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George Wimpey cost reduction letter to sub contractors

George Wimpey has written to sub contractors asking them to cut costs in 'survival of the fittest' measure to stop the house builder facing further difficulties.

Here is the letter below:

Dear Sirs


Firstly on behalf of GW Bristol I would like to thank you for all your effort during 2008 that assisted us in achieving our target volume. Our build quality, health and safety and customer care have not been compromised by the current conditions, which is a positive reflection of the standards that are expected and delivered on all our sites.

Unfortunately, and something I am sure would not have escaped your notice, the sharp downturn in the housebuilding industry, and indeed the economy as a whole, has significantly reduced our turnover. This trend is only predicted to continue in 2009 and possibly beyond. Throughout 2008 we have all begun adapting to a new and extremely difficult era in the industry that has and will test every business to its core.

Letters like this have been written to you in the past, but never have the consequences of a lack of your cooperation been as potentially detrimental to our build and possibly like other developers, our very survival! To those that agreed to reductions in the past I would extend our thanks, but you will need to look again and restructure as necessary to drive out as many reductions as possible.

We have a development plan for all existing sites and the 3 new sites that are programmed to start in the forthcoming half year. However, every build release and site start must be supported by cost reductions, and our requirement is 20 per cent of all current orders. Unless this situation is taken extremely seriously and acted upon swiftly there is every possibility that sites will grind to a halt… which would not benefit either of us.

There are a number of things that cannot be compromised in any negotiation:
• Health and safety
• Existing payment terms (including retentions)
• Dayworks must be eliminated
• The use of nominated suppliers (see below *)

* If you are aware of cost reductions that could be achieved either with value engineering solutions or by using different manufacturers away from our group agreements, then please identify this separately, with some cost evidence, as this may take time to consider and effect.

Please consider the above and take whatever action within your business to ensure that you can provide the required reductions, and then write to us with your commitment, if necessary on a site specific basis. Your response is required by Monday 19th January 2009.

It will be our intention to meet with trades as appropriate to conclude matters by the end of January.

On behalf of George Wimpey Bristol I can assure you that it is not and never will be our intention to drive subcontractors into financial difficulty. On the contrary it is with you that we would like to continue trading but that can only be after careful consideration.

We must all realise that it is the ‘survival of the fittest’ and a failure to react will only bring the inevitable. We have not taken this decision lightly, but it is essential that we take this action if we are to secure the long term business for both ourselves and our subcontractors.

We look forward to your FULL COMMITMENT to “our futures”.

Yours sincerely

Jason Wren
Commercial Director