Examination of Witnesses (Questions 80
- 85)
TUESDAY 23 JANUARY 2001
MR K MACIVER,
MR D MARSHALL,
MR J ROSE,
MR J WESTON
AND MR
R WOOD
80. In relation to the repayable investment,
the £530 million package, I had a discussion with another
parliamentary colleague on this issue at the time who attacked
vigorously the whole notion of Government providing any kind of
support for the private sector and the argument was, particularly
given the success of previous Airbus projects. Surely in this
day and age it was not necessary, he said to me and to the viewers,
for Government to get involved in this kind of assistance. Would
you care to respond to that?
(Mr Weston) It comes back to this thing of creating
a competitive environment in the market sense as well as in the
industrial sense. If we are looking at the launch of a product
like the A380—and I do not think there are huge risks associated
with the A380, because I do believe there is significant demand
out there in the airline market, and providing we make a success
of designing and building the aeroplane we will sell it—in
a commercial sense it is still quite a lot of risk to have in
one project basket. It needs quite a significant, $10 or $12 billion
investment to develop the aeroplane. Essentially the way the mechanism
works is we do get the loan at a commercial rate, slightly better
perhaps than the rate at which we could borrow it as a company,
and the Treasury is sharing a little bit of the volume risk on
the programme with us. In return for that they actually get the
capital repaid and interest on the capital. Because they are sharing
in the volume risk they get a benefit from that in the long term
by also getting a royalty on every aeroplane which is sold after
we have repaid the launch investment. If you went back and did
a development appraisal, for example on the Treasury launch investment
on the Airbus narrow body, you would find it had been a very good
return for the Treasury as an investment. What we are actually
doing is having the Government share a little bit of the risk
but they are actually getting a commercial upside to that when
the project is successful. That does help us make a decision to
launch some of these programmes where we have a lot of risk sitting
in one basket.
Mr Hoyle
81. The A3XX is interesting and the number of
jobs which are claimed. You will remember some of the statistics
which were used: 22,000 UK jobs and 8,000 in BAE Systems would
be created because of this new aircraft. I wonder why on earth
some of these 8,000 new jobs which are to be created could not
be shared out to stop the job losses which are taking place at
the moment; or potential job losses as we have still not been
told where they will take place but we can only assume that Samlesbury
and Warton will be suffering job losses now and yet we are seeing
these new jobs being created. What percentage of work can be given
to Warton and Samlesbury to stop those job losses?
(Mr Weston) We have already split off some significant
parts of the Airbus work we have and are doing those at the moment
both in Samlesbury and in Prestwick. If you would like to come
to spend a day with us at Broughton, you can come down to have
a look at the production of the Airbus wings and you will readily
appreciate when you see the size of the job and the tooling and
things in which it comes together, it is readily apparent, that
it is quite difficult to peel parts of the core part of building
one of these Airbus wings off and put it somewhere else. It certainly
is not an efficient way to do it. What we are doing is where we
are having to make job losses elsewhere in the company, where
people are prepared to relocate we are prepared to pay their removal
expenses and move them to where we have the jobs. I can assure
you that if it were easy to split some of that work off and move
it around the country and it was economic we would do it. Unfortunately
with the nature of this job it is quite difficult to do what you
are suggesting.
82. That does not quite stack, does it? Eighty
per cent of the Airbus work was done at Samlesbury. That work
was transferred to Prestwick not very long ago. So it can move
around. Yes, they do have that expertise in building Airbus and
there is a danger—and maybe you can end speculation because
there is a belief—that you do not want to put work into
the military division because there is a possibility that Airbus
must be sold off. If that speculation could be ended a lot of
people would be happy.
(Mr Weston) Regardless of what happens to Airbus in
the future, and we certainly have no plans to sell Airbus, the
important thing as far as the military division and the aerostructure
activities of BAE Systems were concerned was having a long term
agreement with Airbus when it became an Airbus integrated company.
The direct involvement in the day to day management and sub-contracting
that BAE Systems had was therefore actually reduced. The reason
we moved some of the Airbus work—and we only moved some
of it out of Samlesbury and up to Prestwick—because Prestwick
was desperate for the work and as Eurofighter production built
up at Samlesbury, rather than employing extra people on Eurofighter
at Samlesbury and make people redundant at Prestwick, it made
sense to move some of the work, which is actually what we did.
We still believe we can achieve the overwhelming majority, if
not all, of the redundancies we are currently talking about at
Warton and Samlesbury by volunteers. They are not in the hands-on
manufacturing areas, they are in the overhead areas. The problem
we have in the British aircraft business at the moment is one
of an absorbed overhead. What we are doing is reducing indirect
staff.
83. I have been to visit Airbus and I have seen
the technology of the wings. To follow on from that there is another
aircraft called the A400M. Is it right to say that is a military
aircraft? If it is a military aircraft can we ensure that some
of that work will come to Warton and Samlesbury to try to stop
this haemorrhaging of jobs?
(Mr Weston) The A400M is a military programme inasmuch
as the end customers are military. We decided that we would prosecute
that through the Airbus military company because it is a large
aircraft and the technology of the design of that is closer to
a civil aircraft than it is to a Eurofighter, a Tornado or a Harrier.
I am well aware that as part of the campaign for A400M a lot of
effort was put in by the workers and unions on those sites and
we shall be doing our very best to make sure they get some work
out of it if and when we finally get the programme under contract
and through to the production phase. We are still working on that
at the moment.
84. That is good because you did say we should
not worry and you would make sure we would get some of this work.
(Mr Weston) I have reminded my colleagues in Airbus
that I made that commitment.
85. That takes me on to training which is important.
You have mentioned BAE Systems' commitment to lifelong learning.
Everybody recognises that. The other part of training where there
seems to be a major effect is that the number of apprentices has
substantially decreased, in fact it used to be 120 apprentices
taken on annually at the sites within the North West; that decreased
to 60 and the intake is now going to go down to 40 next year which
shows a 33 per cent reduction. I am very worried about that and
I am sure you must be, because the long-term viability has seen
people being shaken out at the top end with redundancies and voluntary
redundancies taking place, yet we are not seeing the young people
coming in the numbers to replace them.
(Mr Weston) Those numbers are new to me. I would recognise
that if you took our apprenticeship schemes in total we have had
a shift over the last few years of taking fewer undergraduate
apprentices which is how I started myself 31 years ago. We are
taking more people on as graduates and putting them through a
two-year development programme when we first employ them. I should
like to go away and look at those figures to see whether what
we are talking about there is what we call in the old terminology
the craft apprentices or the technician apprentices or the undergraduates
and what the combination is. I should be happy to write back to
you on that. Even in the times when we were making the largest
reductions in capacity in the business in the early 1990s we did
keep the recruitment of young people going through that because
we were determined we were going to maintain that commitment to
the future. One of the significant differences if you look at
the age profiles we have in the business today compared with what
they were ten years ago, because we invest a lot of money in the
voluntary redundancy schemes so we can get people to volunteer,
is that we have tended to lose rather more of the long-serving
members within the organisation and if we compare ourselves to
the American companies, who tend to use rather more direct methods
of reducing their workforces, they have got quite old populations
by comparison. I think that is probably true if you compare that
with some of the continentals as well. For me that is a real indication
of what we did over that time. Even though you could deem that
to be an uneconomic way of going about it we did make that investment
in the future. I would be disturbed if I thought your numbers
reflected what we have done in the business as a whole. I will
go and have a look at it, because I remember when we shut Preston
one of the things we did do for the local community was to say
we would keep the apprentice training school going because people
still wanted to train youngsters locally in those sorts of schools.
Mr Hoyle: There really are issue of morale at
the moment. You have had a lower workforce which has been leading
the fight to ensure contracts are being won for aerospace, because
it is one of the few industries which is still a world leader
and I recognise that. But at the end of the day it is a two-way
street and I think that in fairness we ought to respond to some
of the workers, especially if you take the tool room which two
years ago at Samlesbury had 140 people and is now down to 65.
This is a really worrying trend. When there is a £37 billion
orderbook people wonder why they have to see another shakeout
of jobs. The uncertainty as the axe is swinging at the moment,
not knowing which side is going to be affected, not knowing how
many people are going to be affected, does not do anything for
the North West. They have been loyal to you. Please reconsider.
Chairman: Message given. May we thank you, gentlemen?
We have covered all the areas we have wanted to raise with you
and we should be grateful for the additional information from
you. We are approaching a General Election but equally the fact
is that a number of members of the Committee do have a great interest
and knowledge of the industry, especially in relation to their
own constituencies. That has been displayed this morning. Apart
from that, we thought it would be useful to have you in since
you are a major part of our manufacturing base and we are very
grateful for your time and the frankness with which you were able
to address most of the issues. We realise there are occasions
when you are not going to satisfy us in every respect and we like
to show our dissatisfaction in these areas. We are very grateful
to you for the time you have taken this morning. We have had quite
a long session. Thank you very much.
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