Examination of Witnesses (Questions 26-40)
ALAN CALCUTT,
MICHAEL LEAHY,
TERRY PYE,
STEVE READMAN,
KEVIN ROWAN
AND GEOFF
WATERFIELD
15 JANUARY 2010
Q26 Chairman: May I ask for
order? Thank you—I always wanted to be Speaker, and this
is my only chance. We will now start the second session. Frankly,
we will give this as much time as it needs and will never push
anyone against the clock, but we do need to start again. We will
take evidence from our trade union colleagues. They are, across
the piece, from: Community, the main trade union in Corus; GMB;
the TUC, and Unite. Once again, we are very grateful to our colleagues
for being here. It is, for us, a very important session. Some
of you have come from London, including a very old friend of mine,
Mick Leahy, the general secretary of Community. We will civilise
him, because he is Welsh—you have failed to civilise me
so far, but we'll have a go with him. Others have come from around
the country. It is critically important that we hear from you
this morning. Although the TUC and our union leaders are important,
to be dead straight with everyone, we will be looking especially
to Geoff Waterfield. He is on the ground in the company and is
working extremely hard, and he knows how the work force are feeling.
I believe Steve Readman is in exactly the same position. They
are facing this day in, day out, so they are very important to
us and we are really keen to hear what they have to say. I would
like to start as I started with previous witnesses, by asking
the trade unions and the TUC how and in what way have they been
engaged by Tata Corus in the discussions that have obviously taken
place about Redcar steel. I do not know which one of you wishes
to pick up the baton first, so perhaps Kevin Rowan will start.
Kevin Rowan: Thanks very much,
Dari. May I first say how very pleased we are that the Select
Committee is focusing on Corus as a major issue? Clearly, this
is a huge regional and national issue, as well as a very local
one to the Tees valley. So we very much welcome the Committee
hearing today, and the actions that you and your colleagues have
taken. Certainly, I thank you for giving the trade unions the
opportunity to present our evidence to you today. Before I introduce
Geoff, who led us in the discussions with Tata, to respond directly
to your question, what we want to say to the Committee by way
of introductory remarks is that we're very keen, in this short
time we have, to concentrate on our primary goal—which I
understand is your primary goal, too—to make sure that we
encourage whatever interventions we can from Tata, other private
organisations, or indeed the Government, to ensure that TCP keeps
producing steel. That's the ultimate goal of everyone on each
side of this panel discussion. We are, of course, happy to discuss
some of the broader issues around investment in the Tees valley
and the impact there, regionally and on the national economy.
However, primarily, we are keen to focus on that hugely important
and urgent concern of keeping TCP Tata operating and making steel
here in Redcar.
Geoff Waterfield: Could you repeat
the question a bit more specifically, please, Dari?
Q27 Chairman: For all of us,
listening to your evidence, we want to understand that Tata Corus
has a corporate responsibility, within which it has done everything
with the trade unions not just to communicate where it is coming
from, but where it would like to be. The question to you, Geoff,
was asked because we get a statement from some saying that Tata
doesn't want this sale to take place and that it wants a holding
in Redcar steel, and from others that if it doesn't have effective
partners, this company is going nowhere and will be mothballed.
We want to hear from you. As far as we're concerned, you're the
most important people. How has the company worked with and spoken
to you about the creative opportunities or other, different ones
there could be to ensure the long-term future?
Geoff Waterfield: Clearly, Tata
hasn't done that. We have, on many levels, had a number of discussions
with Tata over a period of time. As you stated in the first session,
Tata appeared to be hiding behind confidentiality agreements.
We are not involved in any talks that the company has told us
it has been having with other companies, which is concerning for
our ability in the process. Since last year, we've seen a change
with the CEO from Philippe Varin to Kirby Adams, which, to some
degree, you could argue was a bit of a cultural change within
the company itself, and a change in direction. Kirby Adams is
now on the board of directors for Tata, where Philippe Varin was
CEO of Corus, which is quite different. We have tried to engage
with the company. Quite clearly, we were very successful at a
local level to come up with imaginative ideas to sustain steelmaking
on Teesside, and I have to thank John Bolton and his team for
that, because they have been very open and honest in their dealings
with the trade unions and tried hard with us. That said, the sticking
point has been there from day one with Tata and its executive
board. Kirby Adams has been very reluctant to meet with us at
any length. In the two or three meetings that we've had, he has
only ever stayed for half the meeting and then disappears—he
comes in, makes a statement of fact, and walks out. We've never
had an opportunity to sit down with the company—Tata—or
with any prospective buyers around the same table and discuss
any long-term possibilities. From the point of view of the national
officers and the local trade unions—who I am sure will back
us up—we are full of ideas that we want to share with the
Government, Tata and any prospective new buyers. However, it seems
to be a little bit of a problem to get all these people around
the same table. When we are talking about community meltdown and
devastation on a wide scale—a situation we have now—I
do not think it is acceptable. It is pretty amazing that a company
like Tata, which is a global operation and sets great store by
its corporate and social responsibility and how it treats people,
has employed an American CEO who cannot give us the good grace
of a full meeting. I understand that he does not even want to
accept turning up at the Commons' Select Committee on Tuesday.
So, you can see from our point of view and the conduct of Mr Adams
how hard it has been for us to make any headway. It really is
not from a lack of effort by the likes of Michael Leahy and ourselves
at local level to progress meaningful talks and headway. We have
got a firm belief, and a catalogue of evidence to prove the viability
of the Teesside plant. Kirby Adams himself has indicated quite
clearly the amount of money that the consortium made through a
very short process. On that, I have to say that he called them
culpable, but he and Corus Tata are just as culpable, because
they shared in the profit. It was not a four-way split, it was
a five-way split. Not only that, but we have heard recently that
Tata would like to keep Southbank Coke Ovens, a clear indication
again of part of our facility making large-scale profits. We have
seen the rise of steel globally, now going to $500 FOB, coming
out of Brazil; the price of slab is massively on the increase,
as is coil. So, the indicators are there, Dari. However, the one
person we were hoping could bring it all together does not want
to be there. The question for the Select Committee is to scrutinise
Kirby Adams's conduct and what his agenda is.
Chairman: Thank you very much, that was
really valuable. Steve, would you like to add to that?
Steve Readman: Yes, there is something
in what Geoff said. On a local basis, as a local rep. on the Teesside
works' multi-union, we have put in a lot of work. As Geoff said,
it has been quite an open and honest debate that we have had with
the local management, but from the announcement in December, when
the task team was set up after the national steel co-ordinating
committee, or even at a meeting last week with a company representative,
Phil Dryden, there has still been some difficulty in understanding
where the most recent negotiations have broken down. Again, it
is all about confidentiality and it seems a very difficult task
for us to understand where the most recent local discussions have
failed. Until we can get a handle on that and find out what it
is exactly we are asking people for—whether we are asking
Tata to fulfil its social responsibility, or what we ask Government—we
need to understand where the deal broke down. At the current date,
it is getting very difficult to get any concrete information from
Corus on a national basis.
Chairman: Did everyone hear that? Can
you hear at the back? That is great, okay, that is smashing. Thank
you very much, Steve. Mick Leahy.
Michael Leahy: First, I don't
want to be long-winded, but you have to understand the history
of Teesside and where Corus currently is. In 2001 it made a decision
to close the mill. The union opposed that closure because it is
like having half a plant. You have got slab, but no means of rolling
it, which is crazy. The plan at that stage was that Corus would
supplement the slab production in TCP and actually get it rolled
in Llanwern. We were opposed to that, because it didn't make any
business sense. Then Sir Brian Moffat insisted that that was going
to happen and, actually, TCP did a magnificent job in making that
system work. Prior to the recent announcement, because of the
recession, certain blast furnaces were shut down—in Scunthorpe,
and in Port Talbot no. 4 furnace was also taken off heat, because
there wasn't an order book. The Marcegaglia/Dongkuk purchase,
which was rumoured to be about £600 million, was taken off
the table simply because of the credit crunch. Steel prices had
plummeted and you wouldn't buy a plant for £600 million in
those circumstances. We understand from Marcegaglia that it offered
Corus 6 months interregnum while it looks for alternatives. Corus's
response was, "You have two alternatives and the only one
that we can see is to continue with the current agreement or else
we'll sue you." That involved no discussion at all and Corus
essentially just walked away. That is what they told Vera and
me when we went to Italy. Since then, we have been looking at
alternatives. The fact is that, at that time, there was an increase
in internal consumption for Corus. However, it made a decision
to light blast furnace 4 in Port Talbot. What it could have done,
if it was really serious about continuing production and looking
for an interim measure for TCP, was use the route that we proved
could be used in 2001 onwards and use TCP to produce for the internal
market that it was short of within Corus itself, rather than going
for an external off-taker or purchaser. It did not; it lit the
furnace. We said to Corus at the time, "Why are you lighting
this furnace? Why aren't you using TCP, bearing in mind it hasn't
got an order book, to supply your internal market?" We know
the answer, don't we? It had already made a decision. Did it genuinely
want a purchaser for the business? Did it want a competitor? In
2001, when Llanwern blast furnace was shut down, we put a deal
together with Caparo and we were willing to purchase Llanwern.
Corus refused. I think it is a fact that it is concerned about
the internal market and competition. Does it really want to sell
the business at time? You need to ask it that question. Why did
it put blast furnace 4 on? We estimate that, in relation to coke
ovens over the next 3 years, the price of raw materials will increase
by 30 to 40%. Basically, the reason for that is that China is
producing at a significant rate. Therefore, because they haven't
got the raw materials—the iron or the coke—indigenously,
the price of raw materials is going through the roof. The truth
is that keeping the coke ovens going will, in our estimation,
probably save Corus around £750 million. The fact of the
matter is that, in terms of coking coal at the moment, the South
Bank Coke Ovens are ancient, but it would cost far more for Corus
to import coal, even at the cheapest price that it can get, than
to produce it through antiquated equipment on the south bank.
You have to ask yourself whether Corus really, commercially, wants
the purchaser, and whether it can make more money with the plant
shut down simply producing coke. It has a shortage of coke within
its own consumption—it can't produce sufficient coke, so
it would have to import it. From a purely economic and commercial
point of view, without any regard for the consequences if it goes
through with the closure, it will make some money. Sir Brian Moffat
used to say to me, "Michael, I'm not interested in making
steel. I'm in the business of making money." We believe that
this is another case of short-sightedness and industrial vandalism,
basically. I joined the steel industry 44 years ago. Corus, or
British Steel, was nationalised in 1967. There were 260,000 people
employed. Prior to the recession, there were 22,000 employed.
It will now go down—not taking Teesside into account—to
17,000. As you say, we have made £1 billion of cost savings.
In the last 20 years, we have had 10% year-on-year productivity,
which is three times the industrial average. What do they want
us to do? It has been starved of investment, but my point is simply
this. We have been saying to our Labour Government, and now we
have industrial activism, "You have to make things to create
wealth". I don't think that we can stand idly by and allow
a company like Tata Corus to shut down and do this piece of industrial
vandalism, which is what it is all about. All they are concerned
about is that they have covenants that they have to meet on their
earnings before interest, taxes, depreciation and amortisation.
I cannot tell you the numbers, because I am bound. They have given
us the numbers, but I cannot tell you as it's commercially sensitive.
However, in the first six months, there was a number that they
had to return on EBITDA. For the next six months, it is twice
that. If they don't reach it, they will have to renegotiate the
covenants, which means the interest rates obviously might be increased.
However, the Government could be of some help in that regard,
because the bank involved is RBS, which is owned by the Government.
Chairman: Yes, it is. Absolutely.
Michael Leahy: Whether that's
a red herring or not, I don't know, but they have to come to terms
with the covenants. So, as far as we are concerned, this is lunacy.
Teesside is a producer of steel that is, in relative terms, extremely
efficient and has low emissions. This steel will be produced somewhere
around the world, probably in a country that will emit more than
Teesside did. There will be an increase of about 5.2 million tonnes
of carbon leakage as a consequence. So none of this adds up. We
have the same problem as you; Kirby Adams does not want to meet
us. He does not want to give us an explanation. We have set up
a taskforce. Because of the bad weather, we said that we wanted
to look at all the alternatives that were available. Of course,
the question is this; does Corus really want to sell the business?
Chairman: Absolutely. That is the key
question.
Michael Leahy: They're asking
a price that no steel producer will pay. So they're right to say,
I think, "Well, we're prepared to sell the business,"
but if they want to sell it at a price that no sensible producer
is willing to pay—
Chairman: There'd be no buyers.
Michael Leahy: Indeed. As Geoff
has said, we do not know who broke off the negotiations, because
it is covered by commercial confidentiality. Was it Corus, because
they saw an opportunity, in terms of the increasing price of raw
materials, to make a buck, or was it the potential purchasers?
We don't know and they're not going to tell us, and I'll be surprised
if they tell you. One final point that I want to make is that
as you know, Madam Chair, we in the steel industry believe in
the force of argument and not the argument of force. However,
we are coming rapidly to the conclusion—and we have said
this to Corus over other matters as well, such as taking our pensions
away from us and not paying bonuses when it was contractually
obliged to do so—that we might have to seek an industrial
solution to this problem. We are not going, and I speak on behalf
of all the unions, to stand idly by and watch what remains of
an efficient steel industry be vandalised.
Q28 Chairman: Do you want
to take us down the path of what you mean by an industrial—
Michael Leahy: An industrial solution.
We may start balloting our members in Corus for industrial action
to save Teesside.
Terry Pye: This company is not
a lame duck. This is not the situation that companies find themselves
in when they make products that are no longer attractive to the
outside world. We have got to remember that when the consortium
broke down in May time, this plant was under threat of closure
in August. But because the consortium walked away, it freed Corus
to be able to talk to other interested people who wanted to purchase
the steel. Geoff and colleagues from the other unions at plant
level worked alongside management in that process and they were
very, very successful. Orders came flooding in from all over the
world—from Canada, from America. That got us in the position
where August came and we were able to lift the HR1 and carry on
production. Not one single person was made redundant. Come September,
same scenario. The HR1 was still lifted and during these months,
the company was at least breaking even—in fact, it was making
a profit. Like Mr Micawber, we hoped that something would turn
up. There was total surprise on 4 December when we got a telephone
call from our own reps, telling us that Kirby Adams was in the
plant announcing the mothballing of the plant. That is a very
discourteous thing to do. Normally, in conjunction with the line
reps, you would tell the national officers of the particular plants.
Reps are going to phone in and say, "Can you give us some
advice on this, some advice on that?" You don't even know
what's been done. It was the first act of discourtesy, and I'm
not surprised when you made the announcement on Tuesday that he
reacted that way, because that seems to be the culture of Kirby
Adams. It's very distressing because you can't actually get him
to sit in a meeting long enough to answer the questions that you
need answering. We don't even know—we surmised that we know—the
names, but we have not officially been told who they were talking
to about a possible sale. We know that there were two companies,
but we don't know who they were. We don't know what caused the
difficulty of the breakdown or who walked away from the discussions.
Was it them? We don't know why they walked away. All that we do
know is that the plant is not a lame duck. It's got products;
it can make products that are of interest to people outside and
who want to purchase that steel. It would be a crying shame if
we allowed this plant to shut and, as Michael said, we will take
whatever means necessary to make sure that that doesn't happen,
but we want to do it by sensible dialogue—that's what we
want to do. Tell us the size of the problem. There must be numerous
occasions when we have managed to get Kirby to sit still long
enough. We've said, "Let's make an approach to the Government.
Tell us what the problem is and let's jointly go together—because
this is a partnership—to the Government and make representations
and see what they can do to help." He has nodded and said
the right words, and we never hear anything again. I made a point
to Phil Dryden at the European works council in front of everybody
saying, "You've got a commitment to do everything necessary
to save this plant. You are the employer." We should be engaging
in tripartite talks with the Government to see where assistance
could be given, whether it be, as we discussed this morning, an
employment subsidy for a short period of time while we get over
the problem or whatever. If there is a will there is a way. The
question is, is there a will?
Chairman: I think we're getting the point
loud and clear. Alan, you are the last person, but you are certainly
not the least.
Alan Calcutt: There's a lot of
talk about mothballing the plant, which would be a short-term
thing until a buyer can be found. More importantly, you have to
look at the work force. Mothballing the work force would be a
low-cost, effective way of retaining skills, if you look at the
Tees valley as a whole. Let us call Tata what it is: it is a foreign
company investing in the UK, and it is so easy for foreign companies
to move out of the UK. We have seen five chemical companies exit,
and a loss of skills. We have seen the SeaDragon project, with
the potential of 1,000 jobs, exported to the far east because
it is easier to get rid of British skills. We must retain those
skills, and this Government have to fund that retention. It is
far easier to fund the Corus wage bill in the short to medium
term than to pay out benefits in this economy.
Geoff Waterfield: Just to supplement
Alan, a lot of people talk about mothballing the work force until
we find a buyer and many other things, but there is a red herring
that tends to go around a lot. Lord Mandelson himself said that
we cannot get customers. However, the reality is that we have
always been able to find customers. From the very first announcement,
we went and found them. We cut our cloth accordingly and cut our
costs—we have always found the customers. That is a herring
because there are people who want to buy us. The real question
is, why have we not brokered a deal yet? We had an opportunity
in February with Marcegaglia and Dongkuk, but the company did
not follow it through—there was no deal. Again, we were
told that within recent weeks the company was very close to a
deal but that it did not go through. There are customers to buy
a profitable, viable site. As Terry said, if we were not profitable,
if we were not viable, we might be able to understand this a little
bit, but there are people there. The Government have to ask them,
"What assistance can we give to help you to broker a deal?"
There are customers and buyers, there is just not a willingness
on the part of Corus. Tata's real agenda needs to be found out.
Are we just being used as a coke processor? We have seen some
evidence of that in the announcement made with South Bank. This
Select Committee has to say, "Hang on a minute. It will be
the Exchequer that picks up the massive bill." I heard in
session one some of the numbers, but they were nowhere near the
truth. Times them by two or three—those are the real costs
to the Tees valley and the Government. I pay for my wife and child,
and I also pay taxes and national insurance, but if I am unemployed,
you will pay for me, my wife and my kids. The massive cost of
meltdown in this region is not worth it. You and this Committee
have to say to the Government, "Get in there. Get talking
to Kirby Adams." It is not acceptable that one man can send
Teesside down the drain.
Q29 Chairman: May I ask a
question before my colleagues come in? This has been quite a long
session. You have addressed issues that you think are critical,
and you are right to address them. We have been given advice,
but never formally. I am now going to put it on the record: the
formal advice is that you have to speak to Tata India; you cannot
keep talking through an intermediary. Would you say that that
is the approach that the Government should be taking?
Geoff Waterfield: We're at the
stage now where Gordon Brown needs to be speaking to Ratan Tata
to see what is going on here, because we are not talking small
numbers. In reality, Kirby Adams should not be an intermediary.
He is on the Tata executive board. There are general secretaries
here who do this day in and day out who are being shut out by
Kirby Adams. The question has to be asked of Ratan Tata, if it
is going to do dealings in the future, "Have you got the
right man in the job?", because he potentially is jeopardising
steel-making throughout the UK.
Q30 Chairman: May I ask a
further question? I will shut up then, as colleagues are desperate
to get in. We have seen the evidence about the new company, or
the company that Tata has expanded in India, the Jamshedpur one.
You're a steelman, so is it your belief that in expanding that
company, it is deliberately and determinedly putting work into
India that we were doing previously?
Michael Leahy: No. We've talked
and know the industry quite well. It is a fact that steel production
is now increasing. The raw materials thing is an aside, because
of China, but the fact is there is a big market in Asia. We talk
ourselves to potential purchasers, who say they could take at
least 1 million to 2 million tonnes. We understand that one purchaser
or potential purchaser was going to take 50%. Corus was going
to take 20%. We only need a third. The question really is whether
Corus wants a solution. Does it really want a solution or is it
that it wants a solution on its terms, which quite frankly, Madam
Chair, I don't think are achievable? You can say, "Well,
we'll sell it, but this is the price," but if that price
is way up there, technically you are telling the truth when you
say, "Yes, we'll sell it", but it is at a price that
nobody would purchase it at.
Geoff Waterfield: There's a couple
of things there, Madam Chair. If you were to make long products
for the next 200 years within India, you probably wouldn't make
a dent in what they need. India in some respects is a little bit
like China: it has massive internal growth—a bit of an industrial
revolution, if you will. It's not really that. They are building
in Jamshedpur and Orissa. We've seen the way they've dealt with
the indigenous population of the hinterland of Orissa and some
of the dealings that they've had with the Tetley tea growers just
recently, so it's questionable about their morals and ethics globally,
not just what they're doing here on Teesside. Kirby Adams, again,
has to think about what he's saying, inasmuch as he's saying there's
over-capacity in Europe, yet we're turning on blast furnaces and
we're selling in Europe. What that statement has to do with Teesside,
I don't know, because Teesside's main customer base has always
been in Asia since 2007, plus Teesside was making specialist steels
that other areas weren't making, so there was a very selective
clientele for us and this is one that we've developed over a period
of time. So again, I go back to my earlier comment. The customers
were there and potentially the buyers were there for a long-term
process, not just spot market buying, so we've built up those
relationships. I repeat myself and I make no apology for it. Kirby
Adams himself mentioned how much profit they made in a very short
period of time, which clearly indicates that it's a viable plant.
With the people who are on that site, it is a very, very well
run site. It's no different from anybody getting new windows or
doors. You can ask for quotes from five people, but you're always
going to get one craftsman who says to you, "Oh, we don't
fancy that job. Stick a massive price tag on it, because we have
other things to do." Mick's absolutely right. What is the
real agenda of Tata and Kirby Adams?
Michael Leahy: To answer a question
you asked about Tata—do you need to go to India?—all
I'm going to say to you is, we have made representations at the
highest level. Whether they bear fruit is another thing.
Chairman: That's really valuable. I have
colleagues wanting to come in on both sides. Denis Murphy.
Q31 Mr Murphy: Kevin, the
trade unions make a very powerful argument for a direct subsidy
to enable the infrastructure, the work force and the plant to
continue while all avenues are explored for a sustainable future
for it. The Government's current position is one of saying that
a direct subsidy like that would fly in the face of EU rules on
state aid. What's your view on that? Also, have you any information
or evidence that other companies in the UK are applying that type
of subsidy or, if not in the UK, within the EU?
Kevin Rowan: The case that colleagues
are trying to make is that we need to buy some time to find a
more sustainable solution to the issue we're currently facing.
Public sector support for buying that time will be critical. Obviously,
the ideal solution is that we find a private sector buyer to continue
making steel here in Redcar, but we need time to do that. There
are a couple of ways in which the Government can provide that
support. One is wage subsidies, and you asked the direct question,
"Are subsidies happening elsewhere?" They're certainly
happening elsewhere in the UK; they might not have been applied
to Corus in the UK, but the ProAct and ReAct schemes in Wales
have wage subsidy and training subsidy arrangements of up to £4,000
per worker. But that has been based around short-time working,
and the point has been made that we haven't reduced working hours
here, which has been used as a technical barrier to accessing
wage subsidies. In other parts of Europe, such as France and Germany,
and in 22 out of 26 countries in the OECD, wage subsidies are
being used today as we sit here. By last summer, about 1.4 million
workers in Germany were accessing wage subsidies through the German
Government. That represents an equivalent saving of about half
a million jobs, so half a million people would have gone on the
unemployment register in Germany had they not received wage subsidies.
So subsidies are happening right across Europe and in the UK,
and we simply do not understand it when Ministers tell colleagues,
"Wage subsidies aren't an option." They are an option
and they are being used elsewhere. There are no EU barriers to
them. It's an issue of will. As colleagues have said—they
may wish to add to this—it is also the will of Tata not
to use wage subsidies. That's given the Government the opportunity
to say, "We haven't been asked." There is a second area,
Denis, where the Government can provide support. We know that
there have been conversations with prospective buyers and that
there is a potential gap in terms of making the deal work. There
are arguments about the price that Tata has put on this and about
whether it is enthusiastic about actually selling the plant on,
but that is also something that the Government can consider. If
there is a 20 or 30 % gap, given the arguments that colleagues
have made about the feasibility and viability of the sector and
the plant, the Government ought to consider providing a bridge.
Whether we call it nationalising, short-term loan support or some
other kind of investment—the Government have similar things
in other industries and, in some regards, that has been to their
credit, although it's often got them a bit of criticism as well—there
are examples of the Government taking a stake in strategically
important industries. Mick talked in his early comments about
the importance of manufacturing, and we all recognise that. There
will clearly be lots of other impacts if we do not get the right
solution for TCP in Teesside, so there is a strong case for Government
intervention, should it be needed. I have given two examples in
which there is no real evidence to suggest that the Government
are barred from intervening.
Terry Pye: Before you move off
that theme, and wage subsidies aside, I should say that I am national
officer for Unite for metals, not just the steel industry. About
nine months ago, we had a problem with Rio Tinto, which owns Anglesey
Aluminium. It wanted to withdraw from the island because the power
station at Wylfa was being decommissioned, and the cost of electricity
was going to soar. It said, "We can't make any money with
these high energy costs." We involved Peter Hain, the Welsh
Assembly and Rhodri Morgan. We had several meetings with Peter,
where I was present with other representatives. At the last meeting,
Peter, on behalf of the Welsh Assembly, which had presumably been
given the authority to do this by the Government, made an offer
of £450 million spread over four years, with certain conditions
attached. One of the main conditions, which was obviously to prevent
Rio Tinto from just taking the money and shutting down anyway,
was the securing of employment. If that employment wasn't secured,
the money would have to be paid back. It wasn't a loan: it was
actually support to remain on the island—£450 million;
500 jobs. Rio Tinto was going to use that money to help build
biomass so it could supply its own energy. There was a feasibility
study taking place, etc. Rio Tinto said it was a very generous
offer, but at the end of the day the main board had taken the
decision that it wasn't going to remain on the island. It was
going to go ahead with the biomass and I suspect that when the
biomass is built, it will sell the energy to outside interested
parties, or even sell the biomass. But the point I'm trying to
make is: why can't we support—whether it be through a wage
subsidy or some other assistance—Corus with 1,700 jobs,
when we can support Anglesey Aluminium? The situation's the same.
Anglesey's devastated now. The price of the houses is through
the floor: the money's swirled round, the redundancy money's gone
and the island's going down the pan. That's what's going to happen
here if we don't do something.
Michael Leahy: On the wage subsidy,
it is true that Corus initially, when there was a downturn in
September-October 2008, went to the Government and asked for wage
subsidy, because it was getting it in Ijmuiden in the Netherlands
and right across Europe. I put that question at the steel summit
to Mandelson and said, "Hang on a minute; I can remember
a Labour Government introducing temporary short-time working arrangements
and actually the Conservatives up until 1983-84 continued with
it and then discontinued it; so, quite frankly, this nonsense
about it being illegal—that is what it is: nonsense. They
could do it." His answer to me—and I was the one who
asked the question, not the employers—was, "It's too
complicated." And the reason is, of course, the Government,
although they have bailed out the banks, at that time would have
had to subsidise all industries. They couldn't simply subsidise
one. I think it's a question of cost. It isn't a question whether
it's legal or illegal. The rules for steel are exactly the same
now as they were in 1980-84; there's no difference.
Q32 Mr Murphy: Briefly, how
long do you think would be a reasonable time to have this type
of subsidy in place?
Kevin Rowan: We would suggest
probably a minimum of six months in order to find a more sustainable
solution for the company, but we would obviously want to keep
that under review and keep the option to extend that to 12 months
as part of the arrangements. We think that's enough time for a
new company, or a new arrangement with the company, to find its
feet and to be really demonstrating significant profitability,
because, as colleagues have said, it's not unprofitable now; but
that would give it a bigger cushion, if you like, in terms of
profitability over that period.
Geoff Waterfield: If I could just
supplement that; you're talking about one aspect there, about
wage subsidies. That's not acceptable on its own. At the very
least I would like to see from the Government—as well as
the time, because people need time to get into the talks—some
sort of joint tripartite meeting of all the parties: the Government,
Tata itself, and interested parties. I think if the external marketplace
could see that the Government were taking a real interest they
might actually step forward themselves, out of the wings, to find
a solution for this region and its families. I think after 150
years of steelmaking in this region, we're owed that at least.
So I think, along with securing and looking after the skills that
are on that site and crucial to making this deal, which I think
is an easy solution for the Government—and the finances
around that should be fairly straightforward—what we've
got to do, and the thing that we're struggling with maybe a little
bit, is actually get Tata to sit down long enough with interested
parties and ourselves and yourselves, and say, "Right, what
can we actually do here?" Because there are too many people
having meetings in different places, but not sitting down together
and actually getting on with the job in hand, and that makes me
very suspicious.
Q33 Chairman: Of course. There
is one statement coming through loud and clear, to which perhaps
you might like just to nod, because Dave Anderson is nearly bursting
to come in. I am a pretty tolerant Chair. I think that I need
to be, given that the subject we are discussing is very sensitive
and we want to get it right. It has been made clear that the Government
have one specific role, which is to get Tata round the table.
We need that to happen, and pretty sharpishly. Do you agree? Okay,
thank you for nodding. We are hearing it loud and clear. We shall
extend our sitting. We should be ending just about now, but I
am sure that One NorthEast will tolerate the fact that we are
extending our sitting until quarter past so that we can get through
a few more matters.
Q34 Mr Anderson: From what
has been said already, it is pretty clear that we are trying to
prevent such action happening. I want to explore a little of what
Corus is saying about the mothballing. I worked for the coal industry
so I know what is meant by, "It just doesn't work".
If Corus is serious about mothballing as opposed to closure, what
should it put in place to make an effective mothballing process
in terms of job numbers?
Michael Leahy: Geoff can answer
the particular question because he works locally. I do not know
precisely what the numbers would be, but we would need to keep
a significant minority of the work force because we have a widespread
skill base that we need to retain. If we put in the salamander,
the likelihood is that unless we keep a certain amount of heat
in the furnace, it will collapse and cost a fortune to put back
in production. Our view is that when they put in the salamander,
that will be it. The works will close.
Q35 Mr Anderson: If the company
were genuine about mothballing, can Geoff put a figure on what
sort of numbers we would be looking at?
Geoff Waterfield: It is a process
that is now happening locally through some of the many work steams
that are going on with local management. Obviously, we have the
TCP business on the site, but we must look at other businesses
such as the engineering processes and administration as well as
the areas that are not being mothballed. There are many levels
of support. Given that we are not at that point yet, I cannot
clearly give numbers but, from our view, we want to know whether
Kirby Adams and the company are genuine about such action being
a genuine mothball and not a "one man and his dog" job.
As Mick said, we are talking about delicate, sensitive and very
expensive equipment. In a couple of weeks, the salamander will
be going in. We are certainly not at that stage, which is another
case for the extension. We would ask local management as well
as Kirby Adams that, whatever plans they want to put in place,
they demonstrate clearly that they can bring the blast furnace
and production back on line if a buyer is found within the next
three, six to 12 months. That says that skills have to be retained.
They are vital. The numbers are vital. It is no good chopping
away at the work force, making people redundant, then finding
a buyer and having no one with the skills to operate a plant.
Kevin can talk about it better than me, but we often talk about
transferable skills. A lot of the people who we are talking about
have one-off, unique skills as we see in mining and shipping.
If we let them go, that knowledge will not come back—it
will disappear for ever. A true mothball means protection of skills
right across the site and an ability to come back on line. Again,
we need to scrutinise the company's view of that and make sure
that it is not a "one man and his dog" operation,
Steve Readman: We were given a
commitment at the national meeting in London that it was to be
a correct mothball as Geoff said, and that the plant would be
taken down in a proper controlled manner. If it isn't and the
mothball isn't correct, and the correct people aren't kept in
place, the recommissioning costs for that site for a potential
buyer will be huge and will impact on anyone coming along to buy
the place.
Q36 Mr Anderson: Could you
sack 1,700 people and mothball the property?
All Witnesses: No.
Q37 Mr Anderson: Is any work
being done on—I hate to use the term because I know that
it's not what you want to talk about—managed decline? Is
there a part of the work force who would be prepared to go voluntarily
at this moment in time? Could they be managed in a way that allows
you to let them go voluntarily and be looked after properly, and
retain the work force that would do the effective mothballing?
If there is that, is there a reward for the Government in potentially
creating a snap redundancy situation?
Michael Leahy: Geoff has the local
knowledge.
Geoff Waterfield: It's no secret
that we have an aged work force. Statistics will tell you that
people change jobs every seven years, and seven times in a lifetime.
I have been in the steel industry for 22 years and I still class
myself as a cabin boy. I am still a new starter compared with
an awful lot of people who have been there 40, 45 or 30 years.
Clearly, there are numbers there who would volunteer, but there
are just as many people who are reliant on that job. Nowadays,
people have very expensive and very large mortgages. So, we are
in that process of looking at who would be interested and what
the total numbers of hard redundancies would be. It is a very
difficult process.
Q38 Mr Anderson: The unions
are not resistant to that as a principle? You are not saying that
nobody should lose their job. You are prepared to lose some?
Geoff Waterfield: We're not blinkered
to anything; we must look at everything. When we talk about thousands
of people, there will always be a percentage of those who are
willing to go, but there is a large percentage of people who need
the job.
Kevin Rowan: The region has quite
a good track record of coping with large-scale losses.
Mr Anderson: Too good.
Kevin Rowan: Yes, we have a lot
of practice in it, unfortunately. In previous large-scale closures,
we have talked about redeployment of 85% and 90%. You have to
put that in context. It has often been the case in other parts
of the region where it has been in a different economic environment
and in different sectors, where the age and skills profile that
Geoff alluded to have allowed it to be more successful. You need
to consider the question in the unique circumstances of this company
in this area at this time. I heard some of the earlier comments
about the resource that is coming from BIS to continue and complete
the apprenticeships, which is incredibly important and very welcome,
and I am sure that my colleagues would echo that. We might go
on to talk about the additional money for developing the economic
base more broadly in the Tees valley, which is very welcome, despite
the comments from the previous session. It is hugely important,
particularly in enabling the supply chain around Tata Corus; we
have 14,000 to 16,000 engineering workers dependent on the industry.
So, developing the broader company base is important for maintaining
those jobs, but it is not realistic to suggest that the vast majority
of those workers who would leave Corus, whether it is a mothball
or closure, will either move into their own business start-ups
or other employment. We need to emphasise that losing the sites
and losing production is devastating.
Alan Calcutt: In response to David's
question and to Geoff with regard to voluntary redundancy, from
a union point of view we look at any option that gives us the
chance of sustaining a viable future. If it means releasing people,
we will release them. We must be mindful and consider it in a
sensible manner and retain skills. That is where the Government
will have to play it right.
Chairman: That's really valuable. I think
that Phil might want to end the session for us.
Q39 Phil Wilson: On the back
of the voluntary redundancies, are there any figures around about
how many of the 1,700 redundancies would be voluntary?
Alan Calcutt: The figures are
being collated at the moment, and obviously they will then have
to be defined into the various groups, profiles and ages.
Geoff Waterfield: There are no
voluntary redundancies. If Tata hadn't made the decision it made,
people wouldn't even be thinking of these things, and that affects
1,700 jobs directly and, as Kevin had pointed out, the supply
chain and the direct contract fraternity. People look at second
and third options because they are forced to do so. By definition
that means they are forced redundancies. No one has been on this
trail as a voluntary campaign, so as far as we are concerned they
are forced redundancies.
Michael Leahy: You also have to
understand the age group issue, because the Government have changed
the pensions, which will change in April, and of course there
are a number of people who will find it convenient to go because
that pension option will no longer be available after April. Those
people might well be anxious and think, "Well if I need to
go, I need to go now." There are a number in that category.
Chairman: We understand that.
Q40 Phil Wilson: I have a
question for Geoff. At the very start you mentioned offering imaginative
ideas to Corus on how it could keep things going. For the record,
are there any examples you can give us about what alternative
ideas there are for trading at the moment?
Geoff Waterfield: No. I am not
prepared to talk about my ideas. If Kirby Adams can't even come
to speak with me, I will not talk openly about that. Some of those
ideas are sensitive ideas that may potentially need support from
the Government or other people, and that needs to be done in the
right place and at the right time. I do not say that with any
disrespect, Chairman, but you can appreciate our position at this
moment in time.
Chairman: You might be persuaded to talk
with us privately and off the record, and that would be very valuable.
I say to all our colleagues that if there is anything else you
wish to say now, please do so. We have got your message loud and
clear and understand where you are coming from and the evidence,
but if there is anything at all that you would like to say, please
do so. You will remember, Mike Leahy, that in 2001 many of us
spoke against Moffat, and he wouldn't speak with us either. They
seem to have a tradition of wanting to make decisions about money
and not about people or steel.
Michael Leahy: We gave him the
red card and he went.
Chairman: Yes he did. Thank you very
much everyone.
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