Companies hit by the global recession in bumpy 2009 were forced to cut corners and consolidation appeared to be the quick-fix solution for many of them. Necessary savings were introduced, mainly by the closure, relocation or expansion of existing sites.
This trend was especially visible in the high-tech industries, with US multinational General Electric merging its UK operations into one site and engineering company Foster Wheeler moving its operations from the US to Switzerland to increase management effectiveness. Web services giant AOL went as far as to close offices in France, Germany, Spain and Sweden.
Far from complete
Although the worst phase of the crisis seems to be over, the consolidation trend is still far from finished. William Henle, from Californian consultancy Henle Associates, confirms that the trend is likely to continue.
“Observations are that the consolidation trends seen in 2009 are continuing in 2010,” he says. “Companies continue to seek opportunities to realise operating efficiencies and reduced cost structures to favourably impact bottom lines through consolidations and other initiatives within businesses.”
Of mergers and acquisitions, Mr Herle says: “Initiatives to minimise overlaps and redundancies carry on. As would be expected, consolidation initiatives include – among other actions – both closures and relocations.”
Such observations are confirmed by the numerous examples brought about in recent months.
The race to save
The high-tech industry has again been at the forefront of the ‘savings race’. IBM has announced that it will cut the number of its employees in Ireland by 200, despite opening a new research centre in Dublin. The company says that the staff reduction is connected with the relocation of its manufacturing services to Singapore.
Another computing giant, Fujitsu, has announced that its Sheffield Business Park call centre and software-testing unit in the UK will close in September. This means that 100 to 200 jobs will be axed in order to cut the costs of its European operations.
Further consolidations continue in the automotive and financial sectors – two industries that have taken a major hit during the global crisis. Toyota Motor Corporation plans to offer early retirement to 750 of the workers at its plant in Derbyshire, England.
In the financial sector, Allied Irish Bank will fold its UK and overseas operations by closing offices in Edinburgh, Leeds, Houston and Sydney.
Fear of recession
Such decisions show that the fear of recession is still strong. However, many companies are using present circumstances to implement decisions that were shelved in better times.
The hope for companies taking the latter route is that, because unpopular decisions are easier to justify during times of economic hardship, they will come out of the recession stronger, better managed and more crisis-proof in the long run.