In a 40-year career at the company, Patrick Wenger rose to become chief executive of Royal Doulton. He quit in 1999 – six years before the world famous brand was taken over by Wedgwood – to focus on recovery from a serious car accident. As Wedgwood fights for survival in administration Mr Wenger, pictured, talks to Business Editor David Johnson about the decline of two household names

WHEN Royal Doulton was taken over by Waterford Wedgwood in 2005, the official line was that the newly-merged luxury brands would have the combined clout to take on the world and fight their way back into profit.

As the future of Doulton and Wedgwood hangs in the balance, however, the acquisition is being blamed for contributing to the downfall of both.

Even before the takeover, commentators were questioning the wisdom of the move.

Parent group Waterford Wedgwood had long and medium-term borrowings of £211.1 million, and the takeover meant finding cash for Doulton's assets while at the same time taking on its liabilities and repaying a £25 million overdraft.

Waterford also had to take on Royal Doulton's pension fund, which at the time showed a deficit of £21 million.

The Waterford board expected to make huge savings by combining the production, distribution and marketing processes of the two brands.

In private, though, it took only a few months for sources at both Doulton and Wedgwood to admit the deal may have been a mistake.

Former Royal Doulton chief executive Patrick Wenger told The Sentinel this week: "They are two companies with batch production of a lot of different products, rather than volume production of just a few products.

"Instead of making the production process simpler it made it more complex, and the economies of scale they were hoping for were never there.

"There's no doubt in my mind the assimilation of Royal Doulton was always a problem."

And he believes Waterford's purchase of other brands – including German porcelain-maker Rosenthal in 1997 – has made matters worse.

He said: "Royal Doulton looked at Rosenthal in 1992, but we realised all the problems there would be with it.

"It would be far too complex and too costly to integrate the production processes.

"Waterford Wedgwood found this out to its cost and has been trying to get rid of Rosenthal for years.

"When you make things more complex, you build up stocks with more product ranges and you can't decrease costs."

According to Mr Wenger, a series of director-level changes over the last two years will have hampered efforts to develop strategies aimed at stemming massive losses.

He said: "There seems to be a new chief executive every few months who says changes are going to be made and costs are going to be cut, but not a great deal happens because there is no settled team to make the changes.

"Looking in from the outside, it's a world I don't understand.

"Some of the basic business rules have never been followed in the Waterford Wedgwood group.

"It's very, very sad, but to be honest I'm amazed the business has survived this long at all."

For years, Waterford has made no secret of its intentions to cut costs by producing more Wedgwood goods at its plant in Indonesia, at the expense of jobs at the firm's Barlaston headquarters.

But reports that much-needed investment from a U.S. private equity fund will be dependent on the wholesale transfer of production abroad have sparked fears North Staffordshire will be left with just a token manufacturing presence – or none at all if a buyer cannot be found.

This comes at a time when Wedgwood sales are increasing and the weakness of the pound makes goods made in Stoke-on-Trent better value in the U.S. – one of the company's key markets.

In the short term, Mr Wenger believes exchange rates will offer some relief from the global recession for many pottery firms.

He believes that smaller-volume, niche manufacturers in North Staffordshire have a bright future.

He said: "It's ironic that rumours of Wedgwood upping sticks to Indonesia is coming at a time when the pound against the dollar and euro is helping UK-based exporters.

"Companies like Steelite and Churchill, which still manufacture significant amounts of product here, may well pick up because of it.

"With the weakness of the pound, the margins of exporters here will increase and that generates the cash needed to spend on the sales and marketing side.

"In the long term, though, there is no doubt in my mind that pottery makers in niche markets will remain strong in North Staffordshire."