Examination of Witnesses (Questions 20
- 39)
MONDAY 13 NOVEMBER 2000
MR JOHN
BRYANT, MR
FOKKO VAN
DUYNE AND
DR JEFF
EDINGTON
20. What evidence have you got for that?
(Mr Bryant) We have got people working in Holland
at the moment.
21. And are they going very happily, because
they are very happy to go there?
(Mr Bryant) And certainly from the point of view of
recruiting people to come to work for us then the attractions
of working for an international company are high.
Dr Turner
22. I am sure you have been reading the press,
as we have, and noting many reports that indicate that some of
the problems that Railtrack are having with rails, which, of course,
are produced by your company, point to a possible disadvantage
in characteristics of the material that is currently being produced
for steel rails. I believe that the one that broke at Hatfield
had been installed less than a year ago. And it seems that these
rails have a tendency to fail without any warning, and this failure
can be quite catastrophic. Now, clearly, there seems to be a fairly
serious R&D problem there; are you going to have the capacity
to deal with it?
(Mr Bryant) Perhaps I can ask Dr Edington to comment
afterwards, but I will, in general. We have been working very
closely with Railtrack on that particular incident, and they have
been using our technical resources both in our rail business and
in our R&D to help to understand all of the factors, of which
there are many, I think, associated with that particular thing.
And the short answer is, we do have the capability to deal with
that and we will have the capability to deal with it. One of the
things that we have done is, just over a year ago, we bought a
French rail company, called Sogerail, which is itself the
main supplier to the French high-speed rail system, and we bought
that company because we saw rail as being something which was
potentially a growth market around the world. And so we will also
be using the experience of our French rail company to help to
get to the bottom, as far as the whole of that particular incident
is concerned, and also, I think, may I say, personally, as a regular
commuter on Great Western, to upgrade the quality of the Railtrack
system; and nothing would please me more than being able to drink
a cup of coffee at speed.
(Dr Edington) I just want to be absolutely crystal
clear, and brief; there is no question in my mind, we have a solid
knowledge base, we have the people, we can deal with that problem
now and well into the future.
23. Can you just expand a little on the proposition
that you had a 20 to 25 per cent overlap in your R&D activities
between the two parent companies; can you say what those areas
were, and are you quite sure that, having taken out overlaps,
you have not lost something?
(Mr Bryant) Could I just say, Chairman, that, I think,
in general, and perhaps Dr Edington could expand, in carbon flat
steel, we were almost equal in size, that Hoogovens was around
5.5 to 6 million tonnes of product, and British Steel was about
7.5 million tonnes of product. Now some of British Steel's carbon
steel went in the constructional area, which had little or no
overlap with Hoogovens, but in the flat products, in that 12,
13 million tonnes, which is a very sizeable chunk of our operation,
we were almost directly overlapping on that particular area. So
that, if you just looked at the company as aluminium, where there
was no overlap, there was stainless steel where there was no overlap,
but in the flat steel area it was almost 100 per cent overlap.
(Dr Edington) It is probably quite important to say
this. We have spent six months looking at the programme, project
by project, we have had five senior directors out of R&D doing
it, and we have gone through every project with a fine tooth-comb,
and even where you are tackling the same problem you find a particular
approach is better than another, so we have been able to combine
the best of one project with the best of another project to get
the best result. It has been an extremely detailed analysis, not
one undertaken lightly, because it is recognised that the future
of a lot of people is involved, at the end of all of that, and
so it has been done extremely professionally. I do need to say,
this is the second time I have done this. I was in Alcan when
Alcan and British Aluminium merged, and we went through the same
kind of process there, and I am quite clear that we have done
the best possible professional job on it.
Dr Iddon
24. Can I move on and suggest to you that the
redundancies in R&D appear not to have been made on a `last
come, first out' basis; they seem to have been made on seniority,
which is of great concern to me, because people are promoted into
senior positions because of expertise and high performance in
a specific R&D area. Are you going to lose all that expertise,
and will it have an impact on the company if you do, or has it
been passed down?
(Dr Edington) I do not think it is true that it is
a question of the older people all going, and that is the end
of it. What we have tried to do is to balance the skills base
that we need for the future with the skills base that we have
now, and we have knitted that together with the projects we are
doing now and the projects we expect to do in the future, and
we have looked closely, with our customers, at what their expectations
of us are going to be. So the activity has been skills- and knowledge-based,
not aged-based, speaking as the oldest member of the executive
committee of the company. So we have done it very, very professionally.
I have to say, every company like ours is concerned about losing
skills and knowledge, and most companies like mine try to put
a process in place which retains that; it is a very, very sensitive
issue, and we are doing the absolute best we can to retain that
knowledge within the company. But I will not say to you it is
easy, because people often have knowledge that they have not realised
they have got and it does not come out until they are facing a
particular problem; so it is not an easy activity, but we are
doing it. And I think I can be absolutely categorical, no-one
is being let go because of their age; absolutely no-one.
(Mr Bryant) Could I add, Chairman, just one point,
which is relevant not just to R&D but to other areas of our
activities in the UK as well. It is a fact that we try, wherever
possible, to avoid compulsory redundancies, and one means of doing
that is by trying to see how many people are volunteering for
redundancy, and we do have a very good, sound, pension scheme,
which is still called the British Steel Pension Scheme, which
does mean that people are able to retire from the age of 50, albeit
at that age with reduced benefits. One of the things that we have
tried to do is, if it is a question, and this applies generally
in the manufacturing area, of an individual who has skills and
a younger man who does not have the skills, that we try then to
train the younger man and allow the older man to retire, because
that is, in that sense, a less painful way of the redundancy being
made. And so that, locally, where most of these things will be
done, people do work very hard to try to get that cross-matching
arrangement as best they can.
25. Most of your present customers that benefit
from your R&D are operating plants and businesses here in
the UK. SIMA suggests that by moving research activity to The
Netherlands, which is what you are doing in a significant way,
you are going to damage the relationship, through doing that,
with your customers, for example, by increasing response times,
and thereby cost. How would you guard against that?
(Mr Bryant) I think that in any change you have to
be mindful of that, and it is a concern, but I think it is something
that can be managed very well; because the actual relationship
with customers, I stressed earlier on, the commercial relationships,
the technical sales, in support of that, they are the front line
in terms of dealing with the customers. And where that actual
technology takes place is less important than the service that
is being provided; and even where we are structured in the UK
at the moment there is not one of our laboratories that is really
close to one particular car company, or dedicated one to the other,
they handle things on a pretty cross-matched basis.
Dr Kumar
26. Just to follow on from what Dr Iddon was
asking: you are transferring all your process research mostly
to Holland, 25 jobs only to remain in the UK. Are you seriously
telling me that you actually can assist the works in Wales for
process research from Holland; are you seriously saying it is
nearer from Holland to get to Wales than it is from Teesside,
or from Rotherham, or from Wales itself?
(Mr Bryant) In a way, I think you have almost said
it yourself, that process research was, in British Steel, centred
at Teesside, and the distance between Teesside and South Wales,
compared with IJmuiden and South Wales, is not that much different.
27. But what about the travelling time and all
you are going to add to the travel, and the equipment they are
going to have to carry to get across to the works, if you want
to do that?
(Mr Bryant) But most exchange of information will
take place electronically, at the moment. At the Teesside Technology
Centre, they have the ability to monitor every one of the blast
furnaces in the UK, and they do not physically have to be there,
they electronically tie into it; and the same thing can apply
from Holland. I have been shown it at the Teesside Technology
Centre, where they have shown me the workings at every site in
the UK.
Chairman
28. We have a press notice here, Mr Bryant,
dated 16 June, and you tell us about your plans there, and you
make it quite clear, in that press notice, as you did to this
Committee earlier on, that a large proportion of your research
is customer-oriented and product-oriented; and that we understand.
But you are going to have a new Research Centre, and we wonder
to what extent you might be having `blue skies' research, original
research, in that Research Centre. Have you dismissed blue skies
research, are you going to buy that in, as you are going to buy
in your process technology, or are you going to try to contribute
to the blue skies research of your industry?
(Mr Bryant) If I could make just a couple of observations
and perhaps ask Dr Edington. I think one of the things in the
merger is that we now have access to not just the Hoogovens research,
but there is an organisation called CRM, which is in the Benelux,
which is another research organisation, and I think we do have
much better access to those sorts of things. What I would have
said, in terms of blue sky research, we would tend to do that
sort of work more in direct conjunction with universities, if
it was something that was more appropriately done there; and I
think we have moved progressively away from individually trying
to carry out, on our own, blue sky research. Albeit, for all that,
there is a small, strategic budget maintained at the centre, which
is the responsibility of Dr Edington, and will be of Professor
de Wit, which is for, what we call, seedcorn research, for strategic
projects, that may or may not succeed.
(Dr Edington) Blue skies research has changed. There
was a time when blue skies research was steel research; blue skies
research now is about integrating what is happening in the world
out there and bringing it in to do something unique within the
company. Because you cannot cover all of these bases, you cannot
possibly, with 1,000 people, do research on everything that matters
to you; so the key thing for us is to monitor what is going on,
to sponsor research in various universities, as a means of doing
that, but it is an integration activity now, not a steel research
activity, and that is true for most—
29. So reassure me then that, even if you may
not be doing blue skies research, you are doing blue skies research
monitoring, to make sure it is available to you should you need
it?
(Dr Edington) Yes, and we are also spending, in those
terms, blue skies money to bring it inside, before it is necessarily
obvious what it is capable of doing.
Dr Gibson
30. Is the restructuring process finished now;
is it over, in your heads, or in practice?
(Mr Bryant) I have worked 35 years in the steel industry,
and it is never over. It is a constant process, a remorseless
process, against a cost/price squeeze, where you have to be better
every year; and so one can never sit back and say it is over.
I have got to say, as well, coupled with what I said earlier,
in the UK at the moment it is particularly difficult. So, in terms
of it being over, the answer is no.
31. Is there any specific thing that worries
you, that might precipitate a restructuring?
(Mr Bryant) The continuing weakness of the euro and
the strength of the pound is, for our industry in the UK, a very,
very strong factor; and, I have to say, it is our customers in
the UK whom we are concerned about.
32. And, this new facility in Sheffield, how
far along the road have you got with that; is it a hole in the
ground, or is there a building emerging?
(Dr Edington) We are at the stage where we have gone
out to architects, we have chosen an architect, the architect
has come up with a design, we are pretty close to deciding a site;
that is how far we have got. The plan is to be in place and up
and running by 1 January 2002, which is only 15 months away.
33. And Sheffield was chosen rather than, say,
Birmingham, for some reason?
(Dr Edington) The Sheffield area has been chosen,
yes.
34. Was there a reason for that; how far around
the country did you look for a site?
(Dr Edington) We looked, obviously, in Teesside, we
looked in South Wales, we looked in Rotherham, in the Sheffield
area, because that is where our sites are already. And there is
an issue, comments were made about making people move from Teesside,
if you put a laboratory in Birmingham, you have got people moving
from Teesside, Rotherham and Wales, so it makes it worse. So our
tendency would be a place where we already are, Sheffield is a
great area, it is close to Sheffield University, Hallam University,
Manchester University, you can get to Birmingham easily, it has
got its own airport now; so it has got a lot of good things going
for it.
Dr Iddon
35. Can I quote something that the company said
in March: "From the Corus point of view, the UK is a good
location for R&D." Why do you see the UK as a good location
for R&D?
(Mr Bryant) I would say, I think, that our comment
there was that we had good links with universities, we had developed,
in the areas where we manufacture, some very strong links with
universities, and that we thought that the UK was an area where
technologists from other countries would come and work as well.
And that, if you looked at it just from an R&D point of view,
which is the question we were answering, we thought that it represented
a good place to be.
36. What has changed, if you are cutting 43
per cent of your research personnel here and only 6 per cent in
The Netherlands?
(Mr Bryant) Because of the overlap and the potential
that there was here, and, I have to say, even within the former
British Steel, we would have been moving towards rationalising
our Research Centres anyway, driven by the merger or not; but
I think that it is something where we could see the extra impetus
that the synergies and the overlap were going to give us.
Dr Kumar
37. How much is it going to cost you, that reorganisation?
(Mr Bryant) I would not comment on that, because I
think—
38. You would not comment, or you have not done
the sums?
(Mr Bryant) Oh, no; no. I think you are talking about
commercial information, but you are talking about a significant
sum, and the total cost will be in the low teens, of millions.
Dr Iddon
39. So, if I can just repeat, what is the main
reason for your shift in emphasis between the two countries, between
the UK and The Netherlands; is it because the projects are in
The Netherlands, that you want to concentrate on?
(Mr Bryant) No. We saw the company as being something
that had a large base in Holland, which was also supporting aluminium,
and we looked to say, well, could that be supported, could we
support the Dutch activities from the UK, could we support the
UK activities from Holland; and we came to the view that two centres
was the right way to do it, compared with the four at the moment.
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