Fodens on the rocks, but can anyone haul them off
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REPORTED in last week's 2A4, Fodens Ltd has asked its Dankers, National Westminster, lo call in a receiver, writes Sraham Montgomerie.
This decision was made be:ause of "'substantial losses Nhich have been incurred in 'ecent trading and in view of the :urrent financial position and immediate prospects of the company".
On Monday July 14, trading in Fodens' shares was suspended after the price had dropped to 23p. In line with the company's performance, the shares have had a somewhat erratic time of late. Last year they reached a high of 61p for a short time and early this year. following a gloomy winter, they went to 45p following a number of rumours about takeovers.
The current market value at he suspension price is less than 7.15m.
Of course, financial problems are not new to Fodens. The company ran into serious trouble in 1 975 when it had to be bailed out by the City. With the benefit of hindsight, this was due to spending a lot of money on a brand new assembly hall with the aim of doubling production capacity.
But this coincided in 1973 with the first signs that world oil reserves were not bottomless, with the subsequent slump catching Fodens unawares.
Following the City rescue operation in 1975, Fodens recovered incredibly well. From a Ulm deficit before the crunch and Ulm in the red the following year, the company recorded a £.1.7m profit in 1977.
This recovery came at just the right time, as it enabled Fodens to fight off a determined takeover bid from Rolls-Royce Motors who, during the course of the battle, upped its offer from £8.5m to £11m.
It is interesting to note that this final offer from Rolls-Royce valued each Foden share (in 1977) at more than twice their closing price at the time of suspension last week.
Fodens then seemed to be going from strength to strength. Not only did the profits continue to rise (more than £21/2m in 1978), but the new range of Fleetmaster and Haulmaster chassis had been launched onto an enthusiastic market.
However, the current slump and declining export orders have been too much for the company in spite of energetic efforts to improve its profitability. One of the criticisms often made of Fodens was that the company had continued to make more components "'in houseat a time when all the opposition was entering into manufacturing and licensing agreements left, right and centre in an effort to spread costs.
Earlier this year, Fodens announced that production of its long-serving constant-mesh gearbox would be wound down at a cost of 300 jobs. This process had already been started with the export modelsin the new vehicle range where Fuller gearboxes and Rockwell had replaced traditionally Foden components.
Industrial disputes, such as the engineering and steelworkers strikes, did little to improve the chances of a company already fighting hard for survival.
So what happens now? Several suggestions have been put forward, some making more sense than others. The perennial chestnut of a merger with the "company down the road"' at ERF has predictably been raised again but it is difficult to believe that this will happen.
Although ERF is in a far stronger position than Fodens, it is faced with the same declining market as everyone else and it is still, when all is said and done, a small company when compared with opposition like Ford and Daimler-Benz, Leyland and IVECO.
ERF also has a lot on its financial plate at the moment. The company has just opened a new engineering centre at Middlewich while, earlier this year, company chairman Peter Foden announced what was probably the coup of the century when he reported a successful negotiation with the European Coal and Steel Community for a loan of £5m to help build a new assembly plant in Wrexham_ So ERF is already heavily committed.
There has also been speculation that the giant Renault group is ready to step in but, at the moment, it remains just that — speculation. A spokesman for Renault confirmed that there had indeed been contact between the two companies in the past but he was unable to comment as to whether it was, related to the current situation.
Another party which at least openly admitted its interest is the Richardson Group which is also one of Fodens. biggest distributors. Roy Richardson, joint chairman of the Group, has
commented that "our company has always promoted British lorries and we have access to the cash to buy Fodens''.
The current reaction in the industry would appear to be one of not taking the Richardson offer seriously. It is after all a big step from running a dealership, however large, to running the parent factory.
The recent Rolls-Royce/ Vickers merger has reawakened the 1977 idea of a connection with Fodens. This would make a lot of sense to all parties from the military viewpoint as Fodens have been very successful with the lowand medium-mobility 6x4 and 8x4 chassis for the Army and they are, of course, powered by Rolls-Royce.
The immediate operator reaction to a Rolls/Vickers takeover of Fodens would probably be along the lines of "does this mean I can't now get a Gardner in my eight-wheeler?" It is highly Unlikely that RollsRoyce would insist on 100 per cent fitment of its engines in Foden chassis, but on the other hand the company could hardly be expected not to push hard for its own "in-house'' products.
The receivers say.. .
FODEN6 will continue to trade under the joint receivers and managers, Sir Kenneth Cork and Mr Philip Livesey of Cork Gully, with a view to selling the business as a going concern. Both Fodens and the joint receivers and managers have been encouraged by the support of both suppliers and customers alike.
Since the news of the present situation broke, the company has received confirmed orders for nearly E1 .5m worth of business. The largest order so far, for 20 of the new VT504powered lightweight sixwheeler, was placed by the Tarmac Group, while another civil engineering group, Costains, confirmed a major order for dumptrucks. The company has also secured an export order for eleven of the Super-haulmaster chassis for Portugal.
SMMT figures for June and the first part of July show Fodens as the market leader in the supply of eight wheel rigids.