Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



  140. Can you perhaps give us details of your proposals prior to the announcement?
  (Sir Brian Moffat) No, I cannot. That is privileged information.

Mr Hoyle

  141. Are you refusing to give that information?
  (Sir Brian Moffat) It is privileged information. When we approve things and decide to invest we announce them. We cannot tell you about information that we have not yet approved.

Helen Southworth

  142. I was asking whether you had made any announcements, whether you had made any approvals, prior to your restructuring announcement, whether you had made major capital investment?
  (Sir Brian Moffat) Yes, they are a matter of record in the accounts.

  143. Perhaps you can let us have them. You now want to make money and steel, that is certainly something that Mr Morgan was quoted as saying after your meeting on 23 January: "They are now in a position of wanting to do something ruthlessly commercial". Is that the picture?
  (Sir Brian Moffat) No. I made the statement in the past that it is no use just making steel, you have got to make money. Money is absolutely important all the way through the company. We have got to have sufficient money, and earn that through our customer base, to pay for our supplies, to pay the wages of the people who work for us, to reward the shareholders and the bankers that lend us the money and to reinvest in the company, as we have been able to do over the years. If we do not make sufficient money we cannot primarily reinvest, and that is perhaps one of the problems that has been at the foot of the situation as far as the UK industry is concerned. It is not making enough money to make sufficiently good investments to secure the future.

  144. Who is driving your decisions at the moment? Is it the institutional shareholders?
  (Sir Brian Moffat) No, the management is driving the decisions.

  145. Do you consider that the announcement on 1 February was a success because it drove up share prices which have remained steadily higher?
  (Sir Brian Moffat) An announcement is not a success, it is the deed that is the success in terms of that announcement and as a result of the actions taken from that announcement securing the future of the company.

  146. How do you and your fellow directors see your duties to other stakeholders in the process?
  (Sir Brian Moffat) We have a duty to all the people in the company who work for us. We have a duty to our customers too, as well as our suppliers, the people in the communities in which we operate, and we are responsible employers as far as that is concerned, to the people who lend us money and invest in us. We have got duties all the way through like all other companies have.

  147. You said earlier on that you had not had any offers of help from Government or from the Welsh Assembly—
  (Sir Brian Moffat) Not specific offers, no.

  148. You indicated that you had not asked for specific help.
  (Sir Brian Moffat) I did not indicate I had not asked. We had been asking for rate rebates for seven years.

  149. You also pointed out that was an issue of legal entitlement, you were not actually asking for Government support.
  (Sir Brian Moffat) Yes, everybody is entitled to appeal against their rate assessment.

  150. Did you not think that you had a responsibility to your stakeholders to seek support from Government or from the Welsh Assembly?
  (Sir Brian Moffat) We did seek support. We have asked for support in helping to train, retrain and seek inward investment so far as the people affected are concerned, which is all we are allowed to do under the Treaty of Paris.

  151. When did you ask for those things?
  (Sir Brian Moffat) The first time was with Mr Byers on about 7 December, 7 or 9 December, I can look that up in my diary and get the date for you, and around about 18 December. Mr Johnston and I met him again last week and, indeed, I got a letter from him today confirming that he wished Government now to work with us, our employees, trade unions and local authorities, to bring that about.

  152. So you sought help from the Government in specific areas?
  (Sir Brian Moffat) Sorry?

  153. No, it is okay, I will leave that. Could I ask you about your October 1999 distribution of £686 million to former British Steel shareholders. Do you think that was appropriate in the light of current events?
  (Sir Brian Moffat) You ask the question and I will answer it.

  154. Sorry?
  (Sir Brian Moffat) I can answer the question. We made that distribution.

  155. And in the light of current events do you think that it was an appropriate thing to do? The current situation did not appear out of the blue.
  (Sir Brian Moffat) No, it did not. It was to create the merger between Hoogovens and British Steel. It was to be a merger. The Dutch wanted it not on a 70/30 basis, or thereabouts, which is what it would have been without the distribution of cash. They wanted it more on a 60/40 basis and to financially engineer that entailed the distribution to British Steel shareholders of the money, which was paid by way of a special dividend which the company had and which it had earned and was there for that purpose in the event. We wanted to do the merger, it was part of the restructuring of the European steel industry and something that we had made public for many years we wanted to do, to embrace more the European market and to try to ameliorate the situation which we could see developing in the UK.


  156. You say that you have restructured. It was October 1999 when you carried through the formalities, as it were, and did the business, but in retrospect was it the right marriage do you think?
  (Sir Brian Moffat) I think for British Steel undoubtedly. I guess the Dutch, with what has transpired in terms of the UK, will be thinking very hard whether it was the right thing; possibly not. From a British perspective it was exactly the right thing. The only business in flat products that has made money and helped support the UK in this last year has been the Dutch, nothing else has made money.

Mr Cunningham

  157. Moving on to some general issues. Could you tell us something about operational problems? Have you had operational problems?
  (Sir Brian Moffat) Yes, we have had operational problems. It was disclosed in the half year results to June last year, declared in September.

  158. Can you tell us something about it?
  (Sir Brian Moffat) Again it is on the record, it cost about £60 million, there were iron works problems in South Wales, in Teesside and in Ijmuiden. There were plant commissioning problems in South Wales. I think that is about it.

  159. Would that have been a factor in the recent decisions you have taken?
  (Sir Brian Moffat) No, it was a market situation. From time to time in a process industry like ours—it was unusual to come three or four at a time—you get incidents like that. In all heavy process plants you get incidents. It is a market situation, not an operational one.

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