost a lot of money, but he has lost a dream.

Pity about him, you might say. But if you don’t have businessmen who dream of doing things — in O’Reilly’s case of creating an international luxury goods brand of truly global scale — you won’t get investment and you won’t have jobs.

O’Reilly must be deeply hurt by what has happened, but his only consolation is that there is little more he could have done. He tried as hard as he could. In his biography — written by Ivan Fallon and published in 1995 — there is this quote referring to his initial investment in the company in 1990: “I am trying to build companies that will exist long after I’m gone. Waterford Wedgwood, I hope, will be a real monument. We were savagely attacked by everyone when we went in, but look at it now — and it will be there for generations to come.”

The brands and the products may well survive under new ownership, but the relatively high costs of operating in Ireland and Britain mean the production will take place under contract in locations like Slovenia and Indonesia.

To those who believe the products will not sell well if would-be purchasers knew they were made outside of their traditional places of manufacture, O’Reilly’s biography provides another interesting nugget of information.

When he was thinking first of buying Waterford Crystal 26 years ago, and seven years before he first became a major shareholder and joined its board, O’Reilly commissioned market research. It showed that — even then — fewer than one-third of Americans who bought the product knew it was from Ireland and even fewer cared. Since then Waterford Crystal has been made all over the world, but it has been its style, price and distribution, rather than its origin of manufacture, that hampered sales.

When O’Reilly became an investor in 1990 the company was already on its knees. When he took control back then — along with American bank Morgan Stanley — the crystal division had lost £60m over the previous three years and was being kept afloat only by profits from Wedgwood. It was massively overstaffed and its workers extraordinarily overpaid, something that was only dealt with after a bitter 14-week strike that stopped all production.

“If we hadn’t put in that $100 million injection it was gone, and that would have been the end of Ireland’s greatest exporter,” O’Reilly told his biographer.

If O’Reilly had been truly ruthless back then he would have moved all of the production to cheaper overseas locations. In time, two of the company’s three Irish factories were closed and the numbers of Irish employees reduced dramatically. He kept the head office and one plant open because he wanted the company to be known as Irish, even if it did not really matter to the sales of the products.

It was a form of economic patriotism. The sentiment cost him dearly. It was only last October that a decision was made to reduce Kilbarry to the status of a small manufacturing centre as well as group headquarters: the idea was to leave only a small group of master craftsmen to make top-end items for the on-site visitor centre. It was intended that design would continue at Waterford but even that was not enough to seduce new investors or banks to lend more money. The sad reality is that for Waterford to have had a chance of survival this type of retrenchment probably should have taken place years ago.

Unfortunately, this wasn’t the only mistake the O’Reilly-chaired Waterford Wedgwood made. The decision to attempt to buy the Royal Doulton company in 1999 — and its brands that competed with Wedgwood — was something of an expensive disaster. Not only did it waste money but it diverted cash that could have been used for an earlier, more aggressive cost reduction at Waterford.

THE company did not act with enough speed in changing its product lines — making them more modern and accessible and at better price points — and did not change its distribution methods swiftly enough to meet modern trends.

In addition, circumstances had turned against O’Reilly — and THEY now make manufacturing at Waterford almost impossible even if a new buyer for the brand is found. The rise in the value of the euro against the dollar has been disastrous, but things have become worse in recent months as consumer demand in the US slumped. Expensive pieces of crystal glass will be near the top of few people’s retail shopping list for some time to come. If O’Reilly, with his connections and charm, cannot find a new investor for the Irish and British crystal and ceramic divisions, then what chance does the receiver have?

There is one small hope for Waterford workers. Senior political sources say the Government is prepared to consider buying the visitor centre from the receiver and keeping it open as a tourist attraction.

Given that so many other tourism-related businesses depend on its 300,000 visitor throughput, this makes some sense. How this would work, or how much it would cost the State, remains to be seen, but unfortunately this looks like the best that will be got.

The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.