Examination of Witnesses (Questions 180
- 200)
WEDNESDAY 14 FEBRUARY 2001
SIR BRIAN
MOFFAT, MR
ALLAN JOHNSTON
AND MR
DAVID JACKSON
180. Is that the same for your work in the Asia-Pacific
region?
(Sir Brian Moffat) In Asia-Pacific we are basically
in the structural end of the business. As you know, three years
ago that business was booming, but as a result of the down-turn
in the Far East it is now just struggling to build itself back
up again. So it is almost a developing market scene once more.
We hope it continues that way.
Mr Cunningham
181. Can you say something about energy costs,
because certainly some of your competitors in Europe have lower
energy costs than in this country? Was that a factor? Can you
say something about that?
(Sir Brian Moffat) Yes. In terms of the DTI, we have
talked to Stephen Byers about energy on several occasions, not
least in December and at least two years before that. Currently
electricity costs in this country are about 30 per cent—just
to make the point you have made—in excess of that of our
competitors in Germany and France. Gas costs have also increased
quite significantly to the tune of about £40 million a year.
Having said that, gas costs have increased worldwide and I cannot
give you the comparator in terms of where we stand today vis-a-vis
the French and Germans. I cannot remember, but it is not as significant
as in electricity.
182. Is that significant in relation to the
decisions you have had to take? Would that be a factor?
(Sir Brian Moffat) No, it would not be a factor because
most of the electricity we consume, that we buy in—because
we manufacture our own as well in the integrated plants—is
to do with our electric arc plants. It does not help the on-going
electric arc plants' competitiveness when we are exporting, for
example, engineering steels into Germany and other places like
that competing with domestic producers. But it has not fundamentally
eroded their ability to do that, threatened it to that extent,
but if it was to carry on inevitably it would.
183. Is that something you actually raised with
Stephen Byers?
(Sir Brian Moffat) Yes.
184. What was his response?
(Sir Brian Moffat) He was sympathetic to it. The regulator,
I know, was informed by him of it and he continues to write to
him about it. That is all I can say. I do not know how the inner
machine of government works with the regulator.
185. But there has been no response from the
regulator so far?
(Sir Brian Moffat) Not that I am aware of. Not anything
fundamentally. As I say, it is 30 per cent today.
Mr Hoyle
186. Sir Brian, can I take you back to Workington,
a plant in the North East and very important to the people who
work there? Would it be fair to say that the reversal strategy
by Corus towards Workington rail plants shows a lack of understanding
by Corus of the likely future demand and how quickly the market
changes? Why did you get it wrong and why did you not invest in
long rail when everybody else did?
(Sir Brian Moffat) Fortunately, we did not get it
wrong, Railtrack got it wrong. The accident at Hatfield caused
a huge infrastructure project to be created with Railtrack which
gave a very significant load to the Workington mill which otherwise
would be struggling to exist because of the competitive market
scene. That we hope will have a load going forward, from what
we understand, for two or three years, and with the other armoury
we have got with the consulting and design people and our technology
people and with the switches and crossings business, which is
very heavily involved in replacing and up-rating the rail system
owned by Railtrack. That is a total reversal of a market through
an accident.
187. I am sorry but I do not accept your Tefal
attitude, "nothing sticks to you". You did get it wrong.
Other companies invested in the manufacture of long rail, so much
so that you bought the plant in France. You cannot have it both
ways.
(Sir Brian Moffat) It was cheaper to buy the plant
in France.
188. So you did get it wrong?
(Sir Brian Moffat) No. It was cheaper to buy the plant
in France—
189. You said it was Hatfield—
(Sir Brian Moffat) It was cheaper to buy the plant
in France than to extend and invest in Workington.
190.—than support British jobs. What would
the cost have been in Workington to upgrade that plant?
(Sir Brian Moffat) It was not feasible as a proposition
to do it. We were doing it on an island site and it just was not
feasible to do it. There is technology there and there is a market,
but it is a very limited market.
Mr Hoyle: You have done a report into Workington
on the future of long rail, can you make that report available
to us?
Chairman
191. We have got it; we have already got that
one. You said there that Railtrack got it wrong. That is not the
most user-friendly, customer relations approach, is it?
(Sir Brian Moffat) Sorry, I am only repeating what
the result of the inquiry was. I do not relish it but the inquiry
said that the rail system had not been properly maintained. That
was unfortunate and was a tragedy because people were killed.
192. I am sorry, I just was not clear what you
meant when you said Railtrack got it wrong. There is a sense in
which it seems the world is going on around you and everybody
is working against you, and even to those who offer help you say
it is not going to make any difference anyway.
(Sir Brian Moffat) We are as frustrated as you, Mr
Chairman, in trying to find a way through this competitive scene
we are in. We are doing our best to find that way. We hope we
have drawn a line in the sand and that we can move forward and
be competitive and gain the competitive edge we are seeking at
a size commensurate with the market we are in.
193. You think you are going to be able to carry
your British workforce with you after this latest round of cuts?
I think the unions take the view, as I understand it, that they
have kept their promises but you have not kept yours.
(Sir Brian Moffat) We made no promises. Unfortunately,
we cannot guarantee, and we have said this consistently, any of
our plants. Our customer base and our success in operating in
the market is what secures jobs and earns the profits to invest
further in the company to carry on moving forward. It is a very
difficult scene. I have got to make this clear, that it is not
one we relish. I and my colleagues on both sides of me have spent
all of our careers fighting for the success of this industry.
We are not people who give up easily, nor are our workforce. We
just have to keep moving forward in the circumstances that we
find ourselves as best we can. As I say, with the co-operation
of the workforce. You have never heard the management criticise
them, just the reverse.
194. That is what I meant, they have been so
co-operative and what are they getting? Let us face it there have
been two other casualties, the two Chief Executives who either
left or got their books in December. Normally when people leave
in that sort of circumstance one wonders whether there should
not have been more leaving as well. You are still there but they
have gone. Are you now carrying out the closure plan that perhaps
they should have carried out earlier?
(Sir Brian Moffat) Perhaps, yes. I said that at the
time.
195. Do you think that the Board perhaps has
a responsibility since, after all, this situation did not happen
overnight?
(Sir Brian Moffat) Sorry, which situation did not
happen overnight?
196. The position that you are in now.
(Sir Brian Moffat) No, it did not happen overnight.
197. You have told us that it has been a long
process, that you eventually decided to close plants, you have
been talking about it for a long time. Is it perhaps a case of
too much too late now, that if you had done more earlier you might
have been able to avoid some of the worst excesses that we are
now seeing?
(Sir Brian Moffat) I do not think we would have been
able to avoid the worst excesses. The shareholders may say that
we could have avoided the loss situation by tackling it quicker,
that is a criticism we have to stand and account for. In terms
of the Board, and the determination of the management too for
that matter, it has been to drive for a solution to a very, very
difficult and complicated problem and to try also, in the going,
not to keep slicing at it. One of the things that we have tried
to do in response to the unions request is not to keep remorselessly
having to hack, hack, hack, but to give them, as they said, some
feeling for what the line is in the sand, as they put it. Indeed,
some of the jobs we have identified that have to go, are not going
immediately. The closure situations are going this year but a
lot of the jobs that are going are going over the space of three
years as we move on and rationalise, etc.
198. Can I just ask one last point. In relation
to what you might call the exit strategy, you are going to leave
a lot of contaminated sites, are you not?
(Sir Brian Moffat) No.
199. You are not? Will you have a chance to
clean them up? There has been some confusion over this issue.
(Sir Brian Moffat) Thank you, it is a very important
point. If I could just go back to Ravenscraig: when we were having
to close Ravenscraig unfortunately some emotions got the upper
hand and the newspapers got hold of the fact from somebody, from
one area of local government actually, that the Ravenscraig site
was so polluted it would cost £400 million to put right and
it would not be a habitable site at all. I would guess that cost
about four years in terms of persuading people after we had cleared
plant and decontaminated the site to look at it positively for
redevelopment. We want to avoid that, because that was total scaremongering.
Our sites, as you will know, are all registered sites and we have
to abide by the law. When we vacate the sites we have to abide
by the law too and clean them up where necessary. As we disclosed
in the announcement, we reckon of the sites involved that will
cost us of the order of £50 million and we will do it. In
doing it, it will be independently audited, it will be audited
also by the Environment Agency separate from our independent people,
and it will be in a fit state for the use it is supposed to be
put to for the future. It will be part of the initiative that
we want to get involved with in the job creation because some
of the sites, not least, for example, Llanwern is immediately
adjacent to both the retail park and a light industrial park and
some of it, not all of it, could be very, very quickly made available
for redevelopment. The same is the case in some of the other areas
and we will tackle it in that way too, Ebbw Vale not least.
200. Do I take it then that this will be dealt
with as a matter of urgency, it will not be just Wales but it
will be the North East and Middlesbrough?
(Sir Brian Moffat) Wherever we vacate sites our policy
has been the same right the way through. Indeed, we have an environmental
report which is published and available and you will see from
that exactly where we are.
Chairman: Thank you very much, Sir Brian. I
realise that we have taken a bit longer than we had intended but
we are very grateful for your answers. If there are any points
we want to pick up on we will get in touch with you. Thank you.
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