West versus east on Diageo jobs
What's the Scottish Government's game plan in its campaign to save Diageo jobs in Kilmarnock? I ask this out of genuine puzzlement.
One can usually see the strategic direction Alex Salmond takes. But in this case, it's not clear.
It's easier to understand how the campaign came about.
First, politicians were antagonised by being kept in the dark until the workforce were told about the Johnnie Walker bottling plant closure.
Second, whisky is a product over which Scottish politicians can hope to exert some influence, as it can't go elsewhere.
And third, Diageo is proposing job losses not from its financial weakness, but from a position of corporate strength, if not dominance.
If the campaign is unsuccessful, and the closure goes ahead, it would make the Scottish Government look weak.
If you're an opposition leader, you can express regret that those in power failed to save jobs.
But if you're in power, where do you turn? To attack the next company saying it wants to close a plant?
There's been a that globally-mobile international business won't take kindly to being beaten up for wanting to restructure, and the attacks on Diageo will be watched by others.
My hunch is that failure of the campaign would lead to a promise to Ayrshire of special economic attention and funding, which it claims it has long deserved anyway.
On the other hand, if the campaign is successful, and saves Kilmarnock jobs (Holyrood ministers are not saying how many) there are big consequences. It will have to be at quite a price. And St Andrew's House doesn't have much money for the kind of subsidy required.
Diageo reckons on saving £20m a year for a £100m investment, so it would be quite a big subsidy if the drinks giant's mind is to be changed - and all for a strategy in which the company is unlikely to have much faith.
Second, if the campaign is successful, what does that say about the next factory closure announcement?
Everyone is going to want a piece of the action, with the first minister literally taking up megaphone diplomacy with the country's major employers.
Will he put public money on the line for every factory closure as unemployment climbs?
Third, if the campaign is successful, what will the consequences be elsewhere?
Scottish Enterprise, on behalf of the campaign alliance, is drawing up a "three-centre solution".
That means Kilmarnock (which is losing 700 jobs), Port Dundas distillery and cooperage in Glasgow (200 jobs to go) and Leven in Fife (more than 300 jobs being created with the planned new investment).
Let's look at Port Dundas first. I'm told the case for closure is hard to resist. Compared with Cameronbridge distillery in Fife, which would take up the grain spirit production, it's considerably more expensive for water and for energy.
Will the Scottish Government sacrifice Port Dundas if it can do something for Kilmarnock, and can it afford to do so when the historic distillery sits in the Glasgow North-East constituency where there's a close-fought Westminster by-election this autumn?
On Kilmarnock, Diageo's case is that it has become inefficient (presumably because the company failed to invest and modernise), and also that the company needs to cut bottling capacity.
The need to cut capacity won't change, even with the help of public subsidy.
So suppose Scottish Enterprise comes up with a plan for a greenfield, new-build, more efficient bottling plant near Kilmarnock.
That would mean hundreds of jobs saved, but surely not all of them. And it would mean cuts in capacity elsewhere.
Elsewhere, in Diageo bottling terms, means either Leven in Fife or Shieldhall in Glasgow, where 550 people work and where Johnnie Walker is already bottled.
Leven is represented by SNP MSP Tricia Marwick, and Shieldhall by one Nicola Sturgeon.
What do these colleagues of Alex Salmond think about the prospect of Kilmarnock taking jobs from their constituencies?
Tricia Marwick tells me she's relieved the Diageo strategic review has led to a commitment to the Leven plant.
And the prospect of more than 300 jobs is only a prospect. The people of Leven don't want Kilmarnock jobs to be lost.
But if their existing jobs come under threat, then you can be sure there will be a campaign in Fife to save them.
Which side will the Scottish Government take then?
The pressure is on Labour as well. Des Browne, MP for Kilmarnock and Loudoun, is making much of the running on the Kilmarnock campaign.
But if the former Defence Secretary is successful, it means some difficult explaining for his Labour colleagues in Fife and Clackmannanshire, where a new cooperage is currently planned as part of the Diageo plan.
And what was the meaning of Annabel Goldie's presence at the Kilmarnock protest? As Scottish Conservative leader, does this mean the prospective Tory government is now on the march against corporate restructuring?
With more than 10,000 people on the streets of Kilmarnock at the weekend, the campaign has momentum, and it's caught the public and media imagination as the rallying point for a fight-back against rising unemployment.
Yes, Diageo has mishandled this, and it has a fight on its hands.
But underlying that, the future of this fight is as much between political parties, and between east and west.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ³ÉÈË¿ìÊÖ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 28th Jul 2009, Ruaridh wrote:Kilmarnock is the home of Johnnie Walker, it is not just a site a large company developed with government grants. The Walker family started and developed the business in Kilmarnock, the town and the workforce helped the business grow and deserve some loyalty in return. It is not that the factory makes a loss, just that Diageo think more profits can be made elsewhere. Is that to be the deciding factor for everything - profit? What will be next - bottling whisky in China?
Iain McMillan of CBI (is Diageo a member?) talks about foreign investors being put off by Sunday's protest. Does he just want the workers and the area to accept the closure without a murmour? I wonder if he has any sympathy for all the small businesses and local suppliers who will be hit by any closure. Or maybe CBI just cares about big business?
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Comment number 2.
At 29th Jul 2009, geoDougie wrote:This was almost a good blog from Douglas Fraser, certainly more balanced than much of the hysterical nonsense coming from elsewhere! However it is let down by the usual 'insight' of journalists who are simply speculating and assume that all politicians here are driven by pure self-interest and nothing else. Also all other estimates say 20,000 not 10,000!
I really do not think there is any 'difficult explaining for anyone to do' unless all politicians in Clackmannan and Fife are hopelessly parochial and would prefer to see them gain less than Ayrshire at the expense of Ayrshire. Also there seems to be this agenda in the media to tell everyone that we should all dance to DIAGEOs tune and that we in Kilmarnock and politicians are behaving irrationally!
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Comment number 3.
At 29th Jul 2009, geoDougie wrote:I think it would be more useful if the ³ÉÈË¿ìÊÖ were to turn its attention simultaneously to 'CBI Scotland' and ask some tough questions of them. Who are there members and who do they represent that they feel they have the right to patronise that element of business in Scotland (the proportion thus unknown) that is disgusted by the activities of DIAGEO at a time when they are posting profits of 2bnGBP per annum. It seems perverse, perhaps they have confused the interests of Scottish industry with that of the corporate fantasy vision of Iain McMillan.
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Comment number 4.
At 29th Jul 2009, redcliffe62 wrote:it is understandable for every local mp to look at things from a local perspective regardless of their party.
pushing for your own electorate would eb expected, nay should be encouraged. perhaps politicians should be doing that more often.
as for diageo shareholders, they have their own self interest and have the right to make conmmercial decisions, but they must understand that there are consequences.
doing all this secretly confirms they knew that they knew there would be an outcry and that to kilmarnock citizenry what they were suggesting was unethical and immoral if not actually illegal.
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Comment number 5.
At 29th Jul 2009, kaybraes wrote:It strikes me that whatever politicians and the media say , Diageo are running the show and know better than everyone else how to run what appears to be a successful business; so , if they find it is more profitable to move production etc. elsewhere then it would be bad business if they did something else. Like every other business they operate to maximise profits for their shareholders, not to provide jobs, and if they did otherwise,then they would not be running a profitable business , they would be bust.
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Comment number 6.
At 29th Jul 2009, Marcus_Fenix wrote:A very famous Conservative MP once said that it is good if you have made enemies because it means that you have stood up for what you believe in. Lets hope Salmond, Coffey, Browne et al make some enemies and in the words of the same Conservative MP: Never Give In!
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Comment number 7.
At 29th Jul 2009, Chris Morrison wrote:I'm just waiting for the Diageo corporate headquarters to move to Scotland? Was that not promised in a previous decade? Diageo clearly don't really care much about Scotland despite the fact that our whiskey gives them a massive amount of their revenue and profits.
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Comment number 8.
At 29th Jul 2009, Walker1820 wrote:Morrison, it was a promise made by the convicted fraudster Ernest Saunders, so I don't think anyone believes it was a promise from an honorable man. Must pick you up on one area of spelling though, because it is an important one, any whisky produced outside of Scotland has -ey at the end. Scotch Whisky has no -ey and therefore is unique to Scotland.
Regards this blog we have to think bigger, we are a wee country in a big world, and whisky is a world renowned product from our wee country. It's time to think about the benefit to Scotland of a strong whisky industry, and to recognise that however devastating to Kilmarnock this might be, Scotland is not the poorer for this.
Alex Salmond should use what small amount of cash he has to assist Kilmarnock in dealing with the eventuality, rather than trying to defeat the behemoth
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Comment number 9.
At 29th Jul 2009, redrobb wrote:I've previously blogged about this and similar occurrences, quite simply its all smoke & mirrors from all concerned! As for the Scottish CBI (I won't say what I think the CBI three letters stand for in my vocabulary, Mr Moderator will not let me) but merely puppets of their big UK brother, the hand up the back variety. Just when will someone take a stand against big business? And the havoc they wreak in our communities!
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Comment number 10.
At 29th Jul 2009, Wee-Scamp wrote:McMillan of the CBI is a member of the Calman Commission so he wouln't care less if Diageo moved their plants to Cornwall...... To him it's all part of the Union and so it doesn't matter where they are.
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Comment number 11.
At 29th Jul 2009, Diabloandco wrote:I read with growing disbelief the articles on this subject by Scottish journalists in the Times, Telegraph , Herald and Scotsman.
Just a useful tool with which to attack the Scottish Government and particularly Alex Salmond .Eh boys?
I wonder what an absent SNP leader would have been treated to by the media.
Would that have been OK?
Or would it have prompted an outpouring of scorn for not supporting the Kilmarnock workforce.?
It seems to me that the media is truly out of step with all 20,000 who marched and the general feeling, written about by the despised internet vermin throughout the UK, that a period of momentous political change is upon us.
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Comment number 12.
At 29th Jul 2009, Comrie04 wrote:Like Douglas I cannot fathom the stance of the various politicians. As a redundant ex member of Diageo (30 years) I feel a great deal of sympathy for a number of friends who work at Kilmarnock. However stepping back from the emotion I think this move is needed and is only a further step in the restructuring that is required in the Drinks industry due to increased efficiency in Packaging plants.
The numbers working in this process today is around only 15% of those employed 25 years ago, yet the industry is selling more. I can't remember any politicians taking such a stance when the following brand's plant's were closed and relocated; Grants, Bells, Dewars, White Horse, Black & White, Haig, J & B, Whyte & MacKay, to name only a few.
In the last 10 years ago Scotland has lost two even more important parts of Diageo because of the expense of doing business in the UK. The first was the International Export Centre. This managed export shipments and collected payments. Keep in mind Diageo's global turnover is approaching £20 billion. This is now routed via Amsterdam rather than Glasgow. 200 plus jobs moved under Labour's watch and yet there wasn't a peep from any politician. The Finance Department followed moving from Edinburgh to Budapest. Again no utterances were heard from politicians.
Diageo cannot be blamed for being efficient or making profits, that is what they are supposed to do. The UK & Scottish governments and agencies such as Scottish Enterprise have a great deal to answer for.
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