Examination of Witnesses (Questions 240
WEDNESDAY 2 MAY 2001
240. So you think you did a good job.
(Mr Pedder) Yes, I believe I did.
241. Were you present at all these meetings?
(Mr Pedder) Yes.
242. If you spent the whole of April working
on this and you have all the costings and you understand the marginal
costs of your plants and you are the experts at running this business,
you simply must have an idea of the finance required to set up
this structure and if you do not like it you must have an idea
of the losses it would have generated.
(Mr Pedder) Let me take you back to the fundamental
issue, that this is not all about cost, this is about the ability
to sell products into the market. The Llanwern proposal, for example,
was to retain one blast furnace, producing one million tonnes
and selling into export markets. First of all there was an analysis
of the cost versus likely sales price and that came out with a
negative number, not a huge number but a negative number. The
more important issue was whether, if we could actually effect
those sales, in so doing we would damage other markets and whether
it was actually a viable possibility to increase those sales.
The Bryngwyn proposal was to retain plant and to keep it going
on a reduced shift basis. There was a cost disadvantage in doing
that in terms of under recovery of the fixed cost, because we
would not take all the costs of the plant out. More importantly,
those sales from Bryngwyn would displace from Shotton, so we could
not viably do it in the market. It was not all about cost, it
was different at each location. The Tees-side proposal was about
retaining a five-shift operation on the hot strip mill, which
would have meant reducing shifts on the Llanwern mill. The cost
differenceI have the number in my headwas £2
million per annum at the end of the day for Tees-side, for the
Lackenby plant, but the issue was that we would displace those
tonnes which Tees-side continued to produce from Llanwern, so
we would reduce the effectiveness of Llanwern. It had to be looked
at in the totality, which is where I think myself, going round
and listening to all of these and being able to integrate the
proposals and discuss at each location why those proposals did
impact one on the other, was helpful, was open and led to the
conclusion that I came to.
243. You have obviously put a lot of effort
into this process of going round the plants and listening to each
of the proposals. Have you produced your detailed response to
those proposals and is it available to the trade unions?
(Mr Pedder) I gave an oral response at each meeting
to those people who were present. I have not produced a written
record of those discussions.
244. Do you think that would be a good idea,
bearing in mind that the principal union is considering industrial
action and that could well depend on the company's response?
(Sir Brian Moffat) May I take issue? That is not the
case. Last Thursday the union decided it would not take any industrial
action at national or local level.
245. Irrespective of the response to the proposals?
(Sir Brian Moffat) They knew of the response to the
proposals because the Executive Committee of the union met last
Thursday and the members from the works affected reported the
situation at that meeting. It would be wrong and it would be totally
misleading to suggest that that is the situation the union stands
246. I accept that correction. I do have a notice
in front of me which briefs me slightly differently. Back to the
original point, do you think it would be a good idea to provide
a written response to the proposals which have been put forward?
(Mr Pedder) I did not judge and I still do not judge
that to be necessary. There were people there who heard my response,
who took very copious notes about my response. I asked in each
locality whether the response was clear. Yes, it was. I do not
believe it was necessary to make a written record of that.
247. You say you have talked and you have given
an oral response to each one.
(Mr Pedder) Yes.
248. So in fact you have appreciated it in the
totality but the unions have not appreciated it in the totality.
(Mr Pedder) I believe they have because my presence
there has given me the opportunity to describe the total scene
which is part of the reason for me being there. I was able, for
example, to say in Bryngwyn that had the proposal gone ahead,
had it been both financially and from a marketplace viable, it
would have impacted on Shotton and vice-versa. I was able to have
that conversation in each location.
249. If the Committee were to ask you to produce
a detailed report in totality and give it to the unions, would
you say yes to that?
(Mr Pedder) No, I do not think it would be necessary.
(Sir Brian Moffat) It is self-evident that subsequent
to Mr Pedder's meeting, for example in Ebbw Vale, his explanation
was properly accepted and a closure agreement with the unions
is in place and that progressively is taking place across the
251. If this Committee asked for a report to
this Committee, would you do it?
(Sir Brian Moffat) I think we would be bound to give
you a report if you asked for one, but we could only give it with
limited financial information, if that is what you are looking
for, because it is damaging and commercially sensitive to ourselves.
252. I can accept that, but can you also accept
that we are the public representatives of people throughout Wales
who are about to lose their jobs. Their representatives have made
detailed written submissions to you, which we have had copies
(Sir Brian Moffat) May I also point out that we have
responsibilities by law as well as employers in terms of consultation
and agreement situations? We are negotiating with our trade unions.
We are responsible for our employees and we have to ensure that
we do not go beyond our legal obligations in that situation and
certainly not exceed them. With all due respect, you are getting
the report first hand from Mr Pedder at the moment.
253. But we are asking for a written one. We
have had written proposals from the union, you have rejected them,
we should like the written rejection. It is a reasonable request.
(Sir Brian Moffat) We could give you a written rejection;
that is not a problem.
254. It would be quite useful if you could give
us one as far as your commercial confidentiality would allow and
we could have a report which we could keep confidential as a Committee
if you felt it necessary to give more financial information.
(Sir Brian Moffat) We would give very limited financial
information, but I could give you a proper written report.
Chairman: Thank you. We shall expect one.
255. Is not the fundamental difference between
yourselves and the trade unions, at least as far as they have
put it forward in their proposals, on your assessment for the
future of the steel market? They are saying on the one hand that
the profitability of steel is cyclical and they expect an upturn
in the market and therefore you should be prepared for that. The
entire drive of their proposal, which is why I think the way you
have described them is a little bit disingenuous, is that they
are very much interim measures. The idea is to maintain capacity
for that upturn in the steel market and to retain those jobs.
The other difference apart from that difference in attitude is
the difference in approach. They have bent over backwards to try
to come to some arrangement which includes loss of jobs, includes
trying to get a package of public money to enable retraining whilst
people are in work rather than whilst they are on the dole. Their
case is basically, and it seems a very logical and humane one
to me, that they think they are right, they think there is going
to be an upturn, why do you not come along with them, maintain
capacity, keep as many of these people in jobs as possible for
the moment but retrain them. Then, if they are right, you are
ready, you have the capacity, you have an even better trained
and more productive workforce to take advantage of that change
in the circumstances. If the trade union side is wrong and you
are right that there is no upturn and things do not get better,
then at least you have done the honourable thing as far as your
workforce is concerned and you have retrained them and they will
have a better chance when they go out into the market to try to
seek alternative work. The difference in your intransigence and
their reasonableness cries volumes to me.
(Sir Brian Moffat) We would not be retraining 6,000
in the circumstances you outline, we would be trying to retrain
our total workforce because the company would be bankrupt. It
is losing over £1 million a day in the UK. That is the situation
we are facing. The market is not getting better: it is getting
worse at the present time. We have to face that reality and try
to protect the parts of the company which are capable of protection
and we owe that to the workforce affected. It is not just about
costs, it is about markets. Part of the responsibility Government
has is to try to create over timeand it is not an easy
job, just like it is not an easy job for employersan environment
for investment in manufacturing industry and that has singularly
been a failure in this country for the last ten to 15 years. I
am not differentiating between Governments when I say that. It
has been a very, very salutory experience to live through in an
industry which has become more and more efficient. People like
Mr Pedder and myself have spent most of our lives fighting to
create an efficient industry, one where steel is produced as cheaply
as possible and gets the benefits into the UK manufacturing base
which they can take benefit from, convert into manufactured goods
and export. As it is, we have to export because the fundamental
fabric of the manufacturing industry of this country is being
eroded, month after month, year after year and has been that way
for the last ten years. That is one of the reasons why I have
been seeing Secretaries of State for Trade and Industry all the
time I have been back in London since 1986.
256. There will be questions about exactly how
much you are losing once you take restructuring and redundancy
out of the equation a little later on. Perhaps someone else will
address that. I am still concerned. You have told us today that
you think the Government's legal opinion is wrong, trade unions'
legal opinion is wrong.
(Sir Brian Moffat) I have not said the Government's
legal opinion is wrong.
257. You think they will have no chance of being
allowed to employ these retraining schemes, public subsidy
(Sir Brian Moffat) I am sorry but I have not said
that. I said that under Article 56 of the Treaty, which I gather
the Government are now reconsidering, there is every chance, if
the Government is willing, to implement it. There is a chance.
258. I am talking about the trade union proposals.
As far as I heard what you told us, you said you believed that
there was no point in going to the European Union to try to get
approval for those because they did not have much chance.
(Sir Brian Moffat) I said I thought it was doubtful
under Article 95, because what has been said by the Council of
Ministers in 1993, was that no more permissions would be granted
under that article. That it will be a very difficult thing to
259. Leading Counsel thinks it is worth it,
the British Government think it is worth it, the National Assembly
for Wales thinks it is worth it, the trade unions think it is
worth it, but you do not.
(Sir Brian Moffat) Leading Counsel did not say it
was worth it. Leading Counsel said it was quite legal to ask for
permission under Article 95 of the ECSC Treaty to do what the
trade unions wished to do. There is nothing illegal about asking.
What sort of answer? Leading Counsel did not say.
2 See page 54. Back