Examination of Witnesses (Questions 140
- 159)
TUESDAY 24 APRIL 2007
DTI
Q140 Mr Binley: Let me put my question
a slightly different way. You are in discussions. You are either
in discussions because you want to do something or you are in
discussions because you want to stop something. Is the emphasis
on the former or the latter? Are Airbus pressing you to put money
in or are you intending to put money in in a more positive manner?
Margaret Hodge: We want to support
the continuation of Airbus within the UK, so we are just engaged
in negotiations. I am sorry I cannot be more specific to you,
but clearly that would be inappropriate at this delicate time.
Mr Binley: I understand the necessity
for retaining commercial information which you would not want
to give out. My concern, however, lies with the willingness of
this Government to support this industry in the most positive
way possible.
Roger Berry: I have just recalled who
had opposed Launch Aid in the past.
Mr Binley: I understand that.
Chairman: We are a Committee, Minister,
of independent-minded people.
Q141 Mr Binley: What I am trying
to find out is whether there are any Treasury restraints on you
or whether the only money you have available to you is the money
within the DTI budget.
Margaret Hodge: We have in principle
expressed pretty positively our support for the development of
the A350 wide-bodied aircraft. We have not yet, it may surprise
you to hear, had a specific request from EADS around the new model
but we are in discussion with them. The only other thing to say
to you, as I am sure the Committee is well aware, is that we have
to be very conscious of the WTO rules and constraints in the support
we choose to give to the development of this new model.
Q142 Mr Binley: I am trying to get
a little bit more from you just one more time. If money was required
and you thought it was right to put it there would you handle
that from your own budget or are the Treasury willing to support
this as well?
Margaret Hodge: These again would
have to be discussions across Government. What we have demonstrated,
I think, in these negotiations with EADS is how very well we do
co-operate across Government.
Q143 Mr Binley: I do accept your
role and I do accept your wish to enhance British industry; it
would be foolish not to do so, so I am not coming from that point
of view. My concern is whether the money would be there if you
wanted to do it and in the way you wanted to do it or whether
the Treasury might put a stop to it. I have not been able to find
that out from you. Can I go on to what sort of mechanism you would
wish to see instead of Launch Aid on the basis that Airbus itself,
I think, wants the money put at the R&T end of the process
rather than in the later stages?
Margaret Hodge: We are discussing
a whole range of options in the way in which one could possibly
provide support, and I think probably Mark, who is leading on
that, might be the best person to answer it.
Mr Russell: I think it is fair
to say that Airbus have been through a great deal over the last
few months and the future financing of Airbus has not been top
of their agenda. Power8 and management changes have been really
what have been using management time. There is no doubt, if you
look out on the financing of Airbus, that there will come a point
where they will need to raise additional capital. They have not
yet provided us with detailed forecasts so we do not precisely
know, but in terms of analysts' reviews of the business it is
pretty clear that they will need some sort of support. It is not
clear whether they may not just be able to raise that money from
shareholders and the capital markets. I think at the moment they
are going through precisely that process of trying to understand
whether they can finance it themselves. If they conclude that
they cannot then I think they will probably have a fuller conversation
with the governments. They have made it very clear that the one
form of support they would like is R&T support.
Q144 Chairman: Which we will be asking
you about in some detail later, of course.
Mr Russell: Yes, of course. In
terms of other sorts of support, such as launch investment or
something equivalent to launch investment, given the WTO issues,
so far they have been non-specific.
Mr Binley: I think that is a nil-nil
draw, Chairman.
Q145 Chairman: This is, of course,
a revised A350. Was there an approach for Launch Aid for the original
version of the A350?
Margaret Hodge: You are going
back quite a long way.
Chairman: Do not worry. I think Mr Russell's
answer is helpful.
Q146 Roger Berry: Minister, my constituents
do work at Filton and know those who supported launch investment
and those who voted against it on a regular basis, but despite
the outcome of the recent negotiations being far better than their
worst fears there are obviously still uncertainties that understandably
those who work at Filton face. My first question is in relation
to the decision of Airbus to seek what they call an industrial
partner for Filton. Did the Government support that decision?
Margaret Hodge: Again, I have
to say the Government had no role in that decision. Our role has
really been to ensure that once the decision has been taken we
facilitate where possible discussions with a whole range of potential
partners so that we secure, again, the long term footprint and
that will be incredibly important for the composite technology
in particular.
Q147 Roger Berry: There clearly was
not an agreed understanding on the basis of what you have just
said, but was there some understanding that an industrial partner
would mean a 50% stake in the site or a 70% stake in the site,
or was there any understanding about the extent of the involvement
of the industrial partner?
Margaret Hodge: No. There was
no discussion. That was a decision taken by EADS as part of the
Power8 deliberations, I suppose.
Q148 Roger Berry: What role is Government
taking in helping to find a partner or partners?
Margaret Hodge: I do not think
we have to look very far to find the sort of people who are likely
to be in the market who could be potential partners. Again, there
are direct discussions at an early stage taking place between
EADS and a number of potential partners. We stand ready to enter
into discussions with whoever is successful in securing future
activity on that site to see how and whether we can support them
in that, but we are not at the negotiating table, if that is what
you are asking me.
Q149 Roger Berry: In part I am, yes,
because in the Department's submission to the Committee, for example,
we are told that the UK Government is actively engaged at ministerial
and official level with Airbus and EADS. I think we are all in
a sense trying to get to grips with how detailed that involvement
is. I used the word "lobbying" earlier, completely out
of order.
Margaret Hodge: I used the word
"negotiation".
Q150 Roger Berry: Exactly. We all
know what we are talking about. Obviously, the question of the
industrial partner is critical to Filton and, of course, as we
all hope, will be incredibly successful for Filton, but can I
ask one further question in relation to the partner? Do you have
a view about whether you prefer that partner to be a UK company
or a non-UK company?
Margaret Hodge: Again, I do not
have a view on that. I strongly want a partner to be established
quickly and I believe that provides further opportunities for
the aerospace industry in the UK, both around developing a real
expertise around composite technology for the aerospace industry,
and, hopefully, securing business from other people. My interest
is in ensuring we have got somebody located there who will want
to stay there and who will use that site to ensure that we really
do develop the expertise that exists elsewhere around the composite
technology of aerospace.
Q151 Roger Berry: Despite the understandable
self-confidence of those who work on the Filton site because of
its great success, clearly talk of a partner raises the issue
about future job prospects at the Filton site, and I wonder if
you have any comment that you could make on that understandable
concern.
Margaret Hodge: Of course, I understand
the concern completely, and uncertainty for anybody who is working
on that site is incredibly difficult and unsettling, which is
why securing a fast determination of those negotiations and securing
a partner as quickly as possible I think is in everybody's interests.
I am an optimist.
Q152 Roger Berry: So am I.
Margaret Hodge: My own view is
that once that partner has been secured the future for the workforce
in Filton is very positive, if we get it right on the composite
technology and if they use the opportunity of that expertise to
secure more customers.
Q153 Mr Hoyle: On composite technology,
were you looking to support Filton or to support the north west?
Margaret Hodge: We are looking
to support composite technology across the UK.
Q154 Mr Hoyle: So you would have
two plants?
Margaret Hodge: Hang on a minute.
We already have four regional centres that are developing what
I call our knowledge transfer networks, developing composite technology.
One is with GKN, one is with Bombardier, one is with Airbus. I
do not know who the fourth is with and I cannot remember, but
there are four of them. We want to see that technology exploited
by all players who have an industrial base in the UK. We want
to develop in particular wing technology and the use of composites
in wing technology. We want to ensure that we are the world leaders
there. Spirit is the other one, I have just been told.
Mr Hoyle: I will take that as a non-answer.
Q155 Judy Mallaber: Are you working
with the company to manage the process of implementing the 1,600
redundancies and helping people to get new jobs?
Margaret Hodge: Again, we stand
ready. The early discussions that I have had with Ian Gray—he
gave evidence here to your Committee—is that half of those
will come from the supply chain and half will come from administrative
jobs within the Airbus organisation itself. I think there will
be a four-year time frame in which to achieve the staff reduction
and Airbus are hoping to do it without any compulsory redundancies,
but we have a well-tried mechanism which brings together the RDAs,
Jobcentre Plus, the Learning and Skills Council and local authorities
to ensure that if there are substantial job losses we take every
action we can to secure a future for the individuals affected.
Q156 Judy Mallaber: So there would
be a programme set up specifically for the company if necessary?
Margaret Hodge: If it is necessary,
but the way in which Iain Gray has so far described the process
of reduction, I am not sure that there will be the sort of MG
Rover-type situation or the Peugeot-type situation where we brought
those parts of the public service together to try and support
individuals affected by sudden redundancies in a large-scale redundancy
situation.
Q157 Judy Mallaber: Is that because
you are assuming it will be a more gradual process?
Margaret Hodge: I am assuming
there will not be any compulsory redundancies. There is a four-year
period over which to do it and nothing that Iain Gray has said
to me so far demonstrates that there will be the sort of impact
that warrants the bringing together of that team.
Q158 Judy Mallaber: You did talk
earlier about the different pressures in relation to the supply
chain, and I think you said that with outsourcing of 50% that
meant new opportunities, and you have touched on that in your
written evidence, but also, obviously, the potential for the redundancies
gives a potential for further job losses in the supply chain as
well. Have you done a specific analysis within the Department
of the likely impact of the restructuring on the supply chain?
Margaret Hodge: We work very closely
through SBAC who lead on the work around the supply chain and
the DTI have supported SBAC in a specific piece of work around
strengthening the supply chain so that it becomes more efficient
and competitive over the longer term. I do not share some of the
pessimism that has been expressed by one or two members of the
Committee. I think there are opportunities for new industrial
growth in the area and in the sector, and therefore what we are
working to do, and we have put £3 million from the DTI into
what we have called Supply Chain 2100 or something like that,
is put money in to support the supply chain in ensuring lean manufacturing
systems and greater efficiency and better productivity, and I
think they seem very positive. The future does look rosy for the
aerospace industry.
Q159 Judy Mallaber: So your expectation
is that this country could snatch up quite a lot of the work from
outsourcing and new development?
Margaret Hodge: Yes. We are coming
to R&T in a minute and yes, if we get all those ingredients
right, and if we focus on the skills—and we have just set
up the National Skills Academy of Manufacturing where the aerospace
industry is taking a leading role, also in the regional structure
that we have got there, and Iain Gray chairs the one in his region,
for example,—I think we have all the potential to really
exploit the huge opportunities that there are in the future. We
have to keep working at it and keep investing in the right things,
but yes, I feel pretty confident.
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