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Dáil Éireann díospóireacht -
Thursday, 4 May 1995

Vol. 452 No. 4

Ceisteanna—Questions. Oral Answers. - Shannon Aerospace Employment Targets.

Mary Harney


3 Miss Harney asked the Minister for Enterprise and Employment if there are any binding commitments in regard to job numbers in the recently announced rescue package of Shannon Aerospace; if these grants are repayable if certain targets are not met or maintained; and if the further £12 million to be paid to the company by SFADCo is repayable by Lufthansa and Swissair in the normal way by way of clawback if employment targets are not met or maintained. [88204/95]

The House is aware of the very difficult market conditions in the aircraft maintenance sector in Europe and elsewhere and, consequently, the serious problems which have arisen for firms such as Shannon Aerospace. As a result, the company had to formulate a restructuring package to ensure its survival. I participated in difficult discussions in Zurich with the shareholders on the company's future and a framework for further discussions and negotiations between the company and Shannon Development was agreed. Arising from these negotiations and following recommendations from Shannon Development the Government approved a grant support package for Shannon Aerospace.

Revisions will be required in the grant agreement between Shannon Development, Shannon Aerospace and its shareholders to reflect the recent grant support package approved by the Government. The revised agreements will include binding job performance targets, parent company guarantees, grant clawback conditions, and workload commitments by the shareholders. Job targets have been revised downwards from the original projection of 1,075 to 855 and this reflects the difficult market environment.

Shannon Aerospace employs 700 people with high skills in its state of the art plant at Shannon. It operates in an extremely competitive marketplace and, accordingly, it would not be appropriate for me to give details of the conditions which will be included in the revised grant agreement. Legal agreements between Shannon Development and Shannon Aerospace to reflect the new arrangements are in preparation. Shannon Development will ensure that as much protection as possible will be included for the State's investment.

Legal instruments in respect of security for additional State investment in Shannon Aerospace are in the course of being drafted. This security will be in the nature of a charge over assets and will be taken out in favour of Shannon Development. It is in addition to company and parent company guarantees in respect of grants already paid and for which contingent liability clauses already exist in the grant agreement.

The support given by the Government to the Shannon company reflects the excellent productivity and work practices of the staff and workers and the high skill levels of training achieved by them; the substantial flexibility of the workforce with little or no overtime; the recognition by the workforce of the seasonal nature of the workload and the fact that it is widely acknowledged, both here and abroad, that the Shannon plant is one, if not the, most cost effective aircraft maintenance facility in Europe.

In supporting the package proposed, the Government also recognised 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 the Shannon World Aviation Park. Shannon Aerospace has had a major impact on industrial development in the mid west region. This support by the Government should ensure that Shannon Aerospace will benefit from the world and European rationalisation currently under way in the aircraft maintenance sector. The sizeable advantage of the company vis-à-vis its competitors, as I have mentioned, 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.

The Government recognises and acknowledges 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. I again pay tribute to the role SIPTU has played during the recent uncertain period.

I assure the Deputy that every effort will be made to ensure that State investment in the company is secured and that it provides the expected return in jobs. In this context, the real security for the existing jobs at Shannon Aerospace and the creation of new jobs is in that commercially viable company.

I agree with what the Minister said about the workforce, but there is a good deal of uncertainty among workers. Why did he not insist that Lufthansa and Swissair make a financial investment as part of the rescue package?

I find the response of the Progressive Democrats on this matter somewhat bemusing. It appears the Progressive Democrats are not willing to acknowledge that we have a proposal from the Shannon board which has been vetted as a viable survival plan for 700 important jobs in the region. I am conscious of the concerns about this proposal, but under this agreement Lufthansa and Swissair are accepting additional undertakings in terms of their financial positions and are making commitments of quality work for the future at a premium price. Those are the critical ingredients to securing the future for that company. It has a highly efficient workforce, excellent work practices and now it has a guarantee of work for the future.

I do not understand what the Minister was talking about regarding the Progressive Democrats. Surely I am entitled to ask questions. I am concerned to ensure that the jobs are maintained. As the Minister said in his reply, the original job targets of 1,075 have been dropped and I want to ensure that the 700 jobs are maintained in the first instance. How does the Minister propose to enforce the commitments being made by Lufthansa and Swissair regarding work? Is that commitment subject to the approval of the Lufthansa board, which I understand, is meeting next week? Is the Minister aware that the trade unions representing Lufthansa employees in Germany are objecting to that work commitment? Can he give me an assurance that the work commitment will be honoured?

I assure the Deputy that the negotiaitons conducted with Lufthansa and Swissair in the first instance were on the basis of a mandate provided by their boards so it is not necessary to return to the boards for formal approval. I am aware of objections from the trade unions. Under the German system they must deal with their supervisory boards, but I am satisfied that the Lufthansa board will secure the necessary approval. Guarantees have been given by the two partners regarding employment levels. That is a critical guarantee for the delivery of the required work. Their guarantees are in the form of employment guarantees and Shannon has security in those commitments, they do not relate to a party to the contracts of work between Shannon Aerospace and the parent company.

Is the Minister telling me that no approval is required now from the Lufthasa board? Is it the case that all the grant aid made by the State to that company in Shannon will be paid back if the 855 jobs are not secured?

There were supposed to be 1,025 jobs originally.

The Lufthansa board gave its negotiators, primarily represented by the chairman, a mandate to negotiate and they had authority to make a deal without referring back to their board. I have no doubt they will refer to the board to notify it of the agreement reached, but its negotiators do not require board approval. Regarding the future employment and securities, in the event of the employment target not being reached, there is a grant clawback clause in the agreement, but I am confident that given Shannon's 30 per cent cost advantage in the marketplace compared with other European plants and its guarantee of business from two important airlines with considerable volumes of work, the company will secure its existing employment and reach the target of 855 jobs over the coming five years.

When will the money be paid?

It will be paid in the next two years in four phases.

Does it require legislation?

Legislation is not required to pay the money, but I am aware that Shannon has a certain limitation as do all State enterprises, such as the IDA or Forbairt, regarding the aggregate grant payments and it is coming close to the limit. The industrial Bill which is due to come before the House shortly will provide for the normal adjustment in Shannon's ceiling on grant payments.