Memorandum submitted by BAE SYSTEMS (SHP
6)
1 Summary
1.1 Clyde shipbuilding has been a discussion
point for much of the last two decades as progressively through
the last century the shipbuilding industry in the UK went into
serious decline and the shipyards on the upper Clyde in Glasgow
were reduced to two at Govan and Scotstoun. This was brought into
sharp focus in 2001 when BAE SYSTEMS Marine announced 1,000 redundancies
in its Clydeside shipyards as part of an overall restructuring
and due to a shortfall of work in the near term.
1.2 The Clyde Shipyards Task Force was consequently
established in July 2001 and conducted a comprehensive review
with Ministers, the company, unions and other interested parties
of the future for shipbuilding on the Clyde.
1.3 The report published January 2002 endorsed
the company's strategy and commended much of the work in hand,
despite the regrettable need to continue with the declared redundancy
programme.
1.4 Since the Report BAE SYSTEMS Marine has continued
to prosecute its declared strategy which aims to deliver a robust
and profitable business and to stabilise employment at its Clydeside
and Barrow shipyards. Key developments include:
— Mitigating action has successfully reduced
the overall number of potential redundancies to around 450, with
further success in delaying the impact from Q4 2001 to Q1 &
Q2 2002 for the most part.
— Signature of the ITP for the first six
T45 destroyers in February 2002 securing the base workload that
forms the cornerstone of the 10 year strategy.
— Implementation of the investment strategy
which has seen £7m of money committed to date in 2002 with
a number of the key facilities completed, or nearing completion.
— Signature of the ALSL contract.
— Successful delay to the impact of the
remaining redundancies from Q4 2001 to Q2 2002.
1.5 Work continues on delivering the next steps
of the strategy, including vigorous bidding activity in the export
markets, supporting the future carrier prime contract organisations
and implementing the various investment and development programmes
that form the backbone of the strategy.
1.6 BAE SYSTEMS Marine is a valuable contributor
to the Scottish economy and is on target to deliver its long-term
strategy to stabilise its position for the foreseeable future.
2 Background
2.1 BAE SYSTEMS operates two shipyards on the
Clyde at Scotstoun and Govan that form an integral part of the
BAE SYSTEMS Marine three yards business (the other being in Barrow-in-Furness).
In July 2001, BAE SYSTEMS announced the redundancy of 1,000 workers
in order to bring its Clyde based workforce to a base figure of
around 2,000. This action resulted in the Clyde Shipyards Task
Force being set up, the membership of which included George Foulkes
MP, Brian Wilson MP, Gordon Jackson MSP, and representatives from
BAE SYSTEMS Marine, Clydeport, trade unions and STUC, employment
service, Glasgow City Council, Scottish Engineering, Scottish
Enterprise Glasgow. Wendy Alexander MSP, Minister for Enterprise,
Transport and Lifelong Learning, chaired the Task Force.
2.2 The Clyde Shipyards Task Force Report published
January 2002 contains full details of the findings, conclusions
and recommendations. A brief summary is included here for information.
2.3 The Taskforce set out to determine:
— How robust was the three yards strategy
of BAE SYSTEMS?
— What changes in the skills mix of the
workforce would be necessary to meet the challenges of the future?
— How might local communities be affected
and what might be done to improve the environment and to offer
support?
— What might be done to reduce the numbers
made redundant compulsorily, and how might any who find themselves
unemployed be assisted back into work or training
2.4 Following a comprehensive six month review
this taskforce reported in January 2002 with a series of conclusions
and recommendations which can be summarised as:
2.5 On Strategy, which seeks to make the
company more competitive in order to win more contracts in a changing
and declining market, the BAE SYSTEMS strategy is considered coherent
and robust. However this view is predicated upon a number of assumptions.
Essentially, the company must strive to win further export orders,
win a significant element of the aircraft carrier design and build
role, and the MoD's programme should be met.
2.6 Key aspects of the strategy include:
— Specialising as a warship and naval auxiliary
shipbuilder with commercial contracts to be pursued that are compatible
with warship capacity demands and where there is a sound business
case;
— Managing the three yards as one business;
— Rationalising the scale of activity in
employee numbers and undertaking a programme of demolition to
cut overhead costs and to implement an associated programme of
investment;
— Identifying Govan as a steelwork centre
of excellence;
— Identifying Scotstoun as a centre of
excellence for exporting, outfitting and designing, and launching
the first Type 45 destroyer; and
— Identifying Barrow as a centre of excellence
for nuclear submarine and Type 45 assembly.
2.7 On Skills the task force concluded
from the comprehensive Training Needs Analysis that, while there
are certain occupations at risk, there are opportunities for redeployment.
There is also concern that skills shortages will become evident
in the medium term since 20 per cent of the current Clyde workforce
is over 56 years old.
2.8 In addition it was concluded that it is essential
for the stability of the workforce to continue to secure flexibility
agreements in order to avoid the debilitating effects of a hire-and-fire
approach, the over use of temporary labour, and low productivity
levels. The company and its workforce were commended on progress
here. Significant advances have already been achieved in cross-skilling
and flexibility, and advantages seem likely to be accrued from
a new approach to the systematised integrated design of products
(Concurrent Engineering).
2.9 On Community Regeneration & Land Use
the task force is of the view that, within the context of the
Structure Plan and the City Plan, opportunities to regenerate
important sites and properties located around the yards should
not be overlooked. There are several major developments and development
proposals on the stocks for the upper Clyde including:
— The digital media campus at Pacific Quay
with proposals for 200,000 square metres of commercial space.
— Braehead, which straddles the Glasgow/Renfrew
boundary and which has already created 3,500 jobs and proposes
a further 9,500 jobs in retail, leisure and commercial space.
— The financial services district of Broomielaw;
and Glasgow Harbour, a major development of housing, commerce,
leisure and retail.
2.10 On Redundancy the constructive and responsible
way in which negotiations have taken place was acknowledged and
commends the work undertaken to mitigate the number of potential
compulsory redundancies to approximately 450 (at time of the report).
The progress made, and measures taken, including outplacement
and employment services were commended.
3 Peripheral Employment and Expenditure
3.1 The peripheral workforce and expenditure
that BAE SYSTEMS Marine supports ie., the local labour market
and economy is also significant.
3.2 In 2001 BAE SYSTEMS Marine spent £25m
on the Clyde in procuring goods and services from local suppliers
and subcontractors. In addition the hotel and incidental expenditure
in 2001 is estimated to be in excess of £1m. In order to
manager the fluctuating labour demands we have employed the services
of many agency and short term contract staff. An indicative average
is shown below:
Clyde
250
Barrow
650
3.3 Additionally Marine brings significant business
to the local economy through both short and long term visitors
to the area.
4 Developments in Q1 2002
4.1 Since the Task Force report was issued in
January the position surrounding the operation of the Clyde based
elements of the BAE SYSTEMS Marine business has continued to develop.
These include:
4.2 Future Strategy and Contracts
The company has been successful in securing key elements
of its strategy in the first quarter of 2002.
4.3 Type 45
The signature in February of the ITP for the first
batch of six T45 destroyers out of a potential complement of 12
was a major step in realising the future strategy of the company.
This contract forms the base workload for the Marine business
in the coming decade.
4.4 Future Carrier (CVF)
Negotiations for the future carrier continue the
Prime Contract level, with the company engaged with both competing
prime organisations. The Clyde operations remain central to the
execution of the Marine CVF strategy. We have just entered into
an agreement with the Clydeport Authority for the lease of a dry
dock facility at Inchgreen in support of our bid to secure shipbuilding
work on the Future Carrier programme.
4.5 Export
BAE SYSTEMS Export Shipbuilding business activities
are continuing at a very busy level, in most regions of the world
market, supported by BAE SYSTEMS Central Marketing team. Active
prospects currently being pursued include three near term opportunities
encompassing a range of products from sophisticated frigates to
complex Offshore Patrol Vessels, and variants of successful existing
BAE SYSTEMS designs. Comprehensive proposals have been submitted
to those Customers of these near term prospects, technical discussions
have taken place, and visits arranged of Customer delegations
to view BAE SYSTEMS products and facilities together with further
discussions of technical and commercial details. Proposals have
also been submitted to other Customers, which are currently under
consideration, which are for technology transfer prospects involving
use of BAE SYSTEMS design and engineering expertise and resources
to support the respective Customers' own warship construction
activities. Efforts are also continuing as planned on a significant
number of medium to long term prospects for high capability warships,
with technical information being exchanged and discussions held
on Customers' requirements, on several of the most attractive
opportunities.
4.5.1 In April the Export Shipbuilding Business
Unit received the Queen's Award for Enterprise in the International
Trade category, in recognition of its outstanding achievement
in the supply of warships to overseas markets.
4.6 ALSL Contract
The build of the first ship has commenced and the
planning and mobilisation effort is well underway.
4.7 Sea Systems Organisation
In January 2002 BAE SYSTEMS PLC announced a restructuring
that placed Marine in the Sea Sector of the organisation. This
structure offers a stronger foothold in the key sea systems markets
than the previous organisation, and offers more synergies with
the associated group companies than the previous Operations Group.
5 Investment Programme
5.1 The investment programme declared in 2001
is in the implementation phase, current status being:
5.2 Scotstoun
Total approved investment £2.2m.
5.3 Work Completed/In Progress
— Medical Centre—Phase II
— Joiners Manufacturing Facility—Centre
of Excellence
— Type 45 Office Accommodation—Phases
I and II
— Consolidation/New Office Accommodation—Customer
Services Solutions (CSS)
— Office Refurbishment—Engineering
Staff
— Resource Centre (Employee Counselling)
— No 1 Dock—New Door
5.4 Work Forecast To Commence End 2002
— Roll-on/Roll-off Quay
— New Access Door/Roadway—Module
Hall
5.5 Govan
Total approved investment £4.8m
5.6 Work Completed/In Progress
— Steelwork Centre of Excellence (including
amenities)—Fabrication Area
— New Medical Centre
— Resource Centre (Employee Counselling)
— New Car Park/Boundary Fencing
— New CCTV Security System
— Main Gatehouse Improvements
5.7 Projects Approved (to commence—May
2002)
— New Programme Office Complex
5.8 Work Forecast To Commence End 2002
— Roll-on/Roll-off Quay
— Refurbishment/Enhancement to 200 Ton
Tower Crane
6 Redundancy
6.1 Since January the company has continued to
strive to mitigate further job losses and has been successful
in delaying the impact of the HR1 announced in July 2001. Against
the original total of 1,000 by April 2002 the number of compulsory
redundancies has been limited to 156 with a further 319 employees
leaving through voluntary redundancy or through other means. A
further 55 applications for voluntary redundancy are currently
being considered. All efforts are being made to mitigate the outstanding
balance of around 400 positions which are being constantly reviewed.
Full details are contained in Annex.
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