Examination of Witnesses (Quesitons 20-39)
MR DAVID LOCKWOOD, MR KEN MUNRO AND MR NIGEL STEWART
29 JANUARY 2008
Q20 Mr Wallace: Are there Type 45s supposedly in the queue somewhere? How many Type 45s had the Government initially planned?
Mr Stewart: Originally it was looking at 12 but the current programme is six; our business is based on six.
Q21 Mr Wallace: What has the Government's position been? Are they pretending there are going to be eight or have they said quite clearly it is only going to be six?
Mr Stewart: At the moment our business case is based on six. I think if the Government choose to order more then that is a matter for the Government, but our workload is currently based on the six that they have on contract with us.
Mr Wallace: Chairman, it would be interesting to get the procurement minister to confirm actually what the Type 45 programme is.
Q22 Chairman: We will be having evidence from the Defence Secretary so we can put these questions to him. I would just like to ask you, you will have heard in the Scottish media speculation that the ship building industry will be dead in two years. Do you think all those headlines in the papers were incorrect?
Mr Stewart: Yes. Assuming that the CVF programme goes ahead to the current schedule—which at the moment we have no reason to believe that it will not do—we will have a very smooth forward load for the next four or five years which is almost unprecedented in the ship building industry. It is very heavily dependent on the carrier.
Q23 Chairman: There is nothing to suggest that there are any barriers or hurdles or possibility of delays?
Mr Stewart: I think we are very aware when we are working with the MoD to look at expenditure to help out with some of the budget issues, but that is re-profiling expenditure within the current programme. All we can go by is the statements that are announced by the Government and again I refer back to the secretary of state announcing or confirming that the orders will go ahead in July and MPs were still confirming last week that the ISDs will still be 2014 and 2016. We have no reason to see that there will be a substantial delay or cancellation.
Q24 Mr Devine: The statements two weeks ago had a really detrimental effect on the morale of the workforce. They felt their jobs were secure; they felt the investment was there; they were looking ahead, as you say, to the unprecedented security for Clyde, certainly into the next decade. I wondered what action you took as an employer to counteract what you are clearly saying was a totally wrong and erroneous statement.
Mr Stewart: Our managing director, Mr Emery, put out a notice to all employees immediately after that speculation to confirm what I have said, that we have no reason to believe there are going to be delays and we are working very positively with the Government to conclude the carrier contract. We have addressed that through notices to the workforce and various team briefings to the workforce.
Q25 Mr Devine: This is a story that was spun on a Sunday in a lot of Sunday newspapers, and it ran on until the Monday, but I have not seen any letters from your company in the papers the following weekend saying that this was basically a load of nonsense. I wondered if there was any thought given to a media strategy to counteract what was clearly erroneous information.
Mr Stewart: We try to work very closely and conduct our dialogue directly with the customer and the MoD and not via the media. Obviously I agree that it is always damaging if conversations and things run like that in the media but all we can do is try to reassure the workforce and work constructively with the Government and the MoD to try and complete the order.
Q26 Mr MacNeil: From the projections you have done of the work coming in how many jobs will the contracts keep in Govan?
Mr Stewart: We look at Govan and Scotstoun as a kind of single facility on the Clyde. At the moment we have approximately 3,300 people and the aircraft carrier will sustain that workforce for approximately the next three or four years.
Q27 Mr MacNeil: What types of jobs are these?
Mr Stewart: Across a whole range really. At the moment we have engineering, drafting skills, all the production skills and integration and into support. It is across the whole range of ship building and integration skills.
Q28 Mr MacNeil: Are these 3000 jobs new jobs at Scotstoun?
Mr Stewart: No. The carrier will sustain jobs but not create additional permanent jobs in our facilities so we are not looking at the carrier to increase the workforce. There will be some areas where we end up with peak loading for a period of six months or a year but we will cover those with sub-contract labour. It will sustain the current workforce but not grow the current workforce.
Q29 Mr Davidson: Can I just clarify the position relating to the Evening Times headline which was, if I remember correctly, "We are sunk. Yard to close in two years." Was that helpful?
Mr Stewart: As I said to your colleague, I think any of those headlines are demotivational to the workforce but there is no reason to understand why the yard will close in two years' time with the aircraft carrier order.
Q30 Mr Davidson: It has been suggested to me that elements of the management were winding up some of the workforce in order to put pressure on the Government to give additional orders. How could that come about? BAE have form in terms of having done this sort of thing in the past and therefore it was a logical assumption for members of Parliament and others to make that you were at it again. Can you clarify whether or not there was any evidence that that was in fact being done because you must be aware that this constant crying wolf underlines the credibility of the company and of the yard?
Mr Stewart: I agree and to the best of my knowledge as a management team we did nothing to ask the workforce or incite the workforce to make comments. We have a very open and constructive relationship with the trade unions where we share both positive and current issues and issues going forward. Sometimes the trade unions can make comments and statements which they are entitled to do but that is not coming from the management within the business.
Q31 Mr Wallace: Is it not a fact that the decline in the size of the Royal Navy and the procurement of the MoD that there is no fat in any of your order books? If you lose one project any yard in the United Kingdom would suffer unless you fill it pretty quickly either with an export or an alternative domestic order or it is plugged with a re-fit or something. The defence spending and the size of our fleet is so thin now that the viability is always going to be delicate for all your ship building yards.
Mr Stewart: That is very much why we are working with the Government. We are looking at consolidation within the industry.
Q32 Mr Wallace: Can you confirm that?
Mr Stewart: When we have prime contracts there are few of them but they are very large when they come.
Q33 Mr Wallace: Do you have any surplus on your order books.
Mr Stewart: No.
Q34 Chairman: It is a matter of concern to everybody in Scotland that we should not score political points on the future of ship building industry and workforce, but can you confirm now that at any time there were no concerns on the company's part that the yard is going to be shut in two years' time, and the company did not give any negative signals to the workforce and whatever was printed in the media those fears were unfounded.
Mr Stewart: We do not see any real issue and there is certainly nothing as a management team where we are running any options or even considering any options of the yard closing in two years' time. I can confirm that. To the best of my knowledge I can confirm that as a management team we were not asking anyone else to make those statements.
Q35 Mr MacNeil: Ten days ago in the Glasgow Herald the shipyard unions were worried had grave concerns of Royal Navy contracts being placed overseas. How do you view their placing of such contracts overseas?
Mr Stewart: The defence industrial strategy changed the policy to say not all warships or their hulls have to be constructed on shore but I think what is important is that under the DIS and with the relationship we have with the Government we need to sustain orders and the order book for an appropriate level of sovereign capability. During the peak of the CVF programme over the next two or three years the UK is at capacity; we would not have the capacity to build more ships in that period. However, after the CVF programme then I think it is really important that we make sure that forward orders will certainly be considered to make sure we can sustain the sovereign capability in the UK.
Q36 Mr MacNeil: Would you be interested in the Ministry of Defence having a more flexible approach and maybe delay these orders a while?
Mr Stewart: Which orders do you mean?
Q37 Mr MacNeil: I am talking about the naval oil tankers.
Mr Stewart: The MARS tankers?
Q38 Mr MacNeil: Yes.
Mr Stewart: I think it depends. There are certain requirements where the Government will need fleet tankers to meet their capability and requirements. I think all we have to consider is a flexible approach to any programme to make sure that if, at the point where we need orders to sustain sovereign capability, that is being taken into consideration. Also we have to be realistic if there is a requirement from the Government and the defence forces, and we are at peak capacity in the industry, then we need to look at options.
Q39 David Mundell: The Future Aircraft Carrier project will be delivered by an alliance of companies. I wonder if you could set out for us what the alliance approach for this project means in practice?
Mr Munro: A minute ago Nigel referred to the defence industrial strategy and I believe the idea of the alliancing in partnership within the CVF project is to enable us as a ship building and ship support industry to put ourselves in a good position as we go forward and carry on past CVF. It gives us an opportunity to collaborate not only in terms of work share but also in terms of resource share in a cross-skilling and an opportunity to emerge with a much more flexible and capable workforce as we carry on in the ship building, whatever that ship building programme is, beyond CVF.
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