Seanad Éireann debate -
Wednesday, 3 Nov 1993

Vol. 138 No. 1

Adjournment Matters. - Problems at Irish Steel.

Mr. Cregan

I raise this matter, a Chathaoirligh, in the light of an impression that was given in the press last Sunday about the problem prevailing at Irish Steel. I am aware of the reply that the Minister for Enterprise and Employment gave to the other House last evening and I am particularly concerned about the ongoing problem. I am not one to say that Irish Steel does not have a problem. It has been known for some time. I remind the House and the Minister of State of the urgency of this matter, particularly in the Cork region.

Over a number of years we have lost many industrial concerns including the Verolme Cork Dockyard, Ford — through no fault of our own — and Dunlop, among others. Unfortunately, in this case we are talking about the lower harbour area of Cork. The amount of money put into the infrastructure of that harbour is enormous, as I know the Minister of State is aware. We are, for example, talking about the deep water berth which at a cost of over £15 million now has a quay length of about 200 yards and can take tonnage up to 75,000 tonnes which is of enormous benefit to the port area. From an environmental point of view Irish Steel could not be sited in a better place. I am confident that we will never have a problem with Irish Steel as regards environmental issues.

The reply from the Minister for Enterprise and Employment, Deputy Quinn, last evening in the other House gives the impression that no opportunities are left open to Irish Steel except to rationalise and create a situation where fewer people are working there. That is disturbing. I am not saying that there should not be rationalisation or that Irish Steel should not work better. The Minister also said he sees opportunities open to Irish Steel and I welcome that, but in saying that he does not give the impression of helping — rather the opposite. He says that management and workforce have to get their act together and I agree with that. I also agree that there is a surplus of steel in the EC.

I believe that there is a strong case to be made for Irish Steel. The Minister claims that other partners should be brought in, although he does not say what type of partners. Partners have been brought into other semi State bodies over the years, an example being Verolme Dockyard. Massive amounts of money were invested in Verolme. There was a great workforce and the then Taoiseach gave a commitment when the other partner was brought in that 300 to 400 people would be working in the yard. At present there are four people working there. Let us not assume that simply by finding a partner Irish Steel will stay alive.

The Minister gave the impression that no argument can be made for Irish Steel at EC level, while at the same time he readily admitted that there are problems in the EC regarding steel plants in other countries which are losing money. This is an island and we should be making an argument for a steel plant.

The Minister himself cited the example of the Aer Lingus management and workforce trying to construct a better company. I agree with that, yet the Minister admits that money can be forthcoming, namely £175 million. That £45 to £48 million is to be allocated for redundancies is an embarrassment to us, albeit a fact of life. I do not suggest that that type of money or anything like it should be forthcoming, but the towel has been thrown in from the EC point of view. We are not prepared to make an argument. The Minister claimed that we have no right to make an argument. This is an embarrassing situation and I would not like to believe that we are adopting a despondent attitude. We as a country should be making an argument within the EC that we should hold on to the one steel plant on the island of Ireland. It is important from a raw material point of view and from an export point of view. Why should we import something which we can produce on the island?

I recognise that there is need for rationalisation and rethinking. However, I ask the Minister of State not to forget that up to two and a half to three years ago Irish Steel was making money. If there is a depression in the market at this time let us not put the total blame on the workers or management of Irish Steel. Cork, having lost many industrial plants, cannot afford to lose another. The Minister has given the impression in his statement that if Irish Steel management and workforce cannot do it for themselves it cannot be done at all. We need a little bit of enterprise here, a little bit of motivation and positive thinking. I expect more from the Minister than the statement that he is not prepared to make a case at EC level. In other words the towel was thrown in, which is unfortunate.

We can and must make an argument at that level to ensure that steel plant is maintained. The European Commission has confirmed that some steel plants need to close, but nobody has said at any time that the Irish plant should be closed. It is imperative that we should argue at EC level. We did so in regard to Aer Lingus, when other airlines were saying there was no way we could get money for the company. The same should done for Irish Steel. It is for the Cork region.

Minister of State at the Department of Enterprise and Employment (Mrs. O'Rourke)

I thank Senator Cregan for raising the matter in this House. As the Senator said, the matter was raised in the Dáil last night and it is equally important that both Houses should debate what is a serious national issue.

At the start of his submission, the Senator spoke of the report in last Sunday's paper. That report was inaccurate in many respects as we all know that from time to time newspapers put stories together part of which may be flawed in one respect or another.

Mr. Cregan

It was never denied.

Mrs. O'Rourke

It is necessary to make the point because the Senator raised the issue himself. If one was to go around denying everything that was in a paper about a person or what was said——

Mr. Cregan

This is a very serious issue.

Mrs. O'Rourke

——one would never be stopped and the Senator knows that quite well.

The Senator has said that we should not adopt a despondent attitude. The attitude we have is one of realism. A serious matter, such as this is, can only be tackled in a realistic fashion. In that way nobody is led up blind alleys or cul-de-sacs from which there is no escape. We know that Irish Steel is in difficulties because of a depressed market, poor prices and costly and less than satisfactory production arrangements. The company has no control over the state of the markets, as clearly that is out of their ambit of control. We can only hope that the market will pick up in time and indeed there are some very faint signs of that. However, it is down the road somewhat.

Management and workers do have control over their own production arrangements and they must address immediately the problems giving rise to the current unsatisfactory production arrangements. If they cannot address those, then the risk of the business failing could not be ruled out. Should it fail, it would not be because of any decisions by Ministers or officials, but rather because it is not getting its act together to save cash and to improve arrangements for production of steel. It is our business in this House and the Dáil, and indeed in the country, to encourage management and workers to avoid such a situation by making such adaptations as can be made to improve the situation.

We are all familiar with last year's financial figures for the company. The company lost almost £13 million on a turnover of £58 million. Like the Minister last night in the Dáil, I do not intend to speculate on the firm's cash flow or whether it might run out of cash. It would not assist the company's affairs if I or anybody in this House were to do so, but we can say, as Senator Cregan has said several times, the situation is serious. I must therefore emphasise strongly the urgent need for management and unions to agree on savings and on work arrangements to put this mill on a level of performance that compares to any other such mill in the rest of the EC. That is essential if the matters are to be rectified.

Irish Steel's main competitors are other EC producers and consequently the company cannot afford to ignore what is happening in the rest of the community where loss making companies are either having to close or reduce the production capacity of their plants and subsequently the numbers of employees. Some 30 million tonnes of crude steel capacity has to be permanently taken out, with the resulting loss of almost 70,000 jobs. We are not part of those reductions, but I repeat that Irish Steel must, if it wants to survive and compete, carry out its own reductions in production costs and improve work practices. It is not easy to compete in European markets when one is on the edge of Europe. The Senator clearly stated that an island nation must take its business seriously. However, Irish Steel will be able to do so only if it can bring in change, flexibility and better cost production arrangements.

It is not allowable for governments to shore up loss making steel companies. The Community rules prohibit governments to aid steel companies and these are rigorously enforced by the European Commission. The Senator said we would go forward with an ambitious programme and compel our colleagues to agree to it. Many countries, for example Denmark, take a keen interest in what happens in steel production in other countries. We would need the unanimous agreement of the Commission and of each member Government to permit us to fund or invest in Irish Steel. The only way we could get that agreement would be to offer sufficient capacity reductions at the plant to counterbalance any aid given. As has already been made clear in both Houses, Irish Steel, because it is a single plant operation, cannot afford to reduce its production capacity.

There is some hope that following agreement on reducing costs and putting in place new work arrangements, this company could then attract the interest of a strong outside steel maker. A partner with all the necessary financial, marketing and technical resources could help overcome some of the inherent disadvantages from which the plant suffers and thereby put the company on a better, more secure footing for the future. However, in order to interest a potential partner the company must first improve its costs and work practices. That requires some adaptation not just by workers but also by management. Regrettably, progress in achieving savings and more efficient and profitable arrangements is slow and I strongly urge both sides to get back to the negotiating table to agree solutions.

This is a business like any other which needs strategies to ease and improve its cash position. Businesses that cannot innovate and show flexibility to cover costs can and do fail. That applies not just to Irish Steel. More and more businesses will have to change, adapt and be innovative. If this business, its workers and management cannot make the necessary adjustments it will not be helped to stay afloat and, given the strict EC rules, there will be nothing the Government can do to prevent that.

We would all want the unions to give the problems much more urgent consideration and I urge the management to negotiate for the maintenance of the greatest number of jobs. If there is any hardship as a result of change and adaptation it should be equitably spread, from top management through the entire workforce. Cost savings may involve some reduction in job numbers over time. This should be a matter for discussion between management and workers.

Irish Steel has been a successful and resourceful operator in its marketing, sales and distribution. If it could improve its production we would be able to look forward to its becoming a competitive mini-mill. With appropriate partnerships or alliances it could be as successful a player in the European steel industry as any other.

The current issue is the difficulty about urgently achieving more efficient and lower cost production arrangements. My colleague the Minister, Deputy Quinn, called on the other House last night to send a message to all at Irish Steel on the need to move quickly to negotiate improvements. Without them the economics of steel making in Cobh will not be at all promising. I call on this House and Senator Cregan to reinforce this message. I am glad to have had the opportunity to come to the Seanad to debate this serious issue.

Mr. Cregan

I thank the Minister for her concern and her interest. If we are asking management and unions to organise proper production and to rationalise, can we give a commitment over a period and recognise the need to update some of the plant? We must ensure some funds are made available over a period of years.

Mrs. O'Rourke

I am sure when the matters which urgently need addressing are completed and the way ahead is relatively clear, the issues the Senator raises can be dealt with.