Examination of Witnesses (Questions 40
MONDAY 6 NOVEMBER 2000
40. Do you favour the kind of instant response
that the American mechanisms seem to afford where you are given
a fair trial and shot afterwards, or maybe shot first?
(Mr Pedder) I prefer shot first, Chairman. I think
the Americans seem to be at the other extreme. I have to say,
given the damage that can be done to our market very, very quickly,
I think you have to err that way rather than the other. The Americans
take it to excesses and I think their greatest marketing tool
is to bring anti-dumping measures. I think somewhere between these
two extremes is where we want to be.
41. In your submission to the Committee you
point out that over the past ten years steel consumption by industry
in the UK has fallen by ten per cent, yet at the same time we
have statistics for Germany and France which show significant
increases. You say also that total UK consumption, if you include
end products, has increased. Can you say why that is? Is it just
that all the things we used to produce like washing machines,
cars, etc., a large number of them are made elsewhere and we import
them in manufactured form rather than products to industry or
are there other factors at work?
(Mr Siddall) That is certainly very true. Steel in
imported goods is now the biggest source of steel coming into
the UK. 38 per cent of steel coming into the UK is in imported
goods, many of those previously were made in this country.
(Mr Bagshawe) If I may just add to that, a lot of
our customers are component suppliers into the motor industry
and other engineering operations in the UK. Our customers are
losing their business now to overseas. It is not just the washing
machines and the cars which are coming in, it is the components
that go into those cars and go into those washing machines which
are also now subject to an awful lot of competition, an awful
lot of price pressure. Those are being imported now as well.
42. You would think the same factor would be
affecting countries like France and Germany, or does it just come
back to the currency again?
(Mr Siddall) The way the euro has weakened has certainly
enabled countries like France and Germany to be more and more
competitive when sending goods into the UK.
43. We are looking at ten year figures here
and unless this change has happened in the last year or so, why
has the consumption of steel in Germany and France gone up and
that in the UK down?
(Mr Rea) You would see the same sort of pattern even
more vividly in the stainless steel statistics. It is about the
manufacturing base and whether that is growing or not. What you
see in the UK is the steady migration of manufacturing out of
here offshore. In the last year or two that has been rapidly escalating.
We could show you some numbers again, and submit evidence afterwards.
Stainless steel is one excellent example where consumption per
capita is tied very much to the intensity of manufacturing in
that particular country.
44. You say later on, it is related to this,
the loss of critical mass in some areas of manufacturing threatens
to undermine our ability to compete. Can you say what you mean
by critical mass exactly in this context?
(Mr Rea) Our standard view on that is that you need
a wide product range as a manufacturing sector or groups within
a manufacturing sector need to be able to supply across the product
range. This applies particularly to us in steel but I am sure
it does in downstream manufacturing as well. When you have a name
and a reputation you supply a product range then you command a
certain size of the market. Once you start to withdraw from particular
products, or once you are not in a particular line of manufacturing,
then you find that foreign competition, or competition from bigger
groups, is better able to supply right across the market. Therefore,
from our point of view we look at a UK manufacturing base that
needs to supply a broad range of products in a broad range of
materials and to have the workforce and academics and research
and development behind that which all makes it a profitable business.
Once you get below a certain size, and it might be arguable exactly
what the certain size might be on that, as you do shrink down
you find it far harder to compete when people are looking for
a range of products.
45. Are there particular parts of manufacturing
you had in mind when you made that remark?
(Mr Rea) Automotive has to be the first stopping point
in any major part of manufacturing. With any major capital goods
of that sort you have to have a product range and you have to
have a basis from which you are coming with new models, new varieties,
whatever it might be.
(Mr Siddall) For instance, in my own company we do
not make any finished products, we make components that go into
certain niches. If those niches that we go into shrink by other
companies moving into Europe, obviously that makes things extremely
difficult for my own organisation.
46. Mr Pedder, I think Corus is the topic I
would like to take up with you. Obviously I presume you are still
celebrating from the good news of all this extra money being spent
by Railtrack on new lines. I just wonder, following that announcement,
will we see a reversal of the redundancies that have been proposed
for Workington with the new contracts and new orders that will
be coming in? Also, what guarantees have you made with Railtrack
about the production of lines being made in the UK?
(Mr Pedder) The discussions with Railtrack about what
their current renewal programme is going to look like are still
ongoing. We have a contract with Railtrack which is for about
60-70 per cent of their requirements in the UK, that is for five
years. That is a contract that they look like placing for in total
about 100,000 tonnes of rail a year with all their suppliers over
the next five years. So far the impression we have of the renewal
programme they are talking about is something of the order of
200 miles which will be around 40,000 tonnes of rail. We will
be able to accommodate their needs and we will be talking to them
very actively about what those are from our rail supply and we
will be adjusting our production accordingly. It is early to say
what that will mean specifically.
47. I think you missed part of my question.
Will that work go to Workington or not?
(Mr Pedder) As I say, that is to be decided. We will
discuss that with Railtrack, it will depend on what they specifically
want in terms of rail lengths, delivery programmes. All of that
will be discussed with them in the near future. I cannot give
you a specific answer today.
48. Have you given a guarantee that there will
be rail production in the UK with Railtrack?
(Mr Pedder) We will be able to meet their needs when
they have decided what those needs are, and I do not think that
will be a problem.
49. So I take that as no, or do I take it as
yes? I will let you decide. It would be easier for both of us
if it was yes or no.
(Mr Pedder) When we know what they require in terms
of quality, specs, delivery time, we will work out a programme
with them and we will meet their needs. Where those needs are
met from we will decide once we know the detail.
50. I will make it easier for you. At this stage
have you given a guarantee that there will be a production of
lines in the United Kingdom? Yes or no?
(Mr Pedder) I am not aware that we have given a guarantee
but we will be able to meet the needs of Railtrack, I am pretty
certain, depending on what their specific needs are when they
are finally given to us.
51. From abroad if need be?
(Mr Pedder) If need be.
52. If Railtrack were to say to you "we
want it made in Britain", would they be able to do that?
That is question one. Secondly, would you have the capability
if the lines were what you were talking about?
(Mr Pedder) I would need to look specifically at what
that means in terms of timing of rollings and specific qualities,
but if that was what they were to say to us I would be very surprised
if we could not meet that need. We need to see the details. I
am not trying to duck the question.
53. It is a problem that you would like to be
able to resolve?
(Mr Pedder) We would love to supply them.
54. Obviously the UK taxpayer has put a lot
of money into ensuring that the standards of Railtrack are brought
up and we are seeing new lines being put in there. I think it
would be an embarrassment both to yourselves and the UK Government
if we were to find that production was coming from abroad. I am
sure you will take that on board. The EU have told us that the
importing of steel used by Railtrack has already happened since
early this year when Corus won the £120 million contract
over a five year period. Is it true that some of that work is
going to a subsidiary in France? Is not all new track of long
rail production going to come out of France as you have not got
any at Workington?
(Mr Pedder) If the need is to supply long rail then
that rail will come out of France. If there is the ability to
supply the track in shorter lengths and weld then the supply from
the UK is easier. Bear in mind that not all of Railtrack's needs
come from Corus anyway, they purchase rail from suppliers other
55. But you have got about 70 per cent of that?
(Mr Pedder) Between 60 and 70, yes.
56. That is a fair crack of the whip, it does
not leave much for all of your other competitors to share out,
does it? In fairness, you are the biggest supplier.
(Mr Pedder) I think it is far more than we would like
our competitors to have.
Mr Hoyle: If you went to France people might
not agree with you, we think UK jobs are important.
57. Can you explain about the rail lengths business
because I am not very clear. There is something about the VIC
(Mr Pedder) I am not an expert on rail, I would have
to come back to you on it. We are happy to do that.
58. I do not want to trip you up, I know it
is not your specialist subject. In the course of the last two
weeks since we have discussed the meeting today
(Mr Pedder) We have length constraint on our Workington
mill and that is what is being referred to here.
Chairman: We will come back to that in written
or oral form.
59. This kind of long rail, is this something
that is new within the British railway system or is this something
that has been used for some time? Is the reason that the French
plant is able to provide it because obviously there has been investment
there and they are able to produce that kind of rail and there
has not been the equivalent investment in Workington?
(Mr Pedder) I think, again, I would need to come back
to you on the specifics of that. There have been different lengths
of rail produced by different producers around the world according
to the needs of their major customers and what has been specified.
That has not been a pressure on us until quite recently as far
as Corus is concerned.