Irish Shipping Limited (Amendment) Bill, 1984: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

When I spoke earlier I placed in its historical context the financing of Irish Shipping Limited and indicated how the changing demands were met by legislation, starting with the 1947 Act and going on through the Acts of 1959, 1980 and 1982. I asked the Minister about the £50 million guarantee in the 1982 Act and its relationship to the £45 million mentioned in this Bill.

The company had a very good record in profit-making to the end of the financial year ending on 31 March 1982 but in the following year net losses were £14 million. Deep sea tramp operations are now in a parlous state throughout the world. The Minister gave statistics and answered beforehand a question I have on the Order Paper about relative rates for this kind of activity. They are nothing short of shocking. We have been reading that there is an upturn in the world economy and specifically in the economy of the United States. Perhaps the Minister would let us know whether there has been a progressive improvement, even in actual dollars, with regard to rates in the deep sea areas. Certainly the US economy is experiencing an upturn, although it may be artificially induced by the fact that there will be a presidential election at the end of the year. Has the Minister any assessment as to how the US recovery will affect the activities of Irish Shipping and can there be any reasonable estimate as to what effect it will have?

One must ask whether there was a question of bad judgment with regard to chartering. Was it bad luck or bad judgment or a combination of both? In any business of this kind there is a problem of assessment. If everybody knew a recession was coming they would take remedial steps beforehand. It looks as if judgments regarding charter rates may not have been as soundly based as they might have been. As the Minister indicated, there is a heavy carrying of the company by the ancillary activities. It is really shocking to hear the report to this House that substantial losses of the order of £22 million are estimated in respect of the financial year which ended on 31 March last.

The purchase of ships is again a question of judgment. Was the original chartering in of nine vessels soundly based? I know it is easy to talk with hindsight. The Minister stated that a total of 393,000 tonnes dead weight was chartered in and the horses backed were coal, steel and lumber. We do not have to mention what has happened to the steel industry all over the world. We know from the EEC that Luxembourg, which depended almost totally on steel, had some people unemployed for the first time. Our own steel enterprise has had to be shored up and buttressed to a very great extent by Government subsidy. There has been trouble in all the great steel-making areas, including the UK and the US. The Minister does not give any judgment and simply says that the chartering in at that time has proved disastrous. It would be as well if we made some kind of assessment as to whether for the future this kind of project should be entered into. If it had come off, if the slump in the world economy had not taken place, we would all be clapping. The track record was so good that nobody would have challenged the judgment of the directors at that time. If there is any lesson for the future, then we should try to learn that lesson. The hope was that freight rates would be much higher.

The link with the Cardiff ship owners seems to have been a wise move at the time and this was borne out by the fact that they could undertake projects which neither the one nor the other would have been able to undertake on their own. However, that company is in trouble and I should like to know if any losses suffered by Reardon Smith have rebounded on Irish Shipping, if they actually lost by the combination.

I am pleased that the negotiations with the foreign owners of the nine chartered-in vessels have been, at least to a limited degree, successful and that concessions have been obtained. Could the Minister say who the owners are and how many ships of the nine each company owned? I am not asking for any of the commercial details, because there is no point in letting competitors know what you are up to. This is also emphasised by what I read out from Mr. Lemass's original speech in 1947 when that Bill was being discussed in this House. There is no guarantee that a number of companies will not engage in a conspiracy to down the smaller companies. Even though it is a State company, this is a small company in that league.

The company are purchasing for $42 million two of those vessels, the Panamax with 62,000 tonnes deadweight of 1982 and the Celtic Venture of 32,000 tonnes, constructed in 1983. The House will be able to judge what value has been got by comparing that with the price of the ship which is being constructed now in Verolme (Cork) Dockyard.

Would the Minister say if the other seven are still in fact under charter to ISL? Did Irish Shipping get out of any of their obligations on foot of this bargain and their buying out of the one large vessel and one medium to large vessel? It must be said in the House that the purchase of the two vessels would not be seen to be wise at this juncture if the well based assessment of the situation did not indicate that profit making was up front — and not too far away up front, either.

As the Minister rightly says, he cannot speculate but there must have been a cold, calculated assessment in the boardroom before the company came to the Minister. They must have given argument on which to base their plea that it would be wise to do this. What were the spin-off benefits with regard to the other seven ships? The main purpose of the Bill is to deal with the Government guarantee on borrowing. It is amusing to find so much — nearly half the print — about remuneration and superannuation of staff. The Ministers for Communications and the Public Service in putting into a statute some conditions about remuneration of staff and about national guidelines seem to be breaking a nut with a sledgehammer. It is reminiscent of the black humour joke "If you do not stop shifting about, I will nail your other foot to the ground"— nailing the negotiations by writing them into a statute.

As I said at the outset, I have known for some time about the difficulties of Irish Shipping. I accept that the Minister has given a clear outline of these difficulties. He mentioned them in his 1983 Estimate speech and also in 1984 in that context. I have here a document which I put together in my own Department when Minister for Transport, in connection with our national economic plan which also dealt with the difficulties as they appeared then in the deep sea market.

I have asked a number of questions which I hope the Minister will answer. There is an obligation on this House to sustain Irish Shipping on account of the usefulness in general of a national shipping company; on account of their history originating in emergency powers orders; on account of the philosophy for them by the late Mr. Seán Lemass in his speech at the establishment by statute of Irish Shipping Limited in 1947; on account of what successive Ministers have done in 1959, 1980 and 1982. However, this should not preclude Members of this House from challenging various decisions. They may have been the right decisions, but at least we should examine them because, after all, it is the taxpayer's money that we are dealing with and we are responsible to the taxpayer. For that reason, I am not opposing this Bill, although I am more uneasy about it than I have been about any of the other Bills which have come before the House asking to sustain various semi-State bodies.

First, I should like to thank Deputy Wilson for facilitating the passage of this Bill through the House. I join with the Deputy in paying tribute to the former Taoiseach, Seán Lemass, who was responsible for transport matters for many years, especially during the war years. He was the Minister responsible for setting up Irish Shipping Limited. Indeed, his actions, as a Minister and as Taoiseach, have inspired many people on both sides of this House.

Irish Shipping were one of those more successful companies started by the late Seán Lemass and indeed, they have been a very successful company. For many years, they have been considered the beacon light of the State sector, the exemplary company, the proof that semi-State or State corporations were not necessarily synonymous with loss-making or inefficiency. They were a profit-making, efficient, proud company, holding their head high in a very competitive world market. For 15 years in a row they made significant profits. Not alone that but they seldom, if ever, troubled the State for additional funds by way of equity or otherwise. Indeed, in some of the arrangements regarding shipbuilding at Verolme (Cork) Dockyard they played more than their fair share and helped out a lot from time to time. Therefore we need to underline yet again the success that Irish Shipping Limited has been for so long.

That makes their present plight all the more tragic and sorry. Deputy Wilson asked: was this as a result of bad luck or bad judgment? We must guard against the wisdom of hindsight. As my colleague, Deputy Alice Glenn, said once, it is very easy to have 20:20 vision from a position of hindsight. Nonetheless it has to be said that a major error of judgment was made — I do not think we should seek to hide that — a very major error of judgment was made. What is more it was made without the Minister of the day being informed that the decision was being taken. Therefore, it was taken unknown to the Minister of the day back in 1979-80, and was made unknown to the Minister for Finance of the day also. Therefore, a major error of judgment did take place although it must be said that it is easier to see that with hindsight than with foresight. Nonetheless it is very clear that the downside risk of this decision was not properly calculated especially in view of the wellknown cyclical nature of the deep-sea shipping industry. Certainly some bad judgment was involved, bad judgment on the part of a company from whom we had come to expect very good judgment. While the judgment concerned was a major one it has to be viewed in the context of a very good previous record. I fervently hope — and in this I am sure I am joined by Deputies from all sides of the House — that this single error of major magnitude can be overcome by the company, that they will soon return to their former position of glory amongst semi-State companies, to a position of success and profit.

There was bad judgment, although it has to be said there was also a good deal of bad luck. Nobody could have foretold the downturn in transshipping rates around the world; nobody could have foretold that they would fall to such a low level, because the level to which they have gone has been unprecedented, unheard of; nobody could have predicted the influence the depression would have on transhipping rates.

There are nine chartered ships, two of which will be purchased as part of this deal. That will have the effect of increasing our strategic shipping fleet from the present approximate 150,000 tonnes to, I think, something of the order of 240,000 tonnes. Deputy Wilson asked about the owners of the ships. One ship is owned by a company called Quincey Chang in Hong Kong, four by a company called Wah Kwong in Hong Kong, one owned by Transocean Transport Corporation in Hong Kong, two by the Teh Tung Steamship Company in Tokyo and one by the Nakamura Steamship Company of Tokyo.

Deputy Wilson also asked about the figure of £45 million and referred to the figure of £50 million in the 1982 Act. The 1982 Act dealt with the special arrangements for the purchase of the Irish Spruce and arrangements for its building at Verolme (Cork) Dockyard. In that case the Irish Spruce was being acquired by a foreign company and leased back to us. Irish Shipping Limited simply guaranteed some of the borrowings of that company. The provisions of the 1982 Act were to guarantee the guarantees whereas the Bill before us simply guarantees Irish Shipping Limited's own borrowing of up to £45 million.

I do not know that there is much else I can say except that a major mistake was made, a mistake so serious as to threaten, to bring very close to the precipice the entire Irish Shipping Limited Group. But, through the deal they were able to negotiate at the last minute of the eleventh hour, they were able to save themselves from that precipice. Certainly it came very close to the end of Irish Shipping Limited. I hope the respite afforded by these negotiations — which will be assured by the enactment of this Bill — will give the Irish Shipping Limited Group sufficient time to recover their posture and restore them to their former profitability.

In conclusion, Deputy Wilson asked had any losses suffered by Reardon Smith rebounded on Irish Shipping Limited. The answer to that is "no", except to the extent that Irish Shipping Limited have had to assume full responsibility for seven ships chartered jointly with Reardon Smith in the Celtic Bulk Carrier Consortium. An initial compensation payment of £1.63 million has been paid to Irish Shipping Limited by Reardon Smith. As I said in my opening remarks, Reardon Smith, who are themselves in difficulties, have assured Irish Shipping Limited that, as soon as their position recovers, they will fully discharge their part of Celtic Bulk Carriers' responsibilities but, for the moment, Irish Shipping Limited because of the nature of the agreement have to carry responsibility for that.

I commend the Bill to the House.

Question put and agreed to.