Dáil Éireann debate -
Wednesday, 24 Apr 1996

Vol. 464 No. 4

Irish Steel Limited Bill, 1996: Committee and Final Stages.

SECTION 1.

Mr. E. O'Keeffe

I move amendment No. 1:

In page 3, line 16, after "company" to insert "which is ISPAT International".

Having listened to the remarks of the Minister of State about Indonesia and Jakarta as being the headquarters of a subsidiary company and about other subsidiaries in Mexico, Canada, Trinidad and Germany, I consider my argument justified. Why was the Canadian or German subsidiary not chosen? Bearing in mind that we are always concerned with having a stable economy and minimising uncertainty, it is obvious that there is merit in my argument, that the parent company should be the sole owner of the operation. On a mere geographic basis I am now convinced that my fears may well be justified. I have never been a believer in any operation being hived off to a subsidiary, especially in the case of international business.

While our steel business is relatively small, exporting something in the region of 85 per cent of production at Cobh, I must express my concern at the amalgamation. Perhaps the Minister will elaborate on why departmental officials in the Departments of Finance and Enterprise and Employment saw merit in amalgamating our operations with a company with headquarters in Indonesia, whereas subsidiaries in two other more progressive countries like Canada and Germany were not considered more appropriate.

Mr. Rabbitte

I understand why Deputy Ned O'Keeffe wants clarity on this seemingly important question. As a businessman of some stature, he understands better than most in this House the nature of an international company. The entire attraction of this particular company was its international reputation in the marketplace. It was the recommendation of those looking at the alternatives open to us at the time we made the decision to sell. Whereas we may have had certain preferences — which may not have been unlike the preferences articulated by Deputy Ned O'Keeffe just now — the company is structured in such a fashion that its very extensive assets, something in excess of £3 billion, are vested in the various operational companies and 70 per cent of that entire asset holding is vested in this company, ISPAT Mexicana.

Deputy O'Keeffe understands the difficulty and the amount of time and effort that went into securing this agreement but at the end of the day we really were not in a position to dictate to an international company how it structures its affairs. Whereas we may have had our own preference, the fact is that 70 per cent of the assets are held by this company and it has been deemed to be the appropriate company on which we will be given this negative pledge that is the subject of Deputy Ned O'Keeffe's amendment. I hope that reassures the Deputy.

Mr. E. O'Keeffe

The Minister made the point that ISPAT International is highly capitalised and looks to be a wealthy company. Were its other subsidiaries considered? As the Minister knows, it is quite easy to close down a subsidiary while the main company continues to operate. I make this point because the economies of countries that can be destabilised are not strong. Were efforts made to enter into an agreement with other subsidiaries of the parent company such as the Canadian or German subsidiaries?

Mr. Rabbitte

The honest answer to Deputy O'Keeffe's question is yes, we did look at the alternative subsidiaries and a number of points need to be made about that. First, none of the subsidiaries has assets commensurate with ISPAT Mexicana, which is by far the predominant operating company in the group. Second, our preference was the Canadian subsidiary, although it is not nearly as substantial as ISPAT Mexicana, but it did not prove feasible for a number of reasons to persuade the purchasers to agree to it. We did not examine too seriously the German subsidiary because of the entitlements between the German company and the European Union and we were advised that was not the road to go down.

It is difficult to see why a company that has 70 per cent of its assets vested in the Mexican subsidiary ought not be acceptable, having regard to the track record and reputation of the international group in this business, which is what attracted us in the first instance.

Amendment, by leave, withdrawn.

Sections 1 and 2 agreed to.

SECTION 3.

Question proposed "That section 3 stand part of the Bill".

Mr. E. O'Keeffe

Section 3 states:

The Minister may, with the consent of the Minister for Finance, pay to the company a sum not exceeding £15,028,500.

When is it intended to pay that money and have we guarantees for it?

Mr. Rabbitte

As the Deputy knows, there are five or six different elements comprising that payment of £15,028,500. This was dealt with on Second Stage and I do not interpret the Deputy's question as asking me to go through them again. The nub of the reply he is seeking is that if we can conclude this agreement as hoped around 30 April 1996, the moneys will be paid over immediately on completion.

Question put and agreed to.

Section 4 agreed to.

SECTION 5.

Question proposed "That section 5 stand part of the Bill."

Mr. E. O'Keeffe

Pension fund funding may be very contentious and in recent times we have seen that employees have been victims. The section states:

The Minister may pay the sum of £628,000 to the trustees of the staff pension fund and on receipt thereof the said trustees shall pay the said sum into that fund.

Are there any outstanding moneys owed to the pension fund or is it up to date? Is the Minister happy with the information he has on the fund? There may be a day when things will not be favourable to the company and I do now want to see the employees in my constituency being denied their maximum entitlement because of a shortfall or difficulties that may prevail in the international company which would not have the same commitment as a wholly owned Irish company.

Mr. Rabbitte

I do not know if I would go so far as to say that it is not unusual but it certainly happens that deficits in pension funds are occasionally uncovered which are to the detriment of the employees concerned. I do not think that is necessarily the case here. The due diligence process threw up this sum and there is nothing unusual in the fact that there are arrears in the context of the workforce. It is not really that serious a matter. The requirement is that it be made good and this was done as a result of discussions with the trustees who are quite separate from Irish Steel ISPAT. As I understand it, the moneys relate to the non-staff element of the workforce. I believe this sum makes up the deficit identified and the trustees are satisfied with that.

Mr. E. O'Keeffe

There can be weaknesses in the reporting system and "due diligence" are much abused words in the business sector, especially when mergers, amalgamations and rationalisations take place. This company is transferring from the public to the private sector and all State control is being lost. My fear is for the approximately 400 people employed there. Should anything happen, what security have they with regard to the funding of their pensions and what commitment is there as a result of international involvement?

Mr. Rabbitte

There is nothing different in this case from the regime that applies generally for the establishment of pension funds for employees in the private sector. The task in this case was to make good an identified deficit. What manner of pension scheme continues thereafter — I have no advice that it will change from the existing pension scheme — is a matter for the workers and management at Cobh. Usually these matters are managed by a pension fund company and have little to do with local management other than the transfer of the cheque. Not all companies do that on the appointed day, but it is usually reconciled at the end of the year. In this case, pension contributions are being managed by a pension fund outside the company and there ought not to be any difficulty arising from that.

Question put and agreed to.

NEW SECTION.

Mr. E. O'Keeffe

I move amendment No. 2:

In page 4, before section 6, to insert the following new section:

"6.—A consultation process shall be established by the Minister between the purchaser and representatives of the staff of Irish Steel to ensure that the workforce are kept informed of developments in relation to the mill. The Minister shall retain the right to appoint representatives to the consultation committee which will be established by agreement between ISPAT International and the group of unions at Irish Steel.".

This amendment must be accepted. It is important for the security of the workforce and the company that consultation and information are available at all times on an easy going basis, rather than obliging the workforce to force information from the company. Some type of arrangement should be put in place. I expect to have the Minister of State's support for this amendment. He understands good labour relations and business practice. The amendment is attractive and reasonable and I look forward to hearing the Minister of State's views.

Mr. Rabbitte

When the sale of Irish Steel shares to ISPAT is finalised the new company will operate as a commercial entity and the activities will not be monitored by my Department except as provided for in the sale and purchase agreement. In these circumstances, it would not be appropriate for the Minister for Enterprise and Employment to become involved in a consultation process such as that suggested by the Deputy. I have mentioned previously the importance of good industrial relations for the future success of the Irish Steel/ISPAT project, and a voluntary consultation process between the new owners and their management and the workers and their unions on the lines suggested by the Deputy would be beneficial and might be pursued by the unions and workers with Irish Steel/ISPAT.

Obviously, the good sense of Deputy O'Keeffe's amendment is accepted. I heard his constituency colleague, Deputy Michael Ahern, refer to the culture shock that might occur in Cork when this agreement is completed in the near future. There may well be such a culture shock, which makes the good sense of Deputy O'Keeffe's amendment all the more valuable. However, there are good procedures in place at present. According to the main trade union concerned, they will be in place on a voluntary basis under the new management. That is the way it must be done; we could not intrude into the affairs of a private company and dictate what type of consultative process ought to obtain.

In the purchase agreement there are specific matters in which the Department will be involved in terms of supervising their implementation. However, in the matter of industrial relations we could not impose a system of consultation on the company. Such a system will work equally effectively on a voluntary basis.

Mr. E. O'Keeffe

Does the Minister envisage a consultation committee being set up in his Department to keep the financial structure in place and to protect the Department's investment of about £35 million? I understand the Minister will have a say for five years in the company. The State investment represents a substantial amount of taxpayers' money and they are entitled to some protection. Would the Minister consider having representatives from his Department on such a consultation committee? In other words, it would be a subsidiary of the Irish subsidiary with a board comprising representatives from his Department and from the company. If necessary it could have an independent chairman.

I am trying to be helpful. I do not want to come back to the House in two years time for another battle about Irish Steel. I am concerned about the involvement of a large multinational company. We are small fry and this company has a turnover of billions of pounds. I welcome its arrival in Ireland and its involvement in Irish Steel. However, I am obliged to protect the taxpayers, the employees who are my constituents and the industry.

Mr. Rabbitte

I object to nothing Deputy O'Keeffe has said. However, the notion of enshrining the concept of consultation in respect of a private company in legislation is not feasible. The procedures applying at the plant are better than consultation and are likely to continue to be better. It would not acknowledge the Irish political and industrial relations culture if I were to give Deputy O'Keeffe the impression that should anything go wrong in the future — I hope nothing will — the doors of the Department of Enterprise and Employment would be permanently closed against the representatives of the workers or the management. The Deputy would be disinclined to believe me.

I do not see a difficulty in this matter. There are good relations between senior officials in the Department, the trade unions concerned and the management. Many hours were spent behind closed doors hammering out this agreement. The environment Deputy O'Keeffe advocates already exists and, I hope will continue to exist.

Mr. E. O'Keeffe

I accept the spirit of the Minister of State's comments but I must look to the future. We live in an age when things change rapidly and we are dealing with an industry that is cyclical in nature. It has its ups and downs and will continue to have them. The Minister of State is more familiar with the economic statements of Adam Smith than I and he has been involved in the trade union movement. He has seen what can happen to businesses and to all those involved.

The trade unions have taken a very responsible stand in this matter. I know Jim O'Connell and Anne Egar, the two trade union representatives involved, quite well and I know Jim O'Connell of MANDATE exceptionally well. They have been most responsible and willing to defend the employees and to ensure that the company was restructured. Many sacrifices had to be made. I do not see why some effort cannot be made to set up a consultation committee made up of representatives from the company, the Department of Enterprise and Employment and the unions to protect a State investment of taxpayers' money. My demand is reasonable and should not fall on deaf ears rather it should go beyond here. I have experience of the private sector. I admire the leadership shown by the trade union movement in this area. It could have adopted a different approach, but by implementing the measures it and others suggested it faced the charge and defended the workers, the industry and its future. It co-operated with all those involved. I pay tribute to Jim O'Connell of MANDATE and Anne Egar of SIPTU for what they achieved. It is not a major demand to request that a consultation committee be set up even on a voluntary basis, if it cannot be established by statute, to assist in protecting the future of the industry.

Mr. Rabbitte

It may or may not be true that I know more about the economics of Adam Smith than does Deputy O'Keeffe, but he has been more successful than I in implementing the economics of Adam Smith.

Miss Quill

He has made more money out of it.

Mr. Rabbitte

That, rather than establishing the theoretical framework, is arguably more relevant to this debate. I accept what Deputy O'Keeffe said about the role of Anne Egar, SIPTU and MANDATE in facilitating this resolution. I would be doing Anne Egar and her union colleagues a disservice if I were to hold out the prospect to them of a committee as somehow being helpful and encouraging that they maintain the umbilical cord with Kildare Street. I am not sure that is the best way forward for this company. I believe the best way forward is to establish procedures to facilitate direct consultation at local level between the management and the unions to protect the future of this plant. I believe that will happen and it will be the most effective way of ensuring what Deputy O'Keeffe wants to achieve.

Amendment, by leave, withdrawn.

Section 6 agreed to.

SECTION 7.

Question proposed: "That section 7 stand part of the Bill."

Mr. E. O'Keeffe

I am surprised that the State will continue its involvement in the company given the guarantees by two financial institutions. I thought that a letter of comfort or guarantee would no longer continue to apply to this company.

Mr. Rabbitte

The opposite is the case. The continuation of the repayments on the two loans concerned is at issue. If the new Irish Steel/ISPAT organisation fails to discharge those responsibilities, arrangements are made in the Bill to ensure that the moneys concerned will be passed over to the State in the event of it having liability to discharge those loans. It is merely a prudent provision to ensure that in the event of unforeseen circumstances or something going badly wrong the Minister concerned is able to discharge those two loans.

Mr. E. O'Keeffe

Will the Minister of State indicate the term of those loans and the number of years they have yet to run?

Mr. Rabbitte

The ACC loan is as recent as 1993 and an outstanding balance of some £10 million must be repaid by the year 2002 or 2003. The European Coal and Steel Community loan dates back to 1983, on which an outstanding balance of some £9 million must be discharged between now and the end of the decade.

Mr. E. O'Keeffe

Am I correct in saying that if the deal were to go wrong the State would have to pick up the bill in terms of discharging the outstanding balance on those two loans?

Mr. Rabbitte

There are three elements involved. An amount just short of £5 million will be put into an escrow account which would be transferred in the event of the circumstances to which the Deputy referred. There is a letter of credit for £4 million and the remainder relates to the discussion we have had about the £20 million negative pledge on an assets block of the purchasing company. If there were a doomsday situation, that is what would happen, but that is not what we envisage.

Question put and agreed to.

Section 8 to 10, inclusive, agreed to.

Title agreed to.

Bill reported without amendment.

Agreed to take remaining Stages today.

Question proposed: "That the Bill do now pass".

Miss Quill

On behalf of my party I wish to say that the enactment of this Bill will mark a major milestone in the troubled history of Irish Steel. It has been privatised successfully and is now a commercial body that will have to make its way in the world, and I have every confidence that it will. That reflects the spirit adopted by those, in this House, who have been involved in one way or another in the transaction in the past number of years. We must approach this matter with confidence and wish the new company well. This major change was not brought about without growing pains. It was the outcome of many generous, long and difficult negotiations, particularly between the management and the unions.

I pay tribute to the independent chairman, Mr. Pat Dineen, who steered the transaction through some of its most difficult stages and who did so with great patience, intelligence and goodwill. I also pay due tribute to the unions. Anne Egar of SIPTU and Jim O'Connell of MANDATE were already praised by Deputy O'Keeffe and the Minister and that praise is well deserved. Irish Steel was marked by old work practices and lines of demarcation that were almost cast in tablets of stone. It required a major cultural change to adopt new work practices and to introduce the new procedures now in place. That was a long, painful and difficult process. Great credit is due to the workers who responded to the leadership given by their unions. They made sacrifices and played their part in bringing about these changed practices and procedures. It was because that happened the Government was put in a position where it could seek a purchaser for Irish Steel. That is the sequence of events.

I express my appreciation of the work done by Pat Dineen, Louis Buckley, others in management and, in particular, the unions and workforce in bringing about this situation. I pay due and full tribute to the Minister of State, Deputy Rabbitte, the Minister, Deputy Richard Bruton, and the Minister for Finance, Deputy Ruairí Quinn. Let us not forget that he played a major role in the earlier part of this transaction and negotiations.

It is a great relief that the industry has been saved, but we must not forget that to save it a number of jobs have been shed and lost. I clearly remember a time when there were 1,000 people working in Irish Steel, many of them from my constituency. I am slow to cite figures, but the size of the current workforce is about 346. That presents us with a number of challenges.

The Minister of State mnentioned the re-adaptation payments expected by those made redundant in 1994 and 1995. I urge him to work hard to bring whatever bureaucratic measures have to be taken to a successful finalisation. Those made redundant have an expectation that the payments will be made sooner rather than later. Unless and until that is done we cannot say that the transaction has been brought to a successful conclusion. I ask the Minister of State to apply his energies to ensure that the Government is in a position to make the payments.

The report of the task force on the Cobh region should be finalised as quickly as possible and its recommendations acted upon. The putting in place of this transaction of necessity involved the shedding and loss of jobs. There is an obligation on all of us to make up for that shortfall which is still being felt in the region.

While we have every good reason to be confident about the outcome of this deal and grateful that Irish Steel seems to have been put on a fine and firm commercial footing, a recent survey in my constituenty of Cork North-Central carried out by a reputable social scientist confirmed that in the past 12 months there has been a 2 per cent reduction in the number of jobs in the constituency. This goes against what appears to be the national trend. In congratulating ourselves this morning, therefore, there is little scope for complacency and we must use all our energies to address this problem. It is frightening that a constituency which already suffers from higher than average unemployment should in the past 12 months have experienced a 2 per cent reduction in the number of those employed.

Those are the tasks we face — the finalisation of the re-adaptation payments, the implementation of the feasible recommendations of the task force and addressing the high level of unemployment in the area. A good day's work has been done for Irish Steel and I repeat my congratulations to all those who worked in close co-operation to bring about this situation.

Mr. E. O'Keeffe

I thank the Minister of State, Deputy Rabbitte, for taking and concluding all Stages of this important legislation which will affect the lives of many people in my constituency. I am glad we have reached finality. The steel business is and will always be a difficult one. Like any commodity business, it has encountered difficulties and created problems during the years. I have no doubt that there are difficult days ahead and we may have to come back to the House again, but I wish the company, now fully privatised, every success in its new environment.

It was difficult for the Minister of State to swallow the bitter pill of total privatisation on which he holds strong views. I do not have the same difficulties. I am great believer in privatisation which is the way forward for many of our State companies. It is a source of finance for the Exchequer and gives people an opportunity to invest. We have many viable State companies and should consider the issue seriously. Now that the Minister of State has accepted the principle of privatisation — we will sort out the problem for him on another day — I am a litle nervous about what is to come in the years ahead.

Exports account for 85 per cent of the company's business. This makes it all the more vulnerable. It is small in the Irish context and deserves all the support it can get. I have paid tribute to all involved, particularly in the trade union movement. The company is of enormous benefit in the Cobh area in terms of the service industry and we are well aware of its difficulties. The area has suffered during the years.

Since I became a Deputy there have been many tragedies in the industrial sector in the Cork region. We lost the Verolme Dockyard which is to be reconstituted in a restructured form with a smaller workforce. I wish it well. We also lost Ford and Dunlop, two flagship industries, with the result that we have no motor assembly or manufacturing industry. Neither is there any tyre manufacturing industry in Cork or the Munster region.

I feel envious when Ford sets up manufacturing outlets in other parts of the European Union and throughout the world but does not feel duty bound to establish such a unit here. We are in an age of specialisation. It manufactures various models of cars in different countries and I fail to understand why it cannot manufacture a single model here, given that we have a well educated and honest workforce. That is what manufacturing industry needs. We have those ingredients as well as the required capital and land.

I was taken aback by Deputy Kathleen Lynch's statement about Fianna Fáil. The party was unanimous and there was not a single dissenting voice from 1993 onwards. Deputy Bertie Ahern was prepared when Minister for Finance to make funding available, practically as a result of the efforts of a deputation that he received. He was succeeded as Minister for Finance by Deputy Ruairí Quinn. Deputy Mary O'Rourke, my party's deputy leader, has continuously fought the battle, whether at Question Time or the Adjournment debate, to highlight what should be done for Irish Steel.

I resent the statement, made by a Deputy who has not been here a wet day and who has lectured us on agricultural and other matters, that Fianna Fáil delayed the Bill. I am sorry that she is not present in the Chamber. She should be more cool in her comments and more practical. There is no blame attaching to anyone on this side of the House which offered its full co-operation. A number of other points have been made. I do not understand why there should be any secrecy about the report of the task force. It should be published. This Government stated it would be as transparent as a pane of glass but it continually hides reports. The report should be debated in the House and in Cork County Council. It is obvious that there is little or nothing in the report, otherwise it would have been debated.

Mr. Mulvihill

Most of its recommendations have been acted on.

Mr. E. O'Keeffe

I suspect they were transmitted to the Deputy by pigeon rather than by fax or telephone.

Mr. Mulvihill

If the Deputy wants to know anything about them he should see me.

Mr. E. O'Keeffe

Many questions were raised on the re-adaptation money. I do not wish to have a row with the Minister but this matter has been going on for too long. It first came to notice on 20 February when Deputy Mulvihill leaked it to The Cork Examiner. It was a good leak and he probably got his information from a Minister. However, nothing has happened since then and I appeal to the Deputy to obtain further information to leak. The money might be paid then. I thank the Minister for bringing the Bill forward. He did everything possible and I wish the company and everyone concerned well. I hope it will have a viable future.

Minister of State at the Department of Enterprise and Employment (Mr. Rabbitte)

I thank Deputies opposite for facilitating the finalisation of this important Bill. I assure Deputy O'Keeffe that never was a bitter pill quaffed down with more relish and it has caused me little grief.

The options facing the Government were painful. The matter has been the subject of criticism which had little regard to the options confronting us. It is indisputable that it is an expensive deal for the taxpayer but there was no alternative before Government that was not as or more expensive than the deal concluded. It is easy for those who write a column in a newspaper once a week and do not need to be paid on the basis of productivity to say "if I were you I would not start from here". Perhaps we would not have taken a particular option if we were starting from a different point but we had to deal with matters as we found them and the options were painful.

The decision is a good one. A major international company with a track record in the business is holding out the prospect of revitalising the industry which will benefit the region and the workers. That is a good day's work. It is true that the workforce have suffered in this exercise. It is a difficult job and not one that would be sought after by some of the commentators who choose to deride it. In so far as one can assure anything in a difficult environment and a cyclical business, the outcome represents the best option open to us.

I heard what Deputies Quill, O'Keeffe and others said about the re-adaptation payments. We are concerned about that matter and have been looking at it. It is not clear and it is not automatic. It will be two or three months before we have the necessary clarity. We are adamant about the rights and wrongs of the matter and about our expectations. We hope we will have a positive conclusion but it will be some three months before that happens.

I am reluctant to intrude on the love bombing between Deputies Lynch and O'Keeffe but it is fair to say that Deputy O'Keeffe and his party have facilitated this necessary restructuring of Irish Steel and I appreciate their support. No more than discussing with Deputy Lynch the merits of industrial policy, I do not propose to comment on the survey in Deputy Quill's constituency to which she referred. I have not seen it and am not questioning it. I would like to see it. If it is true it runs counter to the national average. That is possible as jobs are being created in certain sectors and at certain levels of the economy while they are being lost in others. That analysis gave rise to a report published by the Minister, Deputy Richard Bruton, last week on the necessity for labour market interventions in the profile areas Deputy Quill predominantly represents.

I thank Deputy Bruton, the principal Minister concerned, and his predecessor, Deputy Quinn. I especially acknowledge the extraordinary effort made by the senior officials in my Department. The hard, tedious, detailed work was done there over a prolonged period. Unfortunately they do not qualify for overtime but almost as much money was spent on overtime in trying to secure the deal as the deal cost. I wish the company and workforce a bright future in line with the new arrangements.

Question put and agreed to.