Waterford Wedgwood shifts to Asia to save company

For more than two centuries, Waterford crystal and Wedgwood china have been symbols of Irish and British craftsmanship. Now, their future may lie in Asia.

Drowning in red ink, the storied brands, which merged in 1986, have moved most ceramics production to Indonesia to cut costs and now plan the same fate for crystal manufacturing.

Their headquarters may soon follow.

Short of funds for operations and loan payments, Waterford Wedgwood PLC is in advanced talks to sell a controlling stake to a U.S. private equity fund for roughly 600 million euros ($846 million) in cash and assumed debt, three people briefed on the negotiations told The Associated Press late last week.

The prospective new owners may move the company's management and possibly its headquarters to Indonesia, one of the sources said. They would not identify the fund and spoke on condition of anonymity because the talks are confidential.

With a Friday deadline set by creditors, a deal could come as soon as this week, though the Bank of America-led lender group has extended the company's deadline three times previously.

Waterford Wedgwood, which lost 75.8 million euros (about $107.2 million) in the six-month period ending Oct. 4, has struggled for several years like other fine china makers, as formal dining trends continue to give way to more informal habits. But the global financial crisis has pushed it to the brink of bankruptcy. As credit dried up, the company could no longer raise money to cover costs. Its shares have collapsed to one-tenth of a euro cent on the Irish Stock Exchange.

Workers have made Waterford crystal in Ireland and Wedgwood china in England for nearly 250 years. Their crafts have graced the tables of royalty and made innumerable wedding gifts for the better-off in the United States and elsewhere.

But six years of losses has driven Wedgwood to move all major ceramics production from the green hills of Staffordshire county in central England to the industrial outskirts of Jakarta, Indonesia over the past two years.

Only a small number of high-end products - hand-painted figurines and the iconic blue and white china - will continue to be made in England. The move to Indonesia, which cost 1,500 jobs in England, follows the opening of a smaller ceramics factory in China in 2004.

On the Waterford side, half of its crystal production was shifted to Eastern Europe last year, cutting 1,400 jobs in Ireland. Now, the company is looking to move all crystal work to Asia, with Indonesia a prime candidate.

"This is part of an expansive search for the best partners to work with in Asia," said James Philip Murtagh, senior vice president of Waterford Ltd.

In the English city of Stoke-on-Trent, where Josiah Wedgwood turned the family business into a global pottery center, the founder's statue still welcomes visitors arriving by train. But the skyline is dominated by dormant bottle-shaped kilns. The canals once used to transport fine china are filled instead with pleasure boaters.

The move to Indonesia all but brings down the curtain on English clay processing in a region nicknamed "The Potteries." At its peak, the industry employed tens of thousands.

The latest layoffs in December included Jeanette Seabridge, 55, who started as a teenager on the production line at Royal Doulton, a subsidiary of Waterford Wedgwood. After decades molding delicate ceramic flowers, she held onto her job longer than most because of traditional skills that took her a year to learn.

"I made 360-400 flowers a day, and at the height of production, there were as many as 80 women working with me," she said. Now heading into early retirement, she has taken a part-time job giving demonstrations at the Gladstone Pottery Museum.

The $50 million move to Indonesia will cut manufacturing costs in half and hopefully enable the business to turn a profit in 2009 or 2010, depending on the depth of the global slowdown, said Tony O'Reilly Jr., whose family is one of two that together own a majority stake in Waterford Wedgwood.

The move became inevitable because of rising energy costs, shrinking sales and the falling U.S. dollar, which ate into profits from the important U.S. market, company executives said.

"We're not leaving Stoke-on-Trent completely, but everyone else has either migrated their product, is sourcing overseas, or sadly has gone out of business," O'Reilly said. In another blow to the town, porcelain maker Royal Worcester & Spode filed for a form of bankruptcy protection in November after failing to find buyers for their factories.

After onsite training, Indonesians have taken up positions as managers, designers, technicians and painters at a factory that can produce 10 million pieces a year. It will employ about 1,750 workers by early 2009 as severance packages are settled in England, O'Reilly said.

With an average monthly salary of about 1.8 million rupiah ($150), compared with $1,950 in Britain, their work is vastly cheaper. The reduced costs will enable Waterford Wedgwood to boost spending on marketing and create new products, some with a hint of the Indonesian culture of batik and shadow puppets.

Initial concerns that Indonesian-made china would fall short of Wedgwood's reputation - some of its tableware sets cost thousands of dollars and become family heirlooms used only on special occasions - were overcome when products began rolling out of the new plant.

O'Reilly said the Indonesian-made china meets Wedgwood's high standards, which earned it royal status from the queen of England in 1901.

"There is a culture of artisanship," he said on a visit to the Indonesia factory in November. "Our craftspeople here are as good, if not better, than some of those we have in the United Kingdom."

Though the packaging will say "Made in Indonesia," all pieces will still be stamped "Wedgwood. England 1759" - labeling the company says is permitted under international trade law.