Examination of Witnesses (Questions 120
- 139)
TUESDAY 24 APRIL 2007
DTI
Q120 Chairman: I do not recognise
Mr Hoyle's description of the reasons for the delay; let me put
it like that. We will discuss that privately later. Can I test
you on this question of the undertakings before I hand on to the
next subject? You did put political pressure on the company to
secure a favourable outcome. You have therefore done what you
asked EADS and Airbus not to do, not to take political decisions
but to take commercial decisions. You have therefore broken your
side of the bargain, have you not?
Margaret Hodge: I think we have
a strategic relationship with EADS and Airbus and it is the job
of Government and ministers to ensure that we protect and promote
the UK interest in that strategic relationship. That is the job
we undertook. I think we have been very successful in it, but
in terms of going back to the question that I was just asked:
did we interfere in the commercial decisions taken by EADS which
informed their Power8 programme, no, because we think it is absolutely
right that the company itself should take those commercial decisions.
Of course we have got a strategic relationship and, of course,
if there is government investment and government support that
has to be part of the equation in that strategic relationship.
Q121 Chairman: I think I take that
as a yes but I am not quite sure. I will read what you have said.
Margaret Hodge: I quarrel a little
bit with the words "political pressure". I think it
is absolutely appropriate that Government in terms of the industrial
footprint, the jobs and the investment that is put in from Government,
has that relationship with the company and clearly that means
that you negotiate with them.
Q122 Chairman: Roger Berry mouthed
the word "lobbying" at me. You lobbied pretty effectively
in the UK courts.
Margaret Hodge: We argued very
strongly for the UK interest, of course.
Roger Berry: Quite right too.
Q123 Mr Wright: Minister, you mentioned
earlier about the work share and obviously the outcome was good
for Britain, but what specific criteria did you use to define
that successful outcome for the UK in terms of the work share
for the A350 XWB?
Margaret Hodge: We were always
anxious to secure a sufficient part of the wing development and
assembly which would give us a platform to ensure both a proper
work share of the A350 plane when that comes on and the next generation
of A320s, so getting the rear spar, the front spar and the trailing
edge was really crucial to us. Securing for the UK that we become
the global wing centre of excellence for both wing and pylons
was absolutely brilliant, because that means that much of the
expertise rests here, and of course we have the supervisory role
of ensuring all parts of wing production and development and the
integration of all those processes are overseen by the UK, so
it is a good result.
Q124 Mr Wright: What you are saying
then is that what you went in to get you actually got?
Margaret Hodge: Yes, I think we
did well. As for the argument about the actual components that
we were interested in, clearly that developed through the negotiation
but the final package is good for the UK and gives us a good platform
from which to move forward.
Q125 Mr Wright: In regard to the
percentage, the 20% of the work share that we have got for the
UK from the company, how do we verify what they say it actually
is? How do we measure the 20%?
Margaret Hodge: I think it is
in value. I am looking at Malcolm.
Mr Scott: Yes.
Margaret Hodge: It is in value,
but if you look at the A380, we reckon we have got far more. We
reckon we have got 70%, is it?
Mr Scott: It is not 70%, no.
Margaret Hodge: We have got a
much higher percentage because we have got the Rolls Royce engines,
of course, the Trent 600 and 900, so that gives us a much higher
percentage on that one. It is about 40% on that, but it is in
value. I think, to be fair, EADS have always said we would get
20% of the work share. What we were anxious to ensure was that
it was not the work share of current models but a basis which
would ensure work share of proposed and future models, and we
have got to look at the longer term. That is what we were really
anxious to do.
Q126 Mr Wright: You mentioned the
factors that we are at the top of wing technology, and we are
always saying that, but quite clearly a lot of the equipment work
went to Bremen in Germany. What case did you make to Airbus for
this wing equipping work being allocated to the UK? Did you believe
that the economic rationale for it to go to Bremen was a good
one?
Margaret Hodge: This is why, when
you asked me did we get precisely the bits that we wanted, I said
there was a negotiation over what would be manufactured and developed
here in the UK. Just to be clear on wing equipping, we do do wing
equipping here. We do it for the A320, the A400M and we are doing
it for the A380. What we are not going to be doing it for is the
A350. That was always going to be located in Bremen. There was
a discussion as to whether that should be transferred to the UK
and at the end when they decided on work share they took the decision
in EADS to leave that in Bremen, so the equipping is there but
the overall supervision and responsibility for wing development
rests with us, so whatever happens in Bremen we will have the
supervisory role around that work.
Q127 Mr Wright: What do you consider
the economic rationale was, bearing in mind that we had done the
wing equipping for previous models? Surely it would have been
an economic rationale for that to be transferred here because
we had the plant, the skills and the manufacturing capabilities
in place?
Margaret Hodge: Malcolm knows
the detail on that one.
Mr Scott: The only point I was
going to make was that in terms of doing wing equipping on existing
planes we do not actually do wing equipping on the present A330
or A340, so in fact there is no precedent in that sort of aircraft
for us to do the wing equipping.
Q128 Mr Wright: So that equipping
is already done in Bremen?
Mr Scott: The equipping on the
A330 and the A340 is done in Bremen. We do the equipping on the
A320 and the A380.
Q129 Mr Wright: So was that the economic
rationale for it to continue in Bremen rather than being transferred
into the UK where we already have the technology?
Mr Scott: I am sure that was part
of the rationale.
Q130 Mr Wright: And that would have
been in the whole package for the 20% as opposed to Germany and
France 35%, for instance?
Mr Scott: I believe so, yes, it
would have been.
Q131 Mr Hoyle: I think Mr Scott would
agree it is a major blow to have lost this work back to Bremen
when we took it from them. It would have been better to keep it
in the UK. We can all agree on that surely?
Margaret Hodge: We did not lose
it. We never lost it; we would have gained it.
Q132 Mr Hoyle: Let me put it the
other way then. We were already doing some work. Parts of the
original aircraft were done in Bremen. We then took that work
to the UK.
Margaret Hodge: No.
Q133 Mr Hoyle: So what you are saying
is that we have never done it?
Margaret Hodge: The wing equipping
for those models has been done in Bremen, but there was some discussion
during the negotiations as to whether that should be transferred
to the UK. At the end of the day the decision was taken not to
transfer it, but in the context of the whole package we were content
with that.
Q134 Mr Hoyle: I am sorry; you may
be content to let work go abroad. I am not content and I do not
think it is good enough for the Minister to say she is content.
In fact, I find it a disastrous answer. Now then, we will try
again a little bit. I will say it slowly. Some of the work was
done in Bremen recently. For future generation aircraft we took
all the work. For this next generation of aircraft some of that
work is going to be done in Bremen, so there is a loss to the
UK. If we had had all the work it would have been more beneficial
to the UK than splitting the work between Bremen and the UK. I
think we can all agree on that.
Margaret Hodge: Hang on a minute
because I just want to get it clear. We do the wing equipping
for the A320, the A400M and the A380. We have never done the wing
equipping on the A330 family and the A340 family, and the A350
wing equipping will therefore be done in Bremen. Would it have
been an advantage to the UK to secure additional work? Yes, of
course it would, but in the context of the package as a whole
I think we got a fair allocation of the work which gives us that
security for a long term future for the aerospace industry.
Q135 Mr Wright: Coming back to my
original question about the criteria that were laid down, as I
understand it there was speculation before the Power8 discussions
that we would seek to get the wing equipping transferred over
here. Is that correct?
Margaret Hodge: Yes, that was
part of the negotiations.
Q136 Mr Wright: And we failed to
get that because of the 20%?
Margaret Hodge: But we got the
rear spar and the front spar and the trailing edge, so I think
we did fine.
Q137 Chairman: And composite technology
in particular?
Margaret Hodge: And composite
technology.
Q138 Mr Binley: Minister, do you
intend to provide Launch Aid support for the A350 XWB?
Margaret Hodge: We are clearly
in discussion with EADS and Airbus on the sort of support that
might be required with developing the new model.
Q139 Mr Binley: Minister, the question
was, do you intend? I recognise you are in the discussions but
is it your intention to provide Launch Aid support for the A350?
Margaret Hodge: I am sorry. I
do not think I can tell you more, with the greatest respect, than
I have said in that statement. We are in negotiation and discussion.
We have a good record of supporting Airbus in the development
of all its new models. We have put £1.2 billion of Launch
Aid in and secured a return so far of £1.3 billion for that
£1.2 billion investment, and we are in discussion with Airbus,
as are the other countries, around what further support they require.
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