With your permission, Sir, I propose to give one minute of my time to Deputy O'Rourke.
Adjournment Debate. - Shannon (Clare) Plant.
I am sure that is satisfactory and agreed.
The future of Shannon Aerospace has been giving rise to serious concern for some time. It has lost large sums of money, probably in excess of £20 million, since its establishment. This is due to circumstances beyond its control which could not be foreseen at its establishment. I am familiar with the various considerations taken into account from the time that it was first mooted in 1989 by GPA until it went into production in 1992. Since then, it has been adversely affected by a number of factors. There has been a downturn in world wide aviation; aircraft production has dropped; there has been an unforeseen increase in heavy maintenance facilities in different parts of the world; Lufthansa has had to take over the former East German airline with its maintenance facilities in Berlin; prices for this type of work have dropped dramatically, at times almost halved from what they were three or four years ago and GPA's share flotation failed, with serious consequences for what was once the owner of an enormous fleet of aircraft.
There are slightly in excess of 700 people employed at Shannon Aerospace. Productivity and work practices in the factory could not have been better so it is clear that the present difficulties are entirely outside the control of management or workers. The largest and most expensive training operation ever mounted in this country was used to train workers who have now reached a high level of skill and productivity. There is very substantial flexibility with little or no overtime and account is taken by the workers of the somewhat seasonal nature of the work, which is heaviest in winter.
The job target is 1,075 as agreed on the original payment of the grants. It now looks unlikely that that figure will ever be reached. Since I put down this question for debate the Government made an announcement of an aid package of £12 million, with an investment by GPA of a further £12 million but I am very disturbed to hear that GPA is now quitting the company. I assume that Lufthansa and Swissair have given commitments to Shannon Aerospace to give them a certain level of work at minimum prices but what is the value of this commitment for the future because Lufthansa and Swissair, in contracting with Shannon Aerospace, are merely contracting with themselves as they are now the only shareholders? Any time they want to dishonour any such arrangement they are free to do so and are unlikely to sue themselves or get injunctions against themselves so that any arrangement of that kind seems to be legally unenforceable and can be brought to a conclusion at any time, without notice, by the remaining shareholders in Shannon Aerospace. GPA is now controlled by General Electric which is not a party to any agreement or arrangement with Shannon Aerospace which is legally enforceable.
I am very disturbed by the fact that the two remaining shareholders refused to put any money into this package. The two contributors are the Irish taxpayer and GPA and the latter is simply making a payment to enable itself to disengage and to play no further part in the company. The refusal of the continuing shareholders to contribute, and the anxiety of the retiring shareholder to exit, hardly betokens great confidence in the future of the company.
The Minister will have to spell out precisely the details of this package. Have the shareholders been released from their obligation to provide 1,075 jobs? Will there be a clawback of the grants if they fail to do so? Will this plan eliminate losses from now on and, if not, who will pick up the losses? Have the shaereholders agreed to do so or will the Irish taxpayer have to do so again in a few years' time? At what price are the two remaining shareholders contracting to give work? What is the quantity of the additional work and when does it commence? Are the jobs of the 700 existing employees guaranteed? Why did the Minister agree to allow Lufthansa and Swissair to make no financial contribution in view of the fact that they are the sole owners of the plant? What is the value of an unenforceable commitment to give certain quantities of work? What will happen if the trade unions in Germany object to the transfer of work from there to Shannon? Since GPA's position has declined substantially during the past two years, and the size of its fleet has greatly reduced and is now under the ultimate control of General Electric, what efforts have been made to get work from non-shareholder airlines?
The answers to all these questions are necessary to make any realistic assessment of the future of Shannon Aerospace. Until we get all the necessary information we can have no confidence that the future of the plant is safeguarded. This is an appalling strain for the 700 people concerned and their families, and indeed for the economy of the whole Shannon-Limerick region which has to live with this further uncertainty on top of the uncertainty caused by the substantial over-flying of Shannon.
When is it proposed to pay the £12 million through Shannon Development? I believe the position to be that Shannon Development's statutory limits, as set out in the relevant Acts for payments, have been reached. Is it proposed to introduce legislation and, if so, when? The brief announcement made at 6 o'clock this evening on television is inadequate to allay concern and the Minister should now avail of the opportunity I am giving him here to give full details of the package.
I thank Deputy O'Malley for sharing his time with me. I wish to put some brief points to the Minister on this matter. Will the Minister state whether the job performance clause has been retained or dropped with regard to the money being given by the Government to Shannon Development for Shannon Aerospace? Will the Minister make public the terms of the arrangement worked out between the Government, SFADCo, Lufthansa and Swissair? Those terms should be made public because we are talking about an investment of £12 million in addition to £23 million, making a total investment of £35 million in a four year period. The company, however, is already 375 jobs short of the target.
I visited this company on two occasions and, as Deputy O'Malley said, it is an excellent company. It is well run, well maintained and there is great productivity. Members deserve a full and detailed explanation of the arrangements which the Government has entered into for the payment of tax-payers' money and the workers deserve a clear and open answer from the Minister dealing with the long term view of their jobs. A five year plan does not mean anything if it is based on contracts which can be withdrawn at any time by the two aviation firms in question.
When the question was put down for answer here tonight — which was known — it was shabby treatment for the Minister to give a sketchy answer on television prior to coming into the House and giving the details. I want a confirmation of the retention of the job performance clause and an explanation of the arrangements worked out in this regard. The Minister will say that it is not up to him to do that but I believe it is because we are talking about tax-payers' money. Everyone in this House wants to see the company on a firm footing, not built on sand.
I thank Deputies O'Malley and O'Rourke for raising this matter. I note what Deputy O'Rourke said about first coming into the House to give answers but, unfortunately, these decisions tend to get out very quickly and one has to respond to public concern about the issue as and when it arises. I will try to answer as much as I can of the Deputies' questions in the time available.
Deputies know the background to this matter. Shannon Aerospace is the aircraft maintenance facility established jointly by Lufthansa, Swissair and GPA. It commenced trading in 1992. Considerable State funding of £23 million was made available to it and the firm employs 700 people wih high skills in a state of the art plant at Shannon.
As Deputy O'Malley said, events outside the company's control have seriously affected its performance resulting in substantial financial losses to date. With the aerospace industry recession, brought on by the Gulf War, scarcity of supply rapidly turned around to significant over capacity, resulting in very depressed market prices for maintenance work and the industry continues to be in deep recession. Developments arising from the unification of East and West Germany adversely affected Lufthansa's workload for the Shannon plant and problems experienced by GPA and its impact on aircraft maintenance work for Shannon was another factor.
On 30 March 1995 I visited Zurich to meet the shareholders and at that meeting a framework within which detailed negotiations could take place on a face to face basis between Shannon Aerospace and Shannon Development was achieved. The objective of the whole process I was instrumental in initiating at that time was to secure a commercially viable future for the state of the art Shannon Aerospace plant and its highly skilled employees. The negotiations between Shannon Development and Shannon Aerospace were extremely tough and difficult. The future of Shannon Aerospace was in serious jeopardy. It was also on the brink several times during the talks in recent weeks and I am very pleased that Shannon Development has been able successfully to negotiate a viability package with Shannon Aerospace to secure the company's future and its jobs. The board of Shannon Development recommended the viability package to me and I brought that proposal to Cabinet with a strong recommendation for acceptance. I am pleased that the restructuring plan has found the full support of Government.
The details of the restructuring package are complex. In essence it involves £12 million grant aid from Shannon Development, £6 million to be paid this year, £6 million in 1996 and £12 million from GPA. The package also includes contracts on workloads, including price, from Lufthansa and Swissair, together with increased access to technical, marketing and other resources from them. As part of the support package GPA will no longer hold equity in the company. In addition to GPA's substantial cash injection of £12 million it has given a commitment for significant volumes of aircraft maintenance work. Moreover, the restructuring plan proposes to grow the company from its current employment levels of 691 to employing 855 by the end of the decade.
The losses in the company during restructuring will not be picked up by the taxpayer but by the shareholders. As I said, payments will be over two years. A jobs clause has been retained, not on the basis of 1,075 jobs, which as Deputy O'Malley pointed out is no longer realistic, but on the present target of 855. Clearly GPA is departing to concentrate on its core business in its own restructuring. It will remain on the board and as I said has retained commitments to provide maintenance work to the company.
In forming this support package, cognisance was taken of the serious economic consequences which would arise from the closure of the Shannon facility in terms of job losses, local business and the promotion of Shannon as the location for aviation related and other industries at its Shannon World Aviation Park. The company has had a major impact on recent industrial development in the mid-west region. This support should ensure that the company will benefit from the world and European rationalisation currently underway in the aircraft maintenance sector. The sizeable advantage of the company vis-à-vis its competitors in cost efficiencies, from its flexible operating procedures and its state of the art technology and its now strengthened financial and other back up support, including workload and marketing by the shareholders, will undoubtedly strengthen its competitive position. I wish to acknowledge the significant and critical role played by the management and workers in Shannon Aerospace in providing the competitive advantages that a company like this needs in the business sector. I also pay tribute to SIPTU officials whom I met during recent weeks for the responsible and measured attitude they took on behalf of the workforce during a period of great uncertainty. I am pleased that this period of difficulty is now over.
I hope I have answered most of the Deputies' questions. Clearly it is not always possible when a company is facing serious difficulties to find a viable way out of those difficulties. On previous occasions I have had to come into this House and describe situations where it was not possible for the State to provide a viable way out for business but on this occasion I believe these jobs have a viable future in terms of this agreement in what I freely admit is a difficult period for the industry. This will not last forever. The company has been strengthened, it has two very good base line providers of business, highly efficient work practices, a very flexible workforce and good cost advantages which I believe are the ingredients for a successful future.