The CIE restructuring plan makes severe demands on the company's workers. Asking individual workers to take wage cuts of 30 to 40 per cent is not just demanding but unrealistic. People have entered into long-term financial commitments on the basis of their historical earnings. If the pay cuts were to be accepted many people would find themselves unable to meet their mortgage repayments, afford the cost of putting children through third level education or keep up with other financial commitments. In some instances the pay cuts demanded are so severe it is as if the company was intent on making an offer the workforce simply could not accept. This is hardly the way to secure acceptance of a restructuring package.
It is not surprising that we seem headed for a nation-wide transport strike that will not only disadvantage the public but damage CIE and the prospects of all those employed in the operating subsidiaries. In the CIE companies overtime and allowances have become an integral part of the overall earnings package. It is clear that should not have been the case. The emphasis should have been on basic pay rates. However, the present situation and the problems with the pay structures were allowed to develop over several decades and it is unrealistic to expect that they can be sorted out in one fell swoop.
The ability to rationalise and restructure is one of the key functions of modern management. Most private sector institutions have been brought through a process of rationalisation and restructuring. Some of them have been through it several times in order to cope with the rapid pace of change in their business. The main banking organisations, for example, have dramatically altered the way in which they do their business. They stay open longer, provide a wider range of services to their customers, have a more flexible workforce and are equipped to cope with domestic and international competition.
Public sector organisations have had to embrace change. This has happened on a dramatic scale in other countries. For example, Telecom Éireann's new partner, the Swedish company Telia, shed a third of its workforce over a number of years. The ESB has completed a major restructuring of its operations in order to prepare itself for the competitive market in electricity. The company may have paid top dollar, so to speak, in compensation for securing agreement to the restructuring. However, agreement was secured without industrial dispute or interruption to supply.
Another example is Bord na Móna. The former chief executive, Mr. Eddie O'Connor, transformed the fortunes of the company in little more than five years. Staff numbers were halved; productivity was increased; management was reorganised and new markets were established. As a result, a loss of £16 million a year was converted into a profit of £5 million a year. As Minister for Energy from 1989 to 1992, I was in a position to support and encourage Mr. O'Connor and the then chairman, Mr. Brendan Halligan.
Mr. O'Connor's achievements were made without strikes or disruption. In other words, he completely rationalised the company's operations without antagonising the workforce. As a good manager should, Mr. O'Connor explained the realities of the situation. He outlined the areas in which savings were needed, he impressed upon the workforce that change was essential for the company's survival and he consulted with it on the restructuring-proposals. In short, he won the trust and confidence of the workforce in his bid to carry through the most fundamental changes in the history of the company. It is remarkable in hindsight that Mr. O'Connor should have been able to command the confidence of several thousand Bord na Móna workers but was forced to leave the company because he was unable to command the confidence of the former Minister, Deputy Lowry. Mr. O'Connor is a great loss to the semi-State sector. He showed how flair and commercial sense could be brought to bear on the management of a State company and how taxpayers and workers could benefit as a result. Whatever difficulties arose with regard to Mr. O'Connor's remuneration package, they could have been sorted out without the unseemly witch hunt launched against him by the former Minister.
There must surely be a lesson for CIE in the experience of the ESB and Bord na Móna. Both companies showed that comprehensive restructuring and rationalisation can be achieved provided there is adequate consultation between management and the workforce. The process of consultation has to be built on trust. I worry whether that trust between management and staff exists in the CIE group of companies; if not, it will have to be established. There is no doubt that the CIE companies need restructuring. They all face the challenge of increased competition in a deregulated European market and none of them is adequately equipped to cope with that competitive threat.
Deregulation of the road transport market will mean that Bus Éireann and Dublin Bus will have to face more competition in the years ahead. Both companies will have to fight for customers with private sector operators whose costs are much lower than theirs. For both companies the message is clear, they must rationalise to survive. The position is potentially even more serious for Iarnród Éireann, the CIE subsidiary most heavily dependent on support from the taxpayer. The previous Minister for Transport, Energy and Communications, Deputy Lowry, allowed competing operators access to the CIE rail network, a measure that has gone largely unnoticed because nobody has yet taken advantage of it. There is no need for me to spell out the implications of this for the future viability of Iarnród Éireann.
The most dangerous scenario for the company is one where Northern Ireland Railways is privatised by trade sale to one of the independent train operating companies in Britain. Instead of co-operating with CIE on the Dublin-Belfast route, as at present, NIR could then decide to compete with it. It could become a competitor not just on the Dublin-Belfast route, but on other inter-city routes such as Dublin-Galway, Dublin-Limerick and Dublin-Cork. On the basis of recent developments in Britain the most likely bidder for NIR is Stagecoach and I am sure management and workers at CIE are already familiar with its track record. The company pursues expansion in a very aggressive way, believes in ruthless competition and is prepared to use predatory pricing to force rival operators off the roads and rails. Originally a bus company, Stagecoach is one of the largest train operating companies in the privatised system which obtains in Britain. A company such as this operates on the principle that there is no such thing as an uneconomic route, only an uneconomic operator. It has proven its ability in buses and trains to cut costs to the minimum while still delivering a service that passengers will support.
I understand CIE management is waking up to the possible challenge from Stagecoach and that memorandums are circulating around Heuston Station about the possible impact on Iarnród Éireann. One does not have to be a genius to work out what that impact would be. If Stagecoach were to select two or three high density inter-city routes such as Dublin-Belfast or Dublin-Cork and engage in predatory pricing through a low fare strategy, Iarnród Éireann would suffer badly. The company would see its revenue base crumble quickly as it was forced to cut fares while losing passengers. It would then be left with two stark choices. It could engage in a severe and sudden cost reduction programme involving wholesale redundancies and across the board wage cuts or it could go to the Government and look for a huge increase in the annual subvention. I am not sure it would get a favourable hearing from the Government of the day unless it could show it was seriously willing to tackle its cost base.
The issue for the CIE companies is whether they rationalise now on their own terms or rationalise later on somebody else's. Management clearly understands the need for rationalisation and restructuring. The unions also understand the need for that process. Why are the two sides unable to come together and sort out the issue as they did in Bord na Móna, the ESB and hundreds of companies in the private sector here? Some of us were Members of this House when Deputy Séan Lemass was urging Irish industries to rationalise in preparation for entry to the EEC. We are in a similar critical situation in regard to our State companies.
Cost cutting on its own will not be enough to solve the problems for CIE. It has developed as a protected monopoly over a half century. Like most monopolies, it did not pay as much attention as it should have to customer service and quality assurance. There is no charter of customers' rights, for instance, in any of the CIE operating companies. There are no performance indicators to tell passengers what percentage of buses or trains ran on time or ran at all. This basic information on the quality of service is displayed at all main stations in the Northern Ireland Railways network.
The CIE group and Iarnród Éireann in particular, has placed too much emphasis on engineering skills and not enough on marketing skills. There has been enormous investment in a main line rail network over the past five years, yet the number of passenger journeys has risen by only 6.5 per cent over the same period. Huge investment has gone into developing the diesel suburban rail service in the greater Dublin area over the past years, yet passenger numbers using these services are lower than five years ago. The population of Dublin is increasing, the number of tourists visiting the city has risen dramatically and traffic congestion is making high quality public transport an attractive option. All this should translate into higher demand for the DART service, but what do we find? The number of people using DART in 1995, the last year for which figures are available, is lower than in 1990. This surely puts a question mark over the ability of Iarnrod Éireann to market its products properly.
The same is true of rail freight. In spite of road improvements, traffic congestion still makes it difficult and costly to get road freight to many of our major ports, particularly Dublin Port. Does that not present an opportunity for the rail freight division of Iarnród Éireann, especially when the company enjoys good rail access to most of our ports? Apparently not. Despite the purchase of an expensive fleet of powerful new Canadian locomotives and a continuing programme of improvements to the rail infrastructure funded largely by EU money, rail freight has gone downhill in the last five years. Since 1990 the total tonnage of goods carried on the Irish railways has fallen by 4 per cent while total cash receipts from the freight business has fallen by more than 12 per cent.
The situation is little better at Bus Éireann where passenger numbers are lower today than five years ago and this despite a huge investment in new coaches for the Expressway routes. The CIE group needs a change of direction. Iarnrod Éireann and Bus Éireann should surely be stand alone companies. Equally it makes little sense to have a single company in Dublin, Bus Éireann, running the city bus services in Galway, Limerick and Cork. Would it not make more sense to follow the example of other countries and devolve control of local bus services to the regions?
The Minister should take the opportunity of this debate to state clearly his policy for the future development of CIE.
