More like a Turkey?

From The Times January 10, 2008
Taylor Wimpey cuts payments to subcontractors in ‘urgent action’
Christine Buckley, Industrial Editor

Contractors working for Taylor Wimpey have been told they will be paid 5 per cent less than previously agreed as the housebuilder tries to cut costs.

A letter to contractors working for the Bryant Homes division of the business states: “We need to take urgent action to manage down our cost base. We are reviewing our overheads, house designs and build processes to drive out inefficiencies, but also need subcontractors to play their part. We are therefore introducing a 5 per cent reduction in price on all outstanding works on existing orders as well as all future orders placed after January 2, 2008, and will be looking for an equivalent reduction in future tenders.”

A subcontractor told Construction News that the housebuilder, which has sent the letters from its South East operation, was using bullying tactics to reduce its costs. The subcontractor said: “I don’t remember getting a letter when the market was booming saying: ‘Here, we’re doing so well we’re going to increase your rates.’ This is just bullying tactics. They’re still selling houses and it’s nothing like a recession – it’s a slowdown, at best.”

This is not the behaviour of a company that the Competitive Strength Report would report as Excellent – nor even as Comfortable. It is the pattern that is to be expected from a Constrained operation – just one step ahead of The Abyss.

At the beginning of November 2007 we posted our views about the combination of Taylor Woodrow with Wimpey under the headline

“Two Swallows do not a Summer Make – more like a Gulp”.

We could not believe that these “two swallows” would so soon look like a Turkey.

We warned then that, viewed through the penetrating lens of the Competitive Strength point of view, that the prospects for this merger looked bad.

To quote directly from our November post -

With no evidence of extremely rapid internal transformation, the most probable outcome is a larger “Constrained” business rather than a “better business”. Even if at the outset Wimpey might have rated a Competitive Strength of “Excellent” and assumed that they could absorb a “Constrained” company and remain “Excellent”, this was unlikely to be the outcome. The lower common denominator tends to prevail, as we have seen in so many previous mergers, which is why their success rate is barely 50%.

The Competitive Strength Report could have predicted this outcome.

Please look at the Competitive Strength web site to learn more about the only really objective measure of Comparative Competitive Strength.