Bottle maker warns of shrinking market

THE world's leading glass packaging supplier, Owens Illinois, could again be forced to shrink its Australian operations, leading to potential job losses, as it cites a sluggish local beer and wine market and protracted negotiations over contracts with customers and unions.

THE world's leading glass packaging supplier, Owens Illinois, could again be forced to shrink its Australian operations, leading to potential job losses, as it cites a sluggish local beer and wine market and protracted negotiations over contracts with customers and unions.

The Owens Illinois chief executive, Albert Stroucken, told investors in the US last week that local profitability had improved after a $25 million restructure in Australia - which included job cuts and a shutdown in excess capacity - but shipment levels in the Asia-Pacific had fallen nearly 6 per cent in the second quarter.

"We expect lower consumer confidence or low consumer confidence and high personnel savings rates will continue to weigh down the wine and beer markets in Australia and New Zealand," he said.

Despite its operating profit in the Asia-Pacific nearly doubling from $US9 million in the second quarter to $US16 million, a protracted slowdown in sales of beer and wine in Australia meant Owens Illinois might have to revisit redundancies and plant closures soon.

Incomplete sales contracts with large customers, presumably the brewers Foster's, Lion Nathan and wine groups, together with union deals, were also weighing on the company.

"Given the continued sluggishness of the Australian wine and beer markets, as well as the fact that we are still negotiating major customer and union contracts, further capacity actions may be necessary," Mr Stroucken said.

"To date, we have spent $25 million of the anticipated $50 million restructuring program in Australia. Additional activity to complete this program will be managed to ensure that further spending is offset by cost savings so that our cash-flow goals are achieved."

The pullback in consumer spending has hurt retailers, including beverage companies. A growing trend to bottle local wine offshore to take advantage of the stronger Australian dollar has also adversely affected bottle makers such as Owens Illinois.

The potential job losses could prove another serious blow for Australia's already trembling manufacturing base. Only last week it was announced that a Qantas engineering joint venture would close in September with the loss of 164 skilled jobs in Tullamarine. This came on top of 450 jobs lost at Ford and 112 at CMI, a Ford supplier.

Owens Illinois, which has its Asia-Pacific regional headquarters in Melbourne, and sites in NSW, South Australia and Queensland, has already shut down two blast furnaces due to the downturn in the beverage sector.

It is unclear how many Australian jobs could be at risk if Owens Illinois is forced to spend a further $25 million on restructuring its local business. A spokeswoman for Owens Illinois did not return calls.

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