UK tanners Connolly have announced the liquidation of their US joint venture in December. The US joint venture was established five years ago as an attempt to move into the mass market. But contracts from mass-market car seat makers were unprofitable.

In March 2001, Connolly hired Martin May, a 48-year-old consultant, to cut the company’s losses. He decided to close the US venture, particularly when he uncovered fraud by one of the executives.

The US bankruptcy judge began liquidation proceedings in early December for the US venture, which has about $20 million in unsecured liabilities, another $2.5 million secured, and assets estimated at $4-8 million. Because of US write-offs, Connolly reported a loss of nearly £11 million ($15.8 million) for 2000 on sales of some £35 million ($50.2 million).

Connolly’s attempt to restructure core UK operations also failed. But May has now drawn up a new business plan he says will make Connolly profitable next year. It will again focus on the high-end niche user: Rolls-Royce, Bentley, some Aston Martin and Jaguar models and private jet owners. As a result, the number of cow hides the company handles will fall from 11,500 a week to 4,500, but the average hide price will be about £105 ($151) instead of £65 ($93). Annual revenues will be around £20 million ($28.7 million) rather than £30 million ($43.1 million) and net profit margins will be about 3-4%. ‘We will be smaller but everything will be under control. Bigger is not necessarily better’, May says.

The step back to the past will be done with a far more efficient manufacturing base, May adds. Connolly will shift their tannery work to Northampton where skilled labour is readily available. The Northampton plant will have 50 employees by Christmas. Overall, Connolly will be down to 150 employees from 320 early this year.

‘We are a family business and we are determined not to give up’, said chairman Joseph Connolly. ‘But with Aston Martin now owned by Ford, Bentley by Volkswagen, and Rolls-Royce by BMW, our world has become more difficult.’