Vol. 235 No. 7
I move:
That a sum not exceeding £3,273,115 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1969, to recoup the Industrial Credit Company Limited in respect of advances made to the Industrial Engineering Company Limited, Dundalk.
Before the Minister starts on that, may I ask him if he has last Thursday's Dáil Debates with him? If not, might I suggest that he would send for it to deal with column 689 where there is unquestionably a mistake in a reply.
That is always a possibility. I wish to say a few words by way of explanation of this additional Estimate. Deputies may recall that the then Minister for Finance, Dr. Ryan, when replying to the debate on the Estimate for his Department on 1st July, 1964, gave the Dáil an assurance that the writing-off of the accumulated losses of the Industrial Engineering Company Ltd., Dundalk, would, in due course, be brought to the notice of the House. This Estimate has been introduced in fulfilment of that undertaking and to enable me to relieve the Industrial Credit Company of its liabilities to the Central Fund in respect of advances made to the Credit Company for re-investment, on behalf of the Government, in the Dundalk company. The advances to be written off are £3,273,115 that is, the total Industrial Credit Company investment in the Engineering Company. All this amount has not been lost, however.
Three of the main subsidiaries of the Industrial Engineering Company Ltd. have been sold. One of them, Dundalk Engineering Works Ltd., has been purchased by the S and S Corrugated Paper Machinery Company of New York and two others, Commercial Road Vehicles Ltd. and Agrotiller Ltd., by a group led by Mr. Ivan McCulloch of Dundalk. These sales, together with the proceeds of the disposal of the remaining assets of the group, are expected to realise about £626,000 so that the net loss on the Dundalk investment after the realisation of all the assets will be approximately £2.65 million. The exact amount of the loss will not be ascertainable until some of the remaining assets can be realised, nor will the total purchase price be paid at once. In order, however, to enable the Industrial Credit Company to discharge the Central Fund liabilities it has incurred on behalf of the Government in respect of Dundalk, I propose at this appropriate stage to make it a grant equal to its total investment in the Industrial Engineering Company, that is £3,273,115. Industrial Credit will use this grant to reduce its debt to the Exchequer by an equal amount and will write down its Dundalk investment which will then disappear from its accounts. The debentures which the Credit Company holds in respect of purchase moneys outstanding will be transferred to me.
In your corporate capacity.
As these moneys are paid, the corresponding debentures will be written down. For the benefit of Deputies who may not be familiar with the history of the Dundalk undertaking, I propose to explain the background very briefly. In order to mitigate the threat of very serious unemployment in Dundalk on the termination of the Great Northern Railway Company's services, the Government decided in August 1957 to set up a company to be known as Dundalk Engineering Works Ltd. to promote alternative industrial activities and manufacturing processes at the former railway engineering workshops at Dundalk.
Is this a long statement? If so, we would like the usual courtesy of getting a copy of it. Has the Minister got a copy handy? If he has not, that is all right but perhaps he would read more slowly.
It is difficult to assimilate all this.
I am really only going into the history of the undertaking and it is not really essential from the point of view of what we are discussing. All we propose here is to write off, as far as the Industrial Credit Company is concerned, its full investment in the Dundalk Engineering Works.
Thank you. I am obliged to the Minister for a copy of his speech.
I shall proceed with the history of these events. I mentioned that the Government decided to set up the Dundalk Engineering Works Limited to promote alternative industrial activities and manufacturing processes at the former railway engineering workshops at Dundalk. This was an interim arrangement. Towards the end of 1958, permanent arrangements were completed. These provided for the establishment of a public holding company, independent of direct State control, to be known as the Industrial Engineering Company Ltd., with five wholly-owned manufacturing subsidiaries, also public companies. Dundalk Engineering Works Ltd. became one of the five subsidiaries and ceased to be a State company.
The GNR Engineering Workshops at Dundalk had for many years employed about a thousand men, which was a substantial factor in the economic existence of a town of 20,000 people. The Board of the Industrial Engineering Company was faced with the formidable tasks of devising new programmes capable of employing large numbers of men, of converting the character of the workshops to a commercial basis and re-training the staff to fit them for entirely new engineering techniques. The desirability of avoiding prolonged breaks in the continuity of employment added to the difficulties of the situation.
The principal activities undertaken by the company and its five manufacturing subsidiaries were engineering, foundry work, assembly of commercial road vehicles and caravans, the manufacture of rotary cultivators, Agrotillers, and, for a short time, of Heinkel cars. It was hoped that with the development of the group of companies at Dundalk, ownership would eventually pass to the private sector of the economy through a public issue of shares. In fact this never proved feasible as the group consistently incurred losses and the venture was financed almost entirely by the Exchequer through the Industrial Credit Company.
Over the years, the companies succeeded in winning valuable orders in the face of stiff competition on the home and export markets but they were unable to attract sufficient new business to earn profits. During 1961 a new group management and technical team were recruited who, with the aid of consultants, re-organised the enterprise. Despite these measures, losses persisted and it became increasingly clear that the Dundalk complex could never become viable as then organised.
The Government then decided that a Receiver should be appointed to carry on the business of the group with a view to the sale of the company and its subsidiaries as going concerns. Mr. Niall Crowley was appointed Receiver by the Industrial Credit Company, the debenture holders, in February, 1966. The Receiver was empowered to reorganise the activities of the companies so as to render them more saleable. Additional Exchequer funds were made available to him for the purpose.
Efforts to dispose of the group were not assisted initially by the restrictions on credit which were severe in 1966 in Europe and the USA. However, a substantial number of inquiries continued to be received. Many of these inquiries were tentative but a number of firm offers emerged. Besides the price factor, I gave considerable weight, in considering the offers made, to the probabilities of the individual bidders being likely to run the companies successfully and so to secure the maximum continuity of employment—if not increased employment—in Dundalk.
By these standards, the offers by a group led by Mr. I. McCulloch for Commercial Road Vehicles Limited and Agrotiller Ltd., and by S and S Corrugated Paper Machinery Company of New York for Dundalk Engineering Works Limited were the most attractive. The plans of these concerns offered the best prospects of continuity and are indeed expected to lead to an increase in the level of employment within the next couple of years. As I announced on 2nd May, these offers have been accepted and the three companies have been sold to Mr. McCulloch's group and to the S and S Company.
As I explained at the outset, the purpose of the Estimate is to enable the Industrial Credit Company to be relieved of its investment in the Industrial Engineering Company Limited and to bring accumulated losses of the latter company to the notice of the Dáil. I would like to make it clear that no net cash transaction is involved as the grant will be used immediately by the Credit Company to repay an equivalent amount of Exchequer advances. I, therefore, recommend the Estimate for the approval of the House.
This is a very large sum, and although I accept and understand what is involved in this Supplementary Estimate, at the same time it is almost the final chapter in the provision of a payment by the taxpayer of £2,650,000 which has gone down the drain. That is a serious matter at any time but I can remember when this matter first became urgent with the closing of the railway engineering works of the Great Northern Railway at Dundalk and the suggestions which were then made for the amelioration of conditions for the men employed. Everyone of us on every side of the House was in favour of steps being taken, on the one hand, to preserve their employment and on the other, to provide alternative employment. Many of us felt the steps that were being taken by the Government at that time were the wrong steps; yet we were equally emphatic that for the sake of those people and the town of Dundalk it was essential that proper steps be taken which would mean the establishment of a permanent basis of employment in Dundalk, as apart from merely temporary relief.
The views that were expressed at that time from this side of the House were grossly misinterpreted and twisted by various members of Fianna Fáil. The fact that we were right and the Government Party were wrong is proved by this Estimate. I am disappointed that the Minister has given us no assessment of the employment content that will be involved; the House is entitled to receive some estimate from the Minister in that respect, as well as some breakdown of individual items, to which I shall refer in a moment.
In the debate on 6th June last, Deputy Donegan asked the Minister a question at column 689; there is an error in it. It is stated that the debentures are in the name of the Industrial Engineering Company. That is wrong; they are in the name of the Industrial Credit Company and it is because they are that this Estimate has been introduced. The debentures were given by the Industrial Engineering Company to the Industrial Credit Corporation and are in the name of the latter, not in the name of the company creating them. If they were in the name of the company creating them, there would be no necessity for this Estimate to ease the title transactions. This may be a printing error. It is not all that important, but it is just as well the record should be put right on revision.
Many of the activities undertaken were undertaken with enthusiasm but, until recently, until before the appointment of the Receiver, the paramount cause of the failure of these several undertakings was at management level and the Government must take responsibility for that. The initial arrangements made by the Government were not commercial arrangements. They were political arrangements and it is because the Government were in the beginning endeavouring to play politics that £2,600,000 of the taxpayers' money has gone down the drain. If a proper commercial set-up had been completed at an earlier stage and if, in fact, Mr. Grace had been given a free hand at an earlier stage to organise the company on a purely commercial basis, we would not be witnessing today the very large loss of public money involved. We all accept that it was undoubtedly necessary that some public money would be expended without any hope of subsequent recoupment.
The Minister for External Affairs must take a very large share of the blame for this. It was an operation that was dealt with, as I say, under the cloak of the Industrial Credit Corporation and in a manner that was, in fact, purely political. I am right, I think, in saying that it was the experience in Dundalk that was one of the main reasons for the institution of Taiscí Stáit. If that be so, we have at least got something out of the experience, though it was experience pretty dearly bought. I am sure the Minister has the breakdown of the loss involved between the five manufacturing subsidiaries. It is desirable that that breakdown should be put on the records of the House before the money is voted to-day.
As I said, there were 1,000 men employed and the fact that the works were going to fold-up over night would mean very great hardship for 1,000 families in Dundalk. It was right and proper, therefore, that steps should be taken. The only tragedy is that the wrong steps were taken in the beginning. We hope now that these will be put on a permanent basis. It is appropriate that the Minister should give us now some indication of the employment content, particularly male employment, as visualised by the companies in the immediate future.
Since the Receiver was appointed, I do not know whether any people have been employed there, other than on a care and maintenance basis. If there are, is it clear that they will retain their employment and will be taken over by the new concerns? Finally, when does the Minister hope the final disposal and the detailed arrangements to which he referred will be concluded?
This is a very substantial amount of money and, while we all agree something had to be done to try to keep the very substantial employment going there, nevertheless we also believe that the wrong steps were taken. For quite some time, I and my Party have been advocating State intervention in matters of this kind and the establishment of State-run industries where private enterprise falls down on the job. In this particular case, we seem to have the worst of both worlds. The companies were set up in such a way that one did not lose money: one appeared to have made money but the remainder seem to have fallen down very badly. Perhaps the Minister would tell us whether or not it is true that one of the companies to which the product was being supplied for distribution was, in fact, making money while the others were losing money rapidly. As far as Dundalk is concerned, the result has been that Dundalk has been hammered, not for the first time and probably not for the last time.
The loss of male employment had serious repercussions. A number of skilled tradesmen left following the closing down. When an effort was made to try to pick up the pieces, untrained employees were taken on, but a number of trained personnel returned to work and they subsequently found themselves on the labour exchange and they also left Dundalk. It has been a severe blow to a thriving town and, so far, nothing has replaced it. The closing of the boot factory last year added insult to injury. I am not blaming the Minister for Finance. He cannot wave a wand and solve all these problems overnight. There was no proper planning. Do not let anybody tell me that because it happened so quickly, nobody knew what was going to happen. Everybody should have known that the GNR works were going to close down and proper planning should have taken place before they closed down.
It was not necessary to concentrate on the type of work done in Dundalk. The most severe blow was given by reason of the failure of these companies to carry on and the substantial loss of money involved. When the boot factory subsequently closed down, instead of attempting to find an industry which would have taken over at that stage and making available a sum which would have represented not very much more money to keep it going, the company simply gave a handout to the employees and said: "We are very sorry but here are a few pounds to take you to England." That was the most serious blow. The Government should not adopt that type of procedure again but should try to recreate employment.
Like Deputy Sweetman, I would be anxious to know how soon it is likely that employment will restart; how many people are likely to be employed. I am sick and tired of listening to talk—it used to be by the Minister for Industry and Commerce but it is now by the Minister for Labour— about potential employment. Usually, the potential is given at not less than 500. After 12 months, we find that in a great many cases the 500 has still one nought missing and the position does not seem to get any better. If the people who have taken over in Dundalk are giving employment, it is important that those who live in the area who are leaving school should know whether or not there are employment prospects for them. I am near enough to the area to be interested in what is happening and if the Minister for Local Government is right, I might be more interested later on. Whatever is done, an attempt should be made to encourage the employment of male labour there rather than of young girls whose employment does not add as much to the economy as does the employment of male labour. If the Minister can give any information on that point, I should be very glad to have it. The potential is, I suppose, the best he could give now but I should like the approximate date of restarting.
I should like to know whether or not Dundalk could not have been treated as Shannon is being treated at present, as an industrial estate. Perhaps the idea had not been accepted by the Government at the time as being the proper thing to do. Dundalk is mainly a working-class town, and because it is so near a port and beside the Border, there was very great potential if there had been proper planning. Is it too late now to ask the Minister, in any future development of industry, to recommend to his colleagues that Dundalk should not be forgotten? To do what we are doing here, namely, writing off a very substantial sum of money, is likely to have the effect that it will be said: "We failed there before and should not get our fingers burned again." I would hate to see that sort of thing happening. As to the amount of money received, the difference seems to be pretty small— less than three-quarters of a million pounds. This is a very substantial undertaking. Would the Minister say if this is absolutely the best that could be got? I was under the impression that the property was valued at very much more than that.
May I ask the Minister a question I forgot to ask, so that he can look it up? Could he reconcile the figure of £2,613,599 stated by him last week to be the total indebtedness, with the £3,273,000?
Mr. Haughey rose.
I was offering. The Minister did not see me. I know that Deputy Sweetman intervened with his question.
He asked me so many questions that I will have forgotten half of them by the time I come to reply.
If the Minister wants the loan of a pen, we shall be happy to oblige. Let him not make that an excuse.
It is mental capacity I am short of.
No comment.
We can understand that the Minister may be having a very trying time, like all the members of his Government and Party, at present.
That is where the Party all are. They must be considering weighty matters.
Public time, public money, national effort are all being dissipated by a terribly useless and dangerous exercise in relation to the electoral system which has the poor Minister for Finance so fatigued that he cannot answer a simple sum in arithmetic posed by Deputy Sweetman.
The issue we have to consider today is whether or not blame is to be laid at the door of the Government for the arrangements which they made in Dundalk which have resulted in a loss of over £2½ million to the taxpayer. There is a tendency, whenever criticism is made of an enterprise that has suffered loss, to say that it is justified because it must be taken in the context of all industrial investment and that one must accept losses if one is prepared to accept that risks must be taken to achieve success. That is all right as a general argument but it is not an answer when we are obliged to consider the operations of a particular concern. It is no answer for the directors of the company to say to its shareholders at the annual meeting that they should not be blamed for their failure because other companies have operated successfully either in the same or some other field. The simple truth of the matter is, as Deputy Sweetman said, the Dundalk arrangement began as a political gimmick and it was extremely badly managed in the critical years when it could have been put on the right tracks, and by the time steps were taken to replace the inefficient directorate, which had been appointed by the Government, by people who could do something about it, it was too late to plug the holes in the sinking ship. The result is this colossal loss for some terrible blunders made by the Government in the people that they selected as managers and the mistakes made by those managers.
The town of Dundalk and the people of Dundalk are to be praised that, notwithstanding the several body blows that industry in Dundalk has suffered over the years, they have succeeded in maintaining a reasonable degree of industry and commercial activity in that town. Dundalk deserves a great deal better than it receives from the Government and from the managers appointed by the Government. One would fear, however, that one of the trends in our industrial activity in recent years has been to grasp at the tailend of certain runs of industrial production. We have had it in relation to some electrical equipment; we have had it in relation to oil heaters; we have had it in relation to bubble cars in Dundalk. It is quite extraordinary that several large industries which are worldwide, several large industries whose financial worth is established, have declined to come into this State, even after exploring the possibilities, and have established themselves, instead, on the other side of the Border.
There are several modern industries which are commencing new lines of industrial production. I do not want to name any particular firms because they may have their own reasons for not coming here; I do not know what they are. I think it fair to say here that there must be something radically wrong with our programme of industrial development when some of the large concerns which have built industrial empires now in the six northern counties did not come here. When we compare that with the fact that we did invite in here and give public money to several industries which were at the end of their period of growth we must be very concerend.
We are also keenly aware of the fact that many long-established Irish industries have been unable to get assistance. That may be because they were not in a position to export as much as would be hoped for. But it seems to us it would be preferable to give assistance to people who have their roots in Ireland and owe their loyalty to this country rather than to people who come in from abroad with an anxiety apparently to answer their own immediate production problems.
It seems to me this is more appropriate to the Estimate for Industry and Commerce.
It is because we did not consider these matters carefully enough in relation to Dundalk that we ran into the trouble we did. Because we regarded the production of bubble cars as the answer to the need to provide employment for 1,000 people in Dundalk, we ran into the trouble we did. If there had been thorough market research, it would have established that the day of the bubble car was coming to an end. The production of these cars was fair enough as an ad interim arrangement. Unfortunately, what happened was that a few temporary expedients like that were accepted as a long-term solution. When they were operating, steps were not taken to provide something more worthwhile on a long-term basis.
This is a very disappointing result for the immense public investment and hope put into this company. If it is to be of any value, it must be taken as a lesson to the nation of what is not to occur in future. We must ensure that never again will Dáil Éireann be asked to pardon people for mistakes costing £2½ million. People who have been responsible for mistakes of that kind, be they either in Government or in management appointed by the Government, deserve to be censured and censured severely. These losses should have been anticipated and avoided. The fact that the Government did not take remedial steps in time is something in relation to which they should be censured.
First of all, I shall deal with the last query raised by Deputy Sweetman, who asked me to reconcile figures given in reply to a Parliamentary Question and the figures I have given now. I indicated that the indebtedness of the Dundalk Engineering Company to the Industrial Credit Company at 31st October, 1967, was £2,613,599. That figure can be reconciled with the figure I am giving to-day by the addition of the following: first, since 31st October, 1967, there have been additional advances of £175,000 and there is also a figure for share capital invested by the Industrial Credit Company in the Engineering Company of £484,516. Add these to the figure I gave and you get the figure we are dealing with to-day.
Deputy Tully suggested that the amounts which have been salvaged from the wreck are disappointing. Of course, I must agree. I want to assure him that in all these negotiations and discussions, I gave a directive that the important thing was to try to ensure continuity in the expansion of employment and that, if it were to be a choice between getting a better offer for the assets or the possibility of a more viable enterprise in the future, we were to opt for the latter.
You did not want somebody to buy it for a store at a bigger price.
Or to sell them off at scrap value. The whole emphasis in the negotiations and discussions was on continuing the enterprises and making them as viable as possible. At present there are about 340 people employed there, divided evenly between the enterprises taken over by the S and S Company and the McCulloch Group. There are 170 in each of these two different factories. The S and S Company hope that within a period of 18 months, the 170 they are employing will have expanded to about 250. The McCulloch Group hope to expand the 170 they are employing to 220 over a period of two years.
All the 340 there at present are being taken over?
Yes. The next query put to me was the question of dividing up the money between the various companies. Perhaps I had better repeat again the make-up of the totality in Dundalk. First, the Dundalk Engineering Company Limited, which carried out medium to heavy contract engineering work, has now been sold to the S and S Corrugated Paper Machinery Company Limited. Then Commercial Road Vehicles Limited which assembles heavey commercial road vehicles, does specialised body building and diesel engine overhauls is being sold to the McCulloch Group. Then there is Agrotiller Limited, a company which manufactures Agrotiller farm machinery. It also has been sold to the McCulloch Group. Then there is Dealgan Steel Founders Limited, a steel foundary which is out of production. Its assets are being disposed of on a break-up basis. Then Heinkel Cabin Cruisers Limited, which assembled cars and has been out of production since 1961. That company has been sold to the McCulloch Group. These are the five companies and what is happening to them.
I am sure Deputy Sweetman will appreciate that where you have this sort of situation with five companies, a holding company and common management there is a certain amount of administrative expenses common to the whole five and it is difficult to allocate the losses on any sort of exact basis. To try and help I give the following figures. The last audited accounts we have for the different companies are those at 31st March, 1965.
What?
At 31st March, 1965. These are the last fully audited accounts we have for the five different companies.
Does the Minister seriously say he has not received accounts from these companies for more than three years?
One of them has been out of production since 1961. The position is that the receiver has been there since 1966. I expect the receiver will probably be able to complete his work finally in October of this year.
Has the receiver been filing in respect of these companies the six-monthly accounts, as he is bound to do under the Companies Act?
I am sure he has.
The Minister should have that figure which would be more up to date than this because I am sure the receiver has complied with the statutory obligation.
I could have given the Deputy a simple answer and said it is not possible to give selected figures of these losses. I was trying to be helpful.
I appreciate that.
I am going back to the last firm figures we have. At that stage the total losses of all the companies amounted to £1,842,000. Of this the Industrial Engineering Company accounted for £309,000, the Dealgan Steel Company, £354,000, CRV £60,000, the Engineering Company, £465,000, the Heinkel Scooter Company, £566,000, and the Agrotiller Company, £86,000. I am giving these figures as a sort of rough guide to the scope of the losses involved.
I accept that the Minister cannot break it down exactly between each company.
The losses since then have been a further £470,000 in total. On the general question, I do not suppose any of us would regard what happened in Dundalk, or the final outcome, as satisfactory. I can only say with regard to the accusations made that all the Government were concerned with at any time was to endeavour to provide continuing employment for the people who were looking to this complex for their livelihood. Every effort was made, so far as the Government could make an effort, to ensure that this enterprise would continue to be successful and provide employment for those involved.
As I mentioned in my opening remarks, certain limited successes were achieved by the management at different times but, on the whole, the enterprises could not continue as viable entities, and we arrived at the position which we have today. We sought to carry on the divisions of this complex which were capable of being carried on and hand them over to people who, in our judgment, were capable of making a success of them and providing increasing employment there. With regard to the other sections, we had to cut our losses and write off the amount concerned. The Government made a determined and sincere effort to look after people concerned in those enterprises. It can be said that at any rate the Government did not let these enterprises go to the wall through lack of any willingness to help and provide money. The resources of the Exchequer were mobilised to ensure that every possible attempt would be made to keep as much employment as possible in existence in Dundalk. That is why we are faced with the write off of this loss today.
The only criticism that can be made of the Government is that in their anxiety to help to maintain employment in Dundalk, they were perhaps more generous than they might have been. The only criticism that can be made of the Government in regard to this whole affair is that they were determined that in no circumstances would the enterprises be allowed to fail simply because of lack of resources. If you like, perhaps we tried too hard to ensure that the enterprises would be kept going. In all these matters, the Government have to face difficult decisions. It would be very easy to be ruthless and say: "Close the thing down. Throw the people out of employment. We are not spending any more money." That is what Mr. McGilligan did on a famous occasion when he closed down a whole lot of enterprises——
The Minister should know that is not true.
—— because that was the way he looked at things. We look at them in a different way. We think that to the greatest extent possible at any rate the Exchequer should be available to try to ensure that anything with any chance of survival gets a chance to survive. That is what the Government tried to do over the years in Dundalk and continue to do. If we had been coldly calculating and looking at this from the purely financial aspect, we could perhaps have sold various things and got a little more money for them. That was not what we did. We tried, as I said to Deputy Tully, to err on the side of more employment and continuing economic activity in the future.
In fact, if the Minister used the money properly, he would have created more employment. Are these new concerns buying or leasing the land?
Buying.
That is the £600,000 that is coming back in.
Over a period.
It will not come overnight.
