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Dáil Éireann debate -
Tuesday, 2 Mar 1971

Vol. 252 No. 1

Private Members' Business. - Irish Steel Holdings Limited (Amendment) Bill, 1971: Second Stage.

I move: "That the Bill be now read a Second Time."

The object of the present Bill is to raise the ceiling of borrowings which may be guaranteed by the Minister, with the consent of the Minister for Finance, for Irish Steel Holdings Ltd. The present limit is £1 million and the proposal before the Dáil is to increase it to £3 million.

The Dáil is aware that Irish Steel Holdings Ltd. is a wholly owned State company with equity capital of £6 million subscribed by the Minister for Finance. It manufactures steel, principally re-inforcing steels for the construction industry, from basic raw materials, operating on a single open hearth furnace.

Following advice from external consultants who made a thorough study of the company's operations and potential, the company is embarking on a major expansion of its steel-making capacity. The principal item in this programme is the installation of a second furnace, which will be an electric arc furnace, and there will be additions and modifications of the rolling mills and other parts of the undertaking.

The expansion now commencing almost double the basic output of steel ingots, bringing it up to between 135,000 and 150,000 tons per annum. The main point of it is however, that it will introduce processing by electric arc furnace for the first time. This will give faster and more flexible production and will also open up the possibility of getting into the more lucrative side of the trade in special steels for the export market. It must be said however that, while this expansion will give a greatly increased capacity for ingot production, the addition to the employment force will be a modest one.

The important thing is that it introduces a new and up-to-date method of steel production, and holds out the prospect of putting the company's unit costs of production at a competitive level in the coming free trade era. We all hope that this development into the electric arc furnace method will be only the first of further expansions, but this will depend on the efforts of everybody connected with the company to make it an efficient and competitive undertaking.

The cost of the present programme will be in the region of £3 million. The company is proposing to finance this from its own resources and from borrowing over a fairly short term. The company at present has borrowings of £½ million guaranteed by the State. The Bill before the House will lift the limit of guarantee up to £3 million, although not all of this will be required for the present transaction. The company itself has built up some resources from its profits particularly over the past three years.

There are other related amendments to the Principal Act made in the Bill. Section 2 (b) is for the purpose of being able to give a State guarantee where credit is got from a supplier of equipment on a deferred payment system instead of outright loan. Section 3 (1) is to deal with the position in which this company got its original guarantees for loans under the State Guarantees Act, 1954, and to bring all these guarantees into the one group. This will enable a single statement of guaranteed borrowings by this company to be given annually to the Oireachtas. More details about this can be given at a later stage if required. I am confident that the object of the Bill commends itself to the Dáil, and I recommend the Bill for its approval.

We on this side of the House are pleased to support this Bill because we feel that, as we advance towards the Common Market, there is a necessity to rationalise our industry in every way possible. We all regret if rationalisation sometimes takes the sad path of seeing the depression of an industry, the extinction of it or the reduction of it in employment capacity. We support rationalisation where the effort is being made and the nettle is being grasped on the basis of further investment on advice. I want to make it very clear that the advice is the important thing about it. On the advice of international consultants we have had this decision made to expand the activities of Irish Steel. I am aware of the valuable employment which has been given in Cork by Irish Steel Holdings Limited. I am pleased to see that steps are being taken to ensure that this employment will not be in any way endangered but will, if possible, be expanded when the new furnace is installed and when the new system is in operation.

I should like to ask certain questions. That is the job of the Opposition. How much more employment can we expect from the installation of this new equipment? I would hope that there would be a good increase in employment as a result of the installation of equipment costing some millions of pounds. I should like to know how, in fact, the installation of this new type of furnace will affect the future of Irish Steel, and whether or not there have been any contacts made or any arrangements made with steel manufacturing companies or marketing companies abroad whereby, within the Common Market, the viability of Irish Steel and the marketing force and ability of Irish Steel will be preserved. This is important because, unfortunately, as the world grows smaller and as the freeing of trade comes on us, even in the smaller Anglo-Irish Free Trade Area Agreement situation, one finds that the big operator can often exclude the small operator from business. I should like to know if plans have been made on marketing and also, as the Minister said it was the first of many steps, how much more money can we expect will need to be voted for Irish Steel over the next decade so that it will become a really good steel foundry which will survive under modern conditions.

These are the points I want to bring up. I would then ask whether the figure of 135,000 to 150,000 tons per annum for production capacity is a large or a small figure by European standards, or whether that amount can be regarded as something with bargaining power. I should also like to ask what is our tonnage usage of steel in this country.

I should like to express the view from this side of the House that as regards both Verolme, which is purchasing goods from Irish Steel in large quantities, and Irish Steel there is a realisation in Fine Gael that both these companies must be protected as far as possible from anything which would injure the employment therein. They must be improved, modernised and expanded, so that every job that is there will be safe and that there will be more jobs besides.

Under section 2 (b) guarantees can be extended to machinery which is not bought outright but bought by a deferred payments system. This is a normal procedure in heavy industry today and I see nothing wrong with it. It is something which should have been in various Bills. It should have been in the principal Bill and is being inserted in this one for the very good reason that it is necessary.

I also commend section 3 (1) which tidies up certain things and which puts the guarantees into one group. We in the Fine Gael Party want to see Irish Steel Holdings Limited go from strength to strength. We want to see more people employed there and we will go with the Government in trying to reach that end.

The rest of the Bill, perhaps, might be dealt with on Committee Stage. I do not foresee amendments from this side of the House in Committee but there may be when we have examined the Bill in more detail and in relation to what the Minister says in reply. The decision made by the Government has the backing of the Fine Gael Party. Every worker and every director in Irish Steel may take it that the entire Fine Gael Party is behind them in their every effort.

I do not want to mention names in great detail, but the work of Mr. Hogan, Mr. Devlin and Mr. David Frame is well known. I know a few of the executive management and their reputation is high. Whereas Irish Steel Holdings might, perhaps, if left as it was, have gone to the wall, as some industries could go to the wall in Common Market competition, I am glad that the right decision has been made, that the nettle has been grasped in increasing the capacity and production of the company and safeguarding the jobs there if at all possible.

I am glad that external consultants have been brought in for a thorough study of the company's operations and potential. Within Europe a whole new situation is sure to develop. That new situation is unknown to people in this country and could not be known to them because we have operated here, even if we had exports or import connections, within our own little cloister.

Very often I do not agree with the views of the reports of consultants and find their recommendations unsuited to our small country. However, if we are to remain in the production of steel this is a field where there is the necessity for external consultants who know the European market at least. I am glad the decision has been made after a report from external consultants. It is a pity that the advice of these consultants, in part at least, was not made known publicly and to the Members of this House. However, that is a decision of the Minister and we will not be churlish with him about it. Perhaps if we read the pros and cons, the decisions that had to be made and risks that had to be taken, we would discover it would not benefit Irish Steel if such information were to be given to their competitors.

As spokesman for Fine Gael on Industry and Commerce I wish to say we are in favour of the expansion of Irish Steel, the protection of every job there and the production not only of steel but of more jobs if at all possible.

It gives me great pleasure to be able to welcome unreservedly a proposal from the Government. While the Minister did tell us about the financial end of this Bill, which of course, is a financial Bill, he was rather reticent about the activities of the company. However, their financial success up to the present is indicated by their balance sheet at 30th June last when their debtors exceeded their creditors by £700,000 and they had, in addition to that, cash amounting to £600,000. There is no question but that the people who run this organisation deserve any encomiums we can give them.

I remember that just before the Korean War broke out, about 20 years ago, there were the most awful complaints about the operations of Irish Steel Holdings, that they were compelling certain manufacturers to pay more for steel of the type they were producing than these manufacturers would have to pay on the international market. Then the Korean War broke out and supplies of all kinds of raw materials dried up overnight and fellows were fighting one another—if I might say so without intending to be rude—in much the same way as people were fighting at the Fianna Fáil Ard-Fheis a week or two ago.

Mr. J. Lenehan

I saw them fighting twice as much at the Fine Gael Ard-Fheis.

Hardly true.

I am just making an analogy. It was fabulous to hear the comments of people who were groaning and complaining, and, of course, Irish Steel Holdings continued to supply the people who had been stuck with them as customers when the going was hard and the other people were inclined to find it not too easy to get their supplies.

Despite the careful report of the chairman that the situation could not be expected to be as financially successful this year as it had been the previous year, 1968-69, nevertheless, it is obvious that in recent years the company have been doing extremely well.

One would expect that even if there is no large-scale increase in employment, the introduction of processing by electric arc furnace will render the employment in the company more secure at a time when so many of our industries seem to be under pressure without our being in that disastrous situation of being in the Common Market at all. Therefore, if this is to be a form of security against that disastrous day when we might go into the Common Market, I am all for it.

There is one other angle that interests me, that is, that the company have had the advice of consultants. Like Deputy Donegan I have an ambivalent attitude towards consultants. There are more charlatans among these industrial consultants than any other professional occupation in the world today, but it gives me great pleasure when the chairman of the company is able to say in the report on last year:

In April, 1970, we commissioned the consultants, who had prepared earlier feasibility studies and recommendations, to prepare rapidly a detailed scheme for additional steel-making facilities and for improvements in other installations, the scheme to be such that it would give the industry sufficient capacity to meet the company's production and marketing programme in 1972 and immediately succeeding years and would, at the same time, be such as to fit into any further development of the industry that might be decided upon later.

The scheme recommended by the consultants was adopted by the board, subject to minor modifications. Early in July the Government Departments concerned and the Industrial Development Authority were informed of the company's proposals and of the necessity to order the required equipment at an early date if production and marketing problems in 1972-73 are to be averted.

I believe in that kind of consultancy. You get a firm of consultants, they are with you on and off during a period of time, you find their work first-class and you continue to live with them. There is no point in my pretending that there are no first-class firms of industrial consultants. There are of course, but, as I say, there are more charlatans in that business than in any other business I know of. There is an element of in the kingdom of the blind the one-eyed man is king in this type of thing.

I welcome this Bill without any reservation whatever. It is nice to see that, in fact, this will be done without the Government having to do it by putting their hand into the taxpayers pocket. As I say, out of the moneys already in the company, and out of the additional powers it gets here to borrow money, the company will do it itself. It is right, perhaps, that I should mention that I heard criticism about undue preference being given to particular scrap merchants. This was mentioned in the House before and it seemed to me that the Minister admitted that there was an element of truth in that. This is the only criticism I have heard of this company.

We saw the list. Most Members of the House saw the list of prices. It seemed to me that the very much higher price paid for large quantities of scrap could not be justified in logic. If one supplied 500 tons a week— which really could only be supplied in this country by one scrap company —one got a very much better price, in fact almost double what the small man got who could supply only 25 to 50 tons a week. It is only fair to say that the proof of any commercial operation is in the financial result and, on that basis, this company is to be trusted to carry on its business effectively.

I notice that the Minister states that this is a completely State-owned company which was set up originally by a donation of £6 million from the Minister for Finance. It would be interesting to know if the company pays any rate of interest on that money. So far as I know, Irish Steel Holdings produce the raw material for manufacturing purposes and, unless there has been any radical change in the past year or so, the cost of this raw material is in excess of the cost of material bought outside this country. I believe it was agreed that Irish firms would have to take the raw material from Irish Steel holdings for anything they manufactured for the home market, but that when they are manufacturing for export they are allowed to buy their raw material outside the country.

I know that the agricultural manufacturing firms of which at one time there were two in my constituency— they are now amalgamated into one— found themselves faced with considerable difficulties. When they were manufacturing for the home market their raw material cost them considerably more and, therefore, their costs of production were higher. If and when we enter the EEC I take it that there will be no restrictions on the importation of raw materials, and that any existing restrictions will disappear after a time.

The point I want to put to the Minister is this. Is this a viable firm? It got £6 million from the Minister for Finance. If it pays no rate of interest and no dividend, to anybody, possibly it is viable. In fact, it is in a privileged position vis-à-vis the ordinary private enterprise industrial firm. If it is not now able to provide the raw material for manufacturing as cheaply as raw material can be procured in other countries, that poses the question: is this a satisfactory State investment? The Minister said that a firm of external consultants advised him that this firm will become fully viable. He has not given us any further information. He has not told us who the firm of external consultants are. He has not elaborated on that in any way.

I am raising this point because I was engaged in many negotiations with the Department, long before the Minister became Minister for Industry and Commerce, in relation to the manufacturers in my constituency who were continually complaining about their high cost of production because they had to buy from a national company whose prices were dearer than they were elsewhere. The Minister also said that the new furnace will be electrically controlled and that this will lead to cheaper production costs. If we are to give credit of £3 million to a State-owned company, I should like an assurance that it will be fully viable and that it will be able to produce the raw materials at a cheaper rate to the benefit of industries using steel. I should also like an assurance that it will be able to hold its own for the foreseeable future. I have never been terribly keen on a completely State-controlled industry because that is usually a case of its being nobody's business. Whatever our political sentiments are, whether we think right or left, I think we all agree that it is usually more costly to run a State concern. It is very often controlled from an office in Dublin, especially if there is a big State investment in it. Though it may have local advisers and a local manager, they have to come back to the source of their remuneration to get their instructions.

I should like an assurance on those points. Is this a fully viable company? Is it fully competitive? Is it paying a rate of interest on the money loaned to it by the State? At the present moment, is it producing the raw material at a more costly rate than raw material can be produced elsewhere? What restrictions are imposed on firms in relation to buying raw materials where they are forced to buy from Irish Steel Holdings, based in Cork in the Taoiseach's constituency so far as I know? Is the Minister satisfied from the advice he got from these external consultants, whoever they may be, that the company will be able to produce with the new furnace at exactly the same price as other companies, and will be fully competitive with them? Is he fully satisfied that, in the event of our entering the EEC, this company will be able to exist and function and carry on, and meet the greater competition it will be meeting, because steel will be very competitive in an open market? I should like the Minister to clarify those few points for me.

Naturally, I am pleased with the welcome this Bill has received in the House. It is quite obvious that, in the main, the principal spokesmen for the two Opposition parties fully accept the good work which Irish Steel Holdings are doing and there is general overall goodwill for their continued welfare. The purpose of this Bill is to enable the ceiling to be raised to allow them borrow up to a limit of £3 million.

Deputy Sir Anthony Esmonde seemed to infer that the Bill visualised the State advancing a further £3 million for investment in this company, but such is not the case. The position is, as Deputy O'Donovan said, that this company have been operating quite successfully over the past few years and they have shown a profit in that period. Nevertheless, at no stage have they been in a position to pay any interest, to pay back any of the capital originally invested or to pay any dividends. It is a fully owned State subsidiary.

Deputy Donegan, while welcoming the Bill, asked why, since we were enabling the company to raise this additional money for improvement of their operations, there was no sizable increased employment. I said in my opening remarks that the additional employment force would be a modest one. I would point out that there are approximately 830 people employed by Irish Steel Holdings at the present time. It is anticipated, when they get the improvements works under way, that the employment level will be raised to almost 1,000. This of course, is quite a modest increase in employment in relation to the outlay proposed. It is quite obvious, however, that they hope to have a more efficient and productive operation there and to be in the position of being able to produce a less costly product.

The consultants employed by the company were referred to. I am fully conscious of the fact that Deputy O'Donovan is rather sceptical about the qualities of some of the consultants who may be engaged. In regard to some of the remarks that have been made in connection with the quality or otherwise of the consultants, one must assume, as has been said by Deputies O'Donovan and Donegan, that the consultants in this instance know their jobs. I think this is so. Deputy Esmonde drew attention to the fact that, while I mentioned external consultants, I did not for some reason indicate who they were. I do not see any reason why I should not say who they are. They are Messrs. Guest, Keane and Nettlefold, known as GKN. They are a highly thought of firm of consultants and Irish Steel Holdings Ltd. can look forward confidently to being able to trade satisfactorily, having taken the advice of those consultants.

Deputy Donegan asked if the output of steel ingots, which it is hoped will be between 125,000 and 150,000 tons per annum, is high, low or economical by world standards. That output is quite low by world standards. However, as we see it, there is room for a small versatile steel mill and this is what it is hoped we will have in the reconstituted mill of Irish Steel Holdings Limited. It is certainly small by world standards, but the operators there feel that we will be able to remain quite competitive even following our accession to EEC.

Could the Minister tell me the increase in tonnage from the present situation?

My information on this is that it is doubling the present output per annum. I should acknowledge the tribute which was paid to the directors by Deputy Donegan. From my knowledge of the Board in this regard I should say that his impression of their capabilities is similar to mine. I am quite satisfied from the short experience I have had of meeting the directors and studying their operation that the tribute paid to them is well deserved.

Deputy O'Donovan said that in my opening remarks I appeared reticent about the affairs of the company, that I did not say a great deal. In my opening remarks I endeavoured to give the reasons why this Bill is before the House. I acknowledge that the Deputy paid tribute to the company also. He went on to say that at some stage the Minister admitted there was preference given to certain scrap companies. In reply to a question in the House on some occasion I made a statement in regard to the prices paid for certain quantities of scrap.

We can be supplied with that outside.

Yes, but I do not think that at any stage I said there was preference given to any particular scrap company. In fact, as the Deputy mentioned, there are different rates paid for different quantities of scrap sold to Irish Steel Holdings Limited. One reason why disagreement might arise is that higher rates are paid for the bigger quantities delivered. This is quite understandable from the point of view of a company which is dependent to such a great extent on scrap as a basic raw material.

Deputy Donegan said that whether he would raise anything else would depend on my reply to the Second Stage debate.

The Minister has cleared up most of the points I had in mind.

I think I have covered all the points which have been raised. I again commend the Bill to the House.

May I explain to the Minister why I said he had not given us much information? The fact is that this is a company which does not manufacture, for example, sheet steel. As far as I know it does not manufacture structural steel. The truth is the Minister just did not say what it did manufacture. This is what I was getting at.

Steel ingots.

I know but it is not simply——

I want to assure the Deputy that there was nothing left out of my speech for the purpose of trying to hide anything.

I am not suggesting that at all.

Question put and agreed to.
Agreed to take remaining Stages today.