Dáil Éireann Debate, Thursday - 1 April 2004
7 Mr. E. Ryan asked the Minister for Communications, Marine and Natural Resources the person he asked to carry out a review of the proposed An Post ESOP; when he expects the report on the matter to be available; if he will make it available to members of the Oireachtas Joint Committee on Communications, Marine and Natural Resources; and the circumstances in which he will consider offering the workers shareholding in this company. [10310/04]
Amharc ar fhreagraThe purpose of the ESOP was to facilitate the transformation of An Post into a viable and profitable postal operator in order to deal successfully with the challenges arising from liberalisation and electronic substitution. Having regard to the recent financial situation in An Post and the substantial losses incurred by the company in 2002 and 2003, the board has been asked to review the cost savings verification. As part of this review process, the Department engaged Ernst & Young to undertake a review of the cost savings as stipulated by the ESOP term sheet. It is expected that the final report will be presented to my Department shortly.
As part of the ongoing work on this issue, the Department may decide to make the report available to the stakeholders involved in the ESOP process and will consider, in time, whether to make the report available to a wider audience. The Government is fully committed to an ESOP in An Post if it can be demonstrated that real transformation has occurred resulting in a viable and efficient company, and that the cost savings envisaged in the ESOP term sheet have been achieved. This has been communicated clearly to the CWU and other trade unions.
Over the past three years, the management accounts in An Post were clouded in uncertainty. Why is the Minister sticking to the cost savings that were set for the ESOP to be delivered, when it has been almost impossible to analyse the accounts and ascertain the cost savings? Is it the case that the company's former management came to the Minister's Department last year and said they believed the cost savings had been made and that, as such, the first phase, or 4.9% section, of the ESOP should be delivered?
It is 2%.
I understood that the first phase was to be 4.9%, based on the cost savings. In his speech last Tuesday, the Minister outlined that the cost savings would lead to the first phase of 4.9%.
I will clarify that in my reply.
We can clarify that later but is it the case that the management told the Minister's Department it considered it was appropriate to issue the ESOP? What was the Department's response at that time to such a request from the management?
I would have thought it was well known that in May 2003 the board of An Post verified that cost savings amounting to €7.17 million had been achieved. Under the terms of the agreement, that would trigger a 2% transfer of shares. We were aware that the company's financial position was in severe difficulty. In 2003, the company lost approximately €43 million. In discussions with the board of An Post, we stated that we wished to have this matter examined independently. That is why we asked Ernst & Young to produce a report on this matter in order to verify it. Equally, in 2003, it was forecast that An Post would make a profit of €1 million which turned out to be a loss of €29.5 million. In the context of what was supposed to be a transformation of the company, which is what the ESOP was all about, we indicated that the savings had not been achieved.
As regards the current financial position of An Post, cumulatively over the last two years, and this year, the company will have lost €100 million. To a large extent, the ESOP was a side issue compared to the investment of €100 million by An Post in new automation. At the moment, however, we are not getting the ultimate benefit of that expenditure.
The Minister has partially answered the question I wished to ask. Last summer the union received an indication from management that workers had fulfilled their commitments, thereby permitting the establishment of an ESOP comprising 2% of the company. The Minister keeps saying "we" but he means "I". He intervened to say he was not satisfied that the necessary changes had been made by the workers. He deliberately interfered but I do not criticise him because I only wish to establish the facts. Did he seek an independent audit to ascertain whether the necessary changes had been made?
The board of An Post indicated that the cost savings delivered in 2003 were supposed to have been delivered in 2000 and, therefore, were not delivered on time. However, I queried the cost savings indicated and Ernst & Young were asked to examine the figures because it was important to do so independently. Ernst & Young's draft report highlights the cost savings that were supposed to have been achieved and were not achieved.
According to 2002 accounts, the cost savings were between €8.5 million and €9 million. They were audited by KPMG. Does the Minister accept the 2002 accounts? I have continually asked this question of the Minister but he will not provide an answer.
In 2002, 2003 and this year——
Those are different figures.
One cannot say costs savings were achieved while the company outgoings increased dramatically.
KPMG says one thing and the Minister says another.
There was a delay during these years in producing information relating to the ESOP and the company's costs increased dramatically. Costs increased by approximately 9% in 2001 over 2000 and by 13% the following year. One issue cannot be examined in isolation in the context of the ESOP without examining the overall position.
The Minister intervened as a result.
Ultimately, I intervened because the board, under the terms of the ESOP, must seek the consent of the Ministers for Communication, Marine and Natural Resources and Finance for the share transfer. I did not intervene, I received a request. The company was in severe difficulty financially and we had a duty to the taxpayer to ensure that if shares were transferred the transformation agreement, which had been requested, had been delivered.
Did the Minister not question the competence of the directors?
The transformation agreement was not delivered. Has the company been transformed?
Did the Minister not question the board's ability?
Will the Minister clarify whether the €20 million loss equated to the projected cost of the ESOP? When Mr. John Hynes was chief executive officer he projected the company would be in the black by 2005 but that is far from the reality. Should there be an investigation into the manner in which An Post has arrived at the current impasse? Did the Minister tolerate the action taken by management to bounce the unions into a crisis, which will result in an even more radical clear-out in the company? Should it be pointed out in the negotiations that the Department will investigate how management arrived at the position where the company is making significant losses that were not even mentioned a few years ago?
During the Private Notice Question last week, I did not go through the full list of the contacts between my Department and the management of An Post regarding the company's deteriorating finances. Management continually said from May 2002 onwards that there was no need for a recovery strategy. It was only when I refused to bring the 2002 annual report to Cabinet for approval that management eventually admitted the position was as difficult as it is now.
That should be investigated.
Where were the directors of An Post?
