UK: The restyling of Delta. (1 of 3)

UK: The restyling of Delta. (1 of 3) - Delta did the things in the 1980s which made it readier for the tougher times ahead: cost cutting went with continuing cost consciousness. It also realised that the only way to go was upmarket. Annabella Gabb report

by
Last Updated: 31 Aug 2010

Delta did the things in the 1980s which made it readier for the tougher times ahead: cost cutting went with continuing cost consciousness. It also realised that the only way to go was upmarket. Annabella Gabb reports.

Sitting in his no-frills London office, Robert Easton, Delta's 42-year-old chief executive, recalls how he resisted the lure of a highly paid City job in the mid-1970s: "I didn't feel that was real life ... Delta was a fascinating management challenge."

At the time Delta was one of those proud Midlands metal bashers that had survived through sheer bloody-minded determination. Founded in 1888, the then Delta Metal produced alloys and brass rod until well after the war. In the booming 1950s it acquired Black Country businesses, mainly supplying pressings, forgings, castings and odd parts to the building industry.

In the 1960s and 1970s further acquisitions laid the roots for new Delta businesses in cables and circuit protection that were to prove vital in the future. But like many British managements then, Delta shrank from painful decisions. It recognised the vulnerable nature of the commodity metals business but refused to scale back even when profits plummeted to £14 million in 1975 and continued to swing alarmingly.

The old order collapsed with brutal swiftness in the 1980-81 recession. Too much of Delta's business (some 45%) was in the old metal bashing - rolled copper and brass and extruded metal - and too many of its businesses were only number four or five at what they did. Its cost base was also wrong and its balance sheet too highly geared. Its future was in serious doubt. But unlike many once-proud Midlands engineers, Delta did not end up in the industrial knacker's yard. For that it had to thank Geoffrey Wilson, Easton's predecessor as chief executive from 1981 to 1989.

Despite his aristocratic pedigree (he was the younger son of Lord Moran and was educated at Eton), Wilson had a solid grounding in industry. He started at English Electric and rose to become a financial controller of GEC. He learnt the art of cutting costs from the maestro himself, Arnold (now Lord) Weinstock. It was a lesson which Wilson put into effect in the early 1980s recession and which Easton continues. Delta's Kingsway head office in London, with just 20 staff, matches GEC's Stanhope Gate for austerity.

For Easton, then serving as planning director and Wilson's right-hand man: "It was our blood and guts period. In two years, employees fell from 23,000 to 11,000 in Britain. We rationalised and reduced sites. The rolled metals division was closed and any businesses with a relatively poor competitive position were sold." Overseas operations were not immune. Delta scaled down its South African business and pulled out of Brazil. The group was in hock to the banks, as Easton remembers with a shudder: "Nineteen eighty one and 1982 were the worst years: gearing was nearly 100% and two thirds of profits went to the banks."

The Delta which emerged was vastly changed - leaner, fitter and more focused. Its shift from metal basher to market leader in several sectors, with a range of sophisticated products, is a lesson for British engineering. Competition from low-cost producers in the Far East (and soon from newly liberated Eastern Europe) is cutting away the low technology markets. It is a case of move upmarket or die, as Delta found.

Easton now looks back on the past decade with some satisfaction. In retrospect, the changes wrought seem like simple common sense. The elements of the modern Delta were largely slumbering in the group. Delta now has four clear divisions: cables, including power cables, general wiring and special cables; engineering, made up of plumbing fittings, controls and components; extrusions, medium and low-voltage circuit protection and wiring accessories; and industrial distribution and services in Australia and South Africa.

The mid-1980s were used to rebuild the group's strength and consolidate market share. But caution remained the watchword. Delta was not one of the go-go groups which expanded by costly acquisition. By the late 1980s Delta had achieved its aim: it was the British market leader in general wiring cables and industrial circuit protection and European leader in plumbing fittings, while its Australian and South African niches were profitable. Its move upmarket, through product development and strategic acquisition, had taken it into high-pressure valves for the nuclear and oil industries and safety equipment such as fire-resistant cabling.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today