Debt-ridden Waterford Crystal faced a renewed cash crisis Tuesday after the Irish government said it would not act as guarantor for any new bank loans.
Waterford Wedgwood PLC, parent company of the iconic Irish crystal maker, announced last month that banks would not extend any more credit unless the government stepped in to guarantee repayment.
The company warned that Waterford's hand-cut crystal plant, a major tourist attraction in the southeast Irish city of the same name, might have to close unless the government helped secure a 39 million (US$61 million) loan.
But the government rejected that appeal after extensive arguments at Cabinet level.
Among the government's concerns were that it would set a precedent in Ireland for bailing out a multinational company that has most of its operations overseas, and the risk that taxpayers could get sucked into a series of dead-end bailouts and assume legal responsibility for funding workers' layoffs and pensions.
The government also faced a political difficulty, because any state assistance to Waterford would mean putting money into the pocket of one of Ireland's wealthiest businessmen, newspaper magnate Tony O'Reilly.
O'Reilly and his brother-in-law, Peter Goulandris, own more than half of Waterford Wedgwood shares today and have sunk more than 300 million (US$450 million) personally into keeping the company afloat over the past five years.
But that investment, backed by a trove of new share offerings, has failed to stanch the flow of red ink, and Waterford Wedgwood shares have fallen to penny-stock status. The stock closed Tuesday at 1 euro cent (1.57 U.S. cents), matching its all-time low.
Waterford Wedgwood in September reported a net debt of 473.4 million (US$748.9 million) _ more than five times its market value.
The company is already moving more of its crystal operations overseas, and in February opened negotiations with labor unions to cut about half of the 1,000-strong work force in Waterford. Those workers were told last week that the plant would shut down at short notice for weeklong periods because of excess stock.
The Wedgwood china half of the company is traditionally based in neighboring England but, just like the crystal business, is increasingly shifting operations to lower-cost corners of the globe. Today much of the group's china is made in Indonesia, and crystal in Eastern Europe and Brazil.
Waterford Crystal has its biggest market in the United States, but profits there have plummeted since 2002 as the dollar has weakened.
Waterford Crystal traces its lineage to a factory opened in the town in 1783, although that business failed in the 1850s. The brand was revived by a Czech immigrant to Waterford, Miroslav Havel, in 1947.
The crystal side of the business thrived throughout the 1990s and at its height employed 3,200 people in Ireland. But the company's other facility for cutting lead crystal by hand closed in 2005, leaving only the flagship plant in Waterford, which attracts an estimated 300,000 visitors a year.
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