JCB predicts five-year wait before job levels return to normal

Jul 16 2010 By Graeme Brown

The chief executive of JCB has said it could take as long as five years to return to 2007 employment levels after sales at the firm fell by a third last year.

The Staffordshire digger-maker saw sales drop to £1.35 billion in 2009 but was able to increase pre-tax profit by £1 million to £29 million.

However, chief executive Alan Blake said the firm has seen markets improve in the first six months of 2010, and JCB has taken on 450 people as production increases. It is also planning to bring in 50 more engineers.

But Mr Blake said after seeing markets fall by 46 per cent it would take a long time before plants in Uttoxeter, Cheadle, Rugeley and Rocester are back to their former production levels after more than 1,000 jobs were cut in recent years.

He said: “The worldwide construction market has had the biggest fall in its history. It dropped 46 per cent.

“Will we ever be back to 2007 levels? Yes, I believe we will, but it won’t be for quite a long time.

“It could take us five years to get to those sort of levels again.”

He added: “There is still a fair bit of uncertainty in the developed world but a lot of the products that go around the world are all engineered here.

“The production side is variable but we have been recruiting back here for the last six months.”

JCB actually reached an all-time high global market share of 12.2 per cent last year, reinforcing its position as the world’s third largest construction equipment manufacturer.

However, the 36,000 machines it sold in 2009 compares with 57,000 in 2008 and 72,000 in 2007 – highlighting the rapid decline of the construction industry. JCB’s sales peaked at £2.25 billion in 2007, with record profits of £187 million, but revenue fell back to £2 billion in 2008.

Mr Blake said the firm has seen a stronger start to 2010, in which the company has taken on more people in Staffordshire, and chairman Sir Anthony Bamford has predicted it will sell 48,000 machines this year.

Mr Blake said: “2010 is off to a strong start. We are at the half-way point at the moment and we are very happy.

“Like anyone, looking into the future is very difficult. We keep a very close eye on the markets around the world and run the business quarter by quarter.”

Mr Blake said the company has continued to innovate throughout the recession and has used the extra time created by a fall in production levels to work on greener technology.

JCB has embarked on a £20 million investment in a new generation of its iconic backhoe loader – the machine with an excavator arm at the rear and shovel at the front – and the first of the new eco-range of the British-built diggers recently rolled off the company’s Staffordshire production line in Union Jack colours.

Sir Anthony said the company had managed to maintain profitability by cutting its workforce. Total numbers have gone from 10,000 to 7,000, 4,000 of whom are based in the UK.

He said: “2009 was hugely challenging for the construction equipment industry. The entire JCB organisation pulled together magnificently to respond decisively to the unprecedented downturn, which was particularly severe in the first half of the year.

“Tough action was taken to adjust our cost base to align it to a much reduced level of demand, and this resulted in an improving profit trend as the year progressed. We have created a strong platform for renewed profitable growth.”