When industry bosses make cuts and lay off workers...

[CyberRose]

I just don't understand how they can apparently be making a profit now and still need to get rid of staff? Demand or no demand

 

[teuchter]

Just because they made a profit last year doesn't mean they are going to make a profit this year.

A 40% fall in global demand for steel from its peak of last year caused Corus's order book to drop by more than a third.
And steel prices have fallen by half since last September.

http://news.bbc.co.uk/2/hi/business/7850596.stm

 

[ViolentPanda]

But demand HAS decreased. Declines in construction and auto led to Corus problems didn't it?

(not saying they're right to do it)

That and the fact that Corus's British works mostly make "specialist" steel alloys.

 

[ViolentPanda]

I just don't understand how they can apparently be making a profit now and still need to get rid of staff? Demand or no demand

Because part (maybe a lot) of that profit will have been paid out to shareholders as dividends, rather than being retained as a "cash cushion".

 

[CyberRose]

Just because they made a profit last year doesn't mean they are going to make a profit this year.

Ok I appreciate that and I appreciate that demand has gone down (presumably because people can't afford to build whatever it was they were building) but if these job losses will mean an improvement of £200m annual profits (presumably for the years ahead) then why can't they only make £100m profit improvement and keep workers on? I know I'm not very knowledgeable about economics/business but it just seems like this is all designed to increase profits, rather than help them make a profit to start with

 

[CyberRose]

Because part (maybe a lot) of that profit will have been paid out to shareholders as dividends, rather than being retained as a "cash cushion".

So it's a choice of spend the money on the share holders or spend the money on the workers?! And who makes that choice...!!!

 

[teuchter]

Ok I appreciate that and I appreciate that demand has gone down (presumably because people can't afford to build whatever it was they were building) but if these job losses will mean an improvement of £200m annual profits (presumably for the years ahead) then why can't they only make £100m profit improvement and keep workers on? I know I'm not very knowledgeable about economics/business but it just seems like this is all designed to increase profits, rather than help them make a profit to start with

Where did you read that it would increase their profits by 200M?

In any case, how do you set a level of profit that is acceptable for a company to make?

You suggest £100M, someone else might say that is excessive and suggest £10M.

 

[CyberRose]

Where did you read that it would increase their profits by 200M?

The BBC article said Corus says this restructuring will improve profits by £200m. I took that to mean an increase

You suggest £100M, someone else might say that is excessive and suggest £10M.

Well I'd say £0m but what do I know?!

 

[Kanda]

Well I'd say £0m but what do I know?!

If a company makes £0M, how do they grow? Profit produces cash reserves and also provides a means for growth, which employs more.

No company can realistically manage to live with zero balance sheet.