Examination of Witnesses (Questions 260
THURSDAY 11 JANUARY 2001
260. You think that is a real disadvantage for
the UK, the position it is in now?
(Mr Reilly) I do.
261. Not having made a decision?
(Mr Reilly) I do personally, yes. I have said that
for quite a long time. There is evidence of other companies saying
the same thing and in fact the country is potentially losing out.
I would say though that is not a significant factor in this particular
262. But in 1998 the preference was indicated
for Luton over Antwerp as the second plant for the new Vectra.
Surely, when that decision was made two or three years ago, you
made a decision on certain currency planning assumptions?
(Mr Reilly) Yes, that is true, and if the volumes
had stayed the same and the sales forecasts had stayed the same,
then what we would be doing now is just regretting perhapsnot
me personallythat decision because the pound is higher
and therefore it would have been very difficult to make a profit.
But that is not really the issue here. The issue here is the fact
we have to take capacity out of that segment. It is the only way
it can be done.
263. What about the 1998 pay and conditions
deal? I understand that was tied to a Deutschmark rate. Do you
think you could have got more out of the workforce over the last
three years or do you think they have been doing the best they
(Mr Reilly) I think they were doing the best they
could and the best we could. There is no question you can always
improve and our costs have been impacted by a pound that is higher
than we were hoping it would be. The rate we expected at that
time was 2.70 Deutschmarks to the pound and it has been averaging
nearer about 3.20, so clearly we have been penalised there in
terms of profitability. But we have been able to offset some of
that with good productivity improvements in the plant and I would
say the plant has performed very well over the last two years.
264. Presumably you understand how the workforce
feels about this present decision, given there was this agreement
two years ago. Obviously they are devastated by the decision taken
on 12th December.
(Mr Reilly) I absolutely understand their feelings,
which is why when the decision was inevitable I went back to suggest
at least two things which would mitigate that decision. We are
still working on both of them which should at least offset some
of the losses. But I entirely understand and the workforce, frankly,
I do not think could have done anything more to have made the
decision different. It is a dramatic market change and a profitability
change, and that is what the agreement said. Unfortunately, there
is never a guarantee in this world and so any agreement which
gives an indication of what is intended, which it was in good
faith, has a clause in it which says that if conditions change
significantly we might have to re-visit it, and that is what has
265. Was there not a commitment to bring the
Epsilon into Luton in that agreement?
(Mr Reilly) Unless there were significant changes.
266. Can I ask you about this so-called agreement
because it seems it is an agreement which sticks unless anything
goes wrong. There is no legal underpinning to it. Nobody can turn
round and say to you, "You have reneged on this undertaking
therefore I am taking you to court", would that be correct?
Unless an agreement has a legal underpinning, is it really worth
the paper it is written on?
(Mr Warman) It is a labour agreement and as such does
not have a legal base in law, but it is an agreement we entered
into in good faith in the circumstances at the time.
267. Harold Wilson used to say "Solomon
Binding", whatever that meant. What I am saying is that the
absence of legislative structure to which such agreements could
be tied means that it is a statement of intent, albeit of the
highest order and in the best of good faith, but it is not nevertheless
enforceable at law.
(Mr Warman) That is true of all labour agreements.
It was an experiment and. . .
268. But this is a fairly dramatic one because
it was as a consequence of serious negotiation on both sides with
concessions being madethe unions might say more on their
side than on yours but either way concessions were made. At the
end of the day what incentive is there for British workers to
enter into any such agreement as this with you or any other employer
in the future if there is no legal underpinning to it?
(Mr Reilly) Because we both entered into it with the
express desire of improving the likelihood of our continuing manufacture.
That was the intent of the agreement and that is the intent of
a similar agreement we have elsewhere and the agreements we have
been able to live with.
269. But the several agreements you have elsewhere,
with respect, have a degree of legal underpinning which the ones
in the UK are not required to have.
(Mr Reilly) I am talking about similar agreements
in the UK.
270. Let us talk about Europe for the purposes
of making this point. We are all agreed in the best of good faith
the workers and management in GM and Vauxhall here came to an
understanding, enshrined in that agreement, but at the end of
the day you can choose to define what you consider to be the cataclysmic
circumstances which enable you to walk away from it, but could
you have done that in Germany?
(Mr Reilly) Yes. I am not quite sure why you are suggesting
that the reason this agreement is no good is because it does not
have any legal underpinning. In my view, even if it did have legal
underpinning we would still have argued we have had dramatic changes,
and that is why the clause is in that agreement. Whether it has
legal underpinning or not, that is why the clause is there. On
that basis, we do not feel we have broken that agreement.
271. Would you think it unreasonable for a cynic
to say that the absence of such a legal underpinning in the UK
makes it easier for you to renege on it or to step back from that
undertaking than it is, say, in Germany, and that is the reason
why you did not close down any plants in Germany whereas you are
closing down a plant in the UK?
(Mr Reilly) There is not an alternative plant to close
down in Germany which could get this result, first of all. Secondly,
a cynic could say that, yes, but you have to take a look at the
whole labour law in and around in total, what obligations does
it bring on both parties in Germany and do we want that. We operate
in the conditions we operate in and I would emphasise we do not
feel we are reneging on an agreement.
272. You say there was a time when the decision
was inevitable. Can you give us a date for that?
(Mr Reilly) The decision was actually finally agreed
on Friday 8thI think it isof December.
273. You said that following that you discussed
some ideas for mitigation, and that was after 8th December?
(Mr Reilly) No, the proposal was first put up earlier
274. Earlier that week?
(Mr Reilly) Yes.
275. When did you first discuss it with the
(Mr Reilly) We have regular meetings with the DTI
and in fact only a month before thatsometime early in Novemberwe
had had a meeting with the Government and described the conditions
and the fact that conditions were very difficult and there was
over-capacity, and at that time we explained the plan we had to
move people across from the Luton plant to IBC. So they were aware
of the difficulties of the market place but they were not aware
of this proposal. They were not aware of this proposal until just
before it was announced.
276. Was there anything you asked them to do
prior to the proposal being announced? Anything to do to help
or anything like that?
(Mr Reilly) As I say, we constantly talk to them and
where they can help, in areas such as improving training, improving
general conditions in the business and understanding the business
so that we are not looking at legislation which is likely to add
more to our costs, then, yes, we did ask them, but there was nothing
we specifically asked them to do.
277. You were talking to the Government but
you were not talking to the Joint Negotiating Committee?
(Mr Reilly) We certainly were.
278. But were you talking to them about the
exceptionally adverse changes to the economic environment which
were forcing a reconsideration of the plan which had been signed?
Were you talking to them pursuant to clause 7 of the agreement
signed in 1998?
(Mr Reilly) No, we were not talking to them in those
279. When did you start talking to them in those
(Mr Reilly) We obviously are constantly talking to
our Joint Negotiating Committee and, as I said, we were in the
process of trying to take some action to offset the deteriorating
conditions as of about 60 days before this final proposal came
along. So these conditions were known about for some time.