Diageo under fire over cuts

London - Drinks group Diageo has come under fire over plans to close its Kilmarnock whisky bottling plant and its Port Dundas grain distillery in Glasgow with the loss of 900 jobs. A coalition of MPs and MSPs, with Scotland's first minister Alex Salmond are asking the company to review the proposals.

“This announcement has sent shock waves across these communities and Scotland," said Harry Donaldson, GMB Scotland secretary. "The impact of these announcements if carried through will significantly affect the economic stability and social fabric of these communities."

On 1 July, Diageo announced that it had identified new restructuring opportunities to generate annual cost savings of around £40 million by its financial year (FY) ending 30 June 2012. In addition the cost of production of maturing stocks will be reduced by about £10 million per annum in FY 2011.

The restructuring moves included: consolidating packaging operations from three sites, at Kilmarnock, Glasgow and Fife, to two sites; closure its Kilmarnock packaging plant ; closing the Port Dundas distillery and the adjacent cooperage; and outsourcing of certain warehousing operations.

Meanwhile Diageo said a restructuring programme announced in February would reduce costs by £120 million  in FY 2010, instead of the £100 million originally estimated.

Diageo is also carrying out a review of its plans for the restructuring of brewing operations in Ireland. The revised proposal, it said, will have substantially the same scope as the original proposal, namely the restructuring of all three Diageo breweries in Ireland and is expected to yield cost savings at least equal to the original proposal.

An exceptional charge of £78 million was made in respect of the restructuring of brewing operations in Ireland in the year ended 30 June 2008, the group said. There will, it noted, be further exceptional charges of approximately £20 million in the year ended 30 June 2009 and a similar amount in the year ending 30 June 2010.

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