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Dáil Éireann díospóireacht -
Thursday, 28 Apr 1994

Vol. 442 No. 2

Ceisteanna—Questions. Oral Answers. - Irish Steel Plan.

Máirín Quill

Ceist:

3 Miss Quill asked the Minister for Enterprise and Employment if he has satisfied himself that a business survival plan for Irish Steel can be negotiated, agreed and adopted before the end of June 1994.

I refer the Deputy to my press statement of 26 April 1994 when I announced that the Government, at its meeting on that date, considered the survival plan for Irish Steel Ltd., and approved the opening of negotiations to achieve the levels of costs and of efficiencies needed to enable the company to continue in business as a viable commercial entity. The plan, which identifies cost savings of at least £8.4 million per annum, was submitted to me by Mr. Diarmuid Quirke, chairman of the company. While some details of the plan for commercial reasons, must remain confidential a briefing summary of the report has been made available to management and unions.

I have emphasised that the negotiations between the unions and the new executive chairman, Mr. P.J. Dineen, whose appointment I also announced on 26 April and who begins work in the company today, may identify some other areas where costs are under the control of the company and where reductions can be achieved. Nonetheless, the cost reductions identified in the plan are those areas identified in the Simpson Xavier report. It is likely that the adjustments will have to include them. However, I have also emphasised that the savings, whatever their source, must reach at least £8.4 million per annum as, unless savings of that order are achieved, there can be no Government investment in Irish Steel and, consequently, no future for the company. I should add, of course, that approval of State investment to underpin restructuring of a steel company is subject to the unanimous approval of the European Union and member states, represented on the Industry Council.

The plant at Haulbowline continues to make losses at the rate of £1 million per month on average. Therefore it is urgent that a resolution be found as quickly as possible. Accordingly, the Government has set a deadline of the end of June for the conclusion of negotiations with unions. As this deadline must be strictly adhered to it is vital for negotiations to start as soon as possible but at any rate by early May. It is now a matter for the company and its unions to negotiate and agree within this time frame the cost structure and flexible operating practices of a modern steel plant. This is vital if there is to be any prospect of securing a strategic partner for the company. Such a partnership is essential for the long term future of the plant. If unions and management cannot collectively agree to the changes needed to make the company viable and attractive to a partner Irish Steel will condemn itself to closure.

I would like to record my appreciation and that of the Government of Diarmuid Quirke's commitment to Irish Steel and my regret at his resignation as chairman of the board to allow for his replacement by an executive chairman. Finally, I would like to wish the executive chairman, Mr. Pat Dineen, every success in the very difficult task that lies ahead.

I endorse what the Minister said in relation to Mr. Diarmuid Quirke and offer my best wishes to Mr. Pat Dineen, who took over this morning. This company has a very troubled history and has been losing £1 million a month for a considerable time. Does the Minister consider it realistic to expect it to effect savings of £8.4 million and have a plan in place within a timescale of two months? Is it the Minister's understanding that this saving will be borne by the workforce? Is there any possibility of effecting a substantial reduction in energy costs, as predicted by the Taoiseach when he addressed the Irish Management Institute Conference in Killarney recently and promised that Russian experts would visit the plant and put in place a scheme affecting a substantial change in energy costs? Does the Minister anticipate that that change will be effected in time to incorporate the £8.4 million saving?

Simpson Xavier, consultants appointed by me at the end of last year, at the request of the unions, identified areas directly under the control of the company in which savings could be achieved. The then chairman of the company, Mr. Diarmuid Quirke, with the help of outside assistance, investigated that report and applied its recommendations to the operations of the steel plant in its present form. Based on the Simpson Xavier report and its analysis, they identified the precise manner in which £8.4 million cost savings could be effected under the present operational control of the company. Therefore, those savings—which are to be effected largely from the entire operating costs of the company, excluding cost of raw materials and of energy — are within the immediate control of the company and can be implemented while maintaining the present output of steel.

Any future changes in the cost of energy, or its more efficient utilisation— which I think was the idea behind some of the Taoiseach's comments—will be matters for the future and, I understand, could involve additional capital expenditure before their benefits are reaped. That would be a matter for management and the new executive chairman of the company. However, it would be misleading to advance such energy savings as a substitute for or replacement of the requisite savings of £8.4 million which must be found before the company's future can be clearly guaranteed, including the more efficient use of energy.

I thank the Minister for his clarification. Is he satisfied that no difficulty will be encountered within the European Union in regard to the promised £25 million if these savings are implemented within the timescale suggested in the plan? What are the Minister's hopes for finding a strategic partner to guarantee the long term commercial viability of Irish Steel?

I am not satisfied that we will not encounter difficulty with the Commission or, more particularly, the other 11 member states in which steel industries may be located, some of which are in direct competition with Irish Steel. We cannot presume that we will automatically have the unanimous approval of the other 11 member states. Certainly we will not get their approval if they believe that the changes to be effected in Irish Steel are insufficient to ensure that the company can function as a viable entity in the marketplace without recourse to additional subsidies. In relation to the Deputy's second question, I am satisfied that this company has a future and can prosper.

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