I have allowed Deputy Crotty a Private Notice Question to the Minister for Industry and Energy. Will the Deputy please read his Question?
Private Notice Question: - Kilkenny Factory Closure.
asked the Minister for Industry and Energy if he is aware that Fieldcrest, Kilkenny, may close on Friday next, with the consequent loss of 630 jobs? In view of the seriousness of the situation, will the Minister indicate the immediate steps he proposes to take to prevent this company closing?
Since the company in question went into receivership on 9 March 1982, the IDA and the receiver have made intensive international efforts to secure a takeover of their assets as a going concern. However, no offer for the assets on this basis has been received. I regret to say that earlier today the receiver, representing the banks and other interested parties, informed the union representatives and shop stewards that the plant would cease operation on Thursday, 10 June 1982.
Every effort to secure a takeover of the plant as a going concern has been made. The IDA contacted over 100 companies in the textile sector, 12 of whom, as world leaders in this sector offered the greatest prospect of a take over. Though most of these 12 companies visited the plant in question and carried out detailed analyses, such a takeover has not emerged. The IDA are, however, at my request pursuing other approaches, including the possibility of having the plant purchased for the manufacture of products of a kind not previously manufactured at the plant, as well as towels.
Does the Minister agree that this factory commenced production only in the last two years and, therefore, has not had a reasonable opportunity of performing profitably? Further, as the company commenced trading during a recessionary period, it has had no opportunity of performing profitably. Taking these factors into consideration and the fact that the IDA grant-aided this company to the extent of £12 million, should the Minister not make money available to keep this factory in operation until its viability has been proved one way or the other?
I accept what the Deputy says about the length of time during which the company has been in operation. In that period, the company incurred losses in the region of £10 million. The Deputy is aware, from the many meetings at which he has been present, of all the discussions into every aspect of this company. The problem is the fundamental one of viability. There was a question, even as late as yesterday evening, of a possibility of viability. I had that question investigated, as I promised the Deputy and those with him at the meeting last night. The basic problem is that the cost structures were based on a capacity of 85 per cent, but the company has operated at approximately 60 per cent capacity. The sales prices and cost systems were not adjusted to take account of the situation. In other words, the sales taking place were costing a lot of money. It has also been established by various market researchers into the entire viability of the market, that the kind of product manufactured by this company — undoubtedly a very high quality product — had not a sufficient market available to take the sales. To request money for a company which, as presently constituted, is non-viable and can be clearly shown to be so, is not the proper approach to setting that company on a proper basis. The decision to discontinue operations has been taken by the receiver who, as the Deputy is well aware, represents the banks and the major shareholders involved.
Would the Minister not agree that the State has a moral obligation to the 640 workers directly employed in this operation and possibly to as many others indirectly dependent upon it, one way or the other? The State was instrumental in promoting this industry through its various agencies and in getting people to take up employment, enter into commitments regarding housing and so forth. Would the Minister not agree that it would be wrong for the State now to run away from its responsibility and leave those 640 workers and their dependants high and dry? This is a disaster for Kilkenny. It is almost equivalent to an earthquake; it is a social earthquake. The Minister must take immediate steps to protect the employment prospects. The workers to whom the Minister listened yesterday were very determined to show him and everybody that they could make the firm viable and workable. Would the Minister not provide the necessary assistance to ensure that the operation is kept going at least for a period of time sufficient to establish beyond doubt, one way or the other, the viability of the company?
Firstly, as the Deputy is well aware from the discussions which we had, I made it abundantly clear from the very first day on which I took over the position of Minister for Industry and Energy — which incidentally was the same day on which this company went into receivership — that every humanly possible effort would be made, because of the newness of the plant, to have it restructured. I said then that as long as there was any possibility of a company coming forward to run the company on a sustained, viable basis, the Government would not be found lacking in producing assistance for it. We have spent three months at that. I have gone over the ground fully and the efforts that have been made. It is the greatest major international marketing job ever done by the IDA, not only in one but in three continents. I accept that the Government have an obligation in regard to getting employment but it must be sustainable employment. The Deputy and everybody would, I am sure, agree that where the operation is clearly shown to be non-viable — as I have shown the House that this is — it would be wrong and leading the workers up the garden path to suggest at this point that it is viable when it is not viable. I have already said that the cost structures are there based at 85 per cent, producing to 60 per cent, selling at a loss and that situation is no good for the workers or for Kilkenny. It is only a very short-term policy, throwing good money after bad. I have already indicated that the IDA are now looking for alternative production lines that can be carried on with the towel operation in Kilkenny because it is clearly shown from the marketing situation that for the quantity that would have to be sold and the economy of scale at which it is produced in Kilkenny, the market is not there to receive it. The Deputy, the House and the workers have my assurance that we shall not waste a minute in pursuing the other possibilities and getting this plant re-opened. Within its present structure it is clearly non-viable.
Has the Minister any confirmation of the position of the two Irish partners in the Fieldcrest operation or of any further interest shown by either of them? In the event of the banks deciding not to finance this project any longer, have the Government any contingency plan to ensure that the plant continues operating at least for some time?
The final position of the partners concerned was ascertained this morning following the discussion and the request from the meeting last night. Their situation remains unchanged; they are not prepared to participate beyond today. I relayed that to the workers as soon as I got the information. As regards our approaches to the future of the plant, the IDA are now pursuing other possibilities of trying to bring in larger production lines to produce along with the towelling operation which has clearly been shown to be non-viable in the present situation. It is a tragedy for the community in Kilkenny, but when the situation is non-viable we must try to achieve a viable situation. That is precisely what the IDA and the Government will be doing.
Is the Minister aware that the loss of 650 jobs in Kilkenny is a disaster for the area taking into consideration the fact that a large number of these people left good employment to take on jobs in the Fieldcrest industry and as a result have put themselves in a heavy debt situation with mortgages and other commitments? In view of the statement that the Minister has repeated consistently in answering questions today, is he aware that the IDA made an investment of £12 million in this industry two years ago? Is he fully satisfied that the IDA are now satisfied that this factory is not viable? If he is so satisfied does this not put the whole IDA operation into question?
I am aware of the people who took on financial commitments in the area and I suppose it is understandable that when they looked at the promoters of that project they thought they were going into secure employment. I accept that. I know from talking to workers during the many meetings we have had their serious financial problems. I would not say it is a total disaster for the area, but it is a setback. If anybody thinks we will forget about Kilkenny from now on, that is not and has not been the situation and it will not be the situation for the future. Some people may say when a factory closes: "That is the end of the line". I may refer to the case of Galway Crystal which closed eight months ago and everybody then thought those skills were being thrown on the dump. It was not the end of the line and there was an announcement yesterday about a re-opening. What I do say is that where a project is clearly not viable as in the present case nobody concerned should think of pouring good money after bad. The IDA are satisfied that we are taking the proper course in the present situation. Producing this top quality towel it was assumed and expected would make the same impact on the European market as similar brands did make on that market. That did not occur and losses amounting to up to £10 million in the first couple of years were incurred. I have given reasons why that has happened. On that basis everybody must agree that the situation is non-viable. We are setting out to make it viable and sustainable and to take every step necessary to get a selection of the right products that will make it viable and get the business back on its feet as soon as possible. That is what the IDA and the Government are committed to.
Hearing today that it is quite definite that the factory closes tomorrow, is the Minister aware that he is now leaving 640 people who have been in employment in Fieldcrest out of work to draw social welfare and redundancy money? Does he agree with what Deputy Crotty said, that only two years ago the IDA backed this venture? Yet the Minister today says it is not viable now. Is the Minister satisfied that if the factory closes tomorrow it can be re-opened again? I saw the same thing happen in Carlow with Erin Foods. The actual plant was closed and is still lying idle. I hope that, if the Minister and the Government are not prepared to put in the money to keep this plant going for another three or four months so as at least to give an opportunity for somebody to come in, he is fully aware of the consequences. I believe that if the Minister allows this factory to close, it will never be opened again.
It is not a question of the Minister allowing the factory to close. The decision has been taken by the receiver representing the main partners, but I point out to the Deputy and the House that the situation he is talking about for the next two months has been going on for three months. The Deputy is well aware that if there was a possibility of a company coming in to take this enterprise over and make it viable even as late as last night or today or even tomorrow, there would be no question of Government assistance not being forthcoming.
That situation does not exist that the IDA must look for other companies to bring in other products in an effort to make it viable. I am also aware of the IDA's investment in the company but I am sure the Deputy and the House are aware that a decision of this magnitude did not rest with the IDA. It was taken by the Government of the day. Everybody had full access to the decision-making process at that point. The facts are there. We must face them. We must now go forward and look for a combination of factors to make that operation viable. It has a first class building, a first class site and a first class workforce. It is a question of getting the marketing right and the products right to go forward with sustained employment, not have a situation in which everybody knew it would not last and it did not last. It is a question of the market being right, of the price being right and of our being able to go forward in a situation of sustainable employment and not in a situation in which everybody knows the operation will not last.
Would the Minister take into consideration——
The Chair is anxious to proceed with other business.
It is not often that I ask questions.
That would not justify you being allowed to ask one now. However, it is difficult to refuse Deputy Crotty.
Would the Minister take into consideration the fact that this industry is the first IDA-sponsored industry to be located in Kilkenny and would he have regard also to the fact that there is no doubt in the minds certainly of middle management and of top management, too, in the factory that this operation is viable? It has been only in operation for two years, in a recessionary period? It has never had a chance to perform. I am asking the Minister to intervene to ensure that the factory is not closed on Monday next.
I am surprised that the Deputy continues to refer to the viability of this operation. I have dealt at great length in this House with the question of the viability of this plant. If there was any question of its being viable, this question would not arise in the House today because the Government will sustain viable employment, especially when that employment is in factories and more particularly an operation of the size we are talking of, but where an operation is shown clearly to be not viable as shown by the records and having regard to the marketing situation, that is a different matter. The situation in the market place is there to be researched by anybody. To make an operation of this kind viable it is necessary to introduce a combination of products. Any company who are geared to an 85 per cent production capacity but who operate on a 60 per cent production capacity, who do not adjust their cost structures and who sell on that basis, and who have lost £10 million in a couple of years are not in a situation that is sustainable. The operation must be put together on a sustainable basis in the future and that is what the IDA are doing and what I will be doing.
Since I have not received a satisfactory answer on this matter I propose, with the permission of the Ceann Comhairle, to raise the Question on the Adjournment.
Likewise, I seek permission to raise this matter on the Adjournment.
Technically these requests are late but the Chair will communicate with the Deputies.