Examination of Witnesses (Questions 140
WEDNESDAY 14 FEBRUARY 2001
140. Can you perhaps give us details of your
proposals prior to the announcement?
(Sir Brian Moffat) No, I cannot. That is privileged
141. Are you refusing to give that information?
(Sir Brian Moffat) It is privileged information. When
we approve things and decide to invest we announce them. We cannot
tell you about information that we have not yet approved.
142. I was asking whether you had made any announcements,
whether you had made any approvals, prior to your restructuring
announcement, whether you had made major capital investment?
(Sir Brian Moffat) Yes, they are a matter of record
in the accounts.
143. Perhaps you can let us have them. You now
want to make money and steel, that is certainly something that
Mr Morgan was quoted as saying after your meeting on 23 January:
"They are now in a position of wanting to do something ruthlessly
commercial". Is that the picture?
(Sir Brian Moffat) No. I made the statement in the
past that it is no use just making steel, you have got to make
money. Money is absolutely important all the way through the company.
We have got to have sufficient money, and earn that through our
customer base, to pay for our supplies, to pay the wages of the
people who work for us, to reward the shareholders and the bankers
that lend us the money and to reinvest in the company, as we have
been able to do over the years. If we do not make sufficient money
we cannot primarily reinvest, and that is perhaps one of the problems
that has been at the foot of the situation as far as the UK industry
is concerned. It is not making enough money to make sufficiently
good investments to secure the future.
144. Who is driving your decisions at the moment?
Is it the institutional shareholders?
(Sir Brian Moffat) No, the management is driving the
145. Do you consider that the announcement on
1 February was a success because it drove up share prices which
have remained steadily higher?
(Sir Brian Moffat) An announcement is not a success,
it is the deed that is the success in terms of that announcement
and as a result of the actions taken from that announcement securing
the future of the company.
146. How do you and your fellow directors see
your duties to other stakeholders in the process?
(Sir Brian Moffat) We have a duty to all the people
in the company who work for us. We have a duty to our customers
too, as well as our suppliers, the people in the communities in
which we operate, and we are responsible employers as far as that
is concerned, to the people who lend us money and invest in us.
We have got duties all the way through like all other companies
147. You said earlier on that you had not had
any offers of help from Government or from the Welsh Assembly
(Sir Brian Moffat) Not specific offers, no.
148. You indicated that you had not asked for
(Sir Brian Moffat) I did not indicate I had not asked.
We had been asking for rate rebates for seven years.
149. You also pointed out that was an issue
of legal entitlement, you were not actually asking for Government
(Sir Brian Moffat) Yes, everybody is entitled to appeal
against their rate assessment.
150. Did you not think that you had a responsibility
to your stakeholders to seek support from Government or from the
(Sir Brian Moffat) We did seek support. We have asked
for support in helping to train, retrain and seek inward investment
so far as the people affected are concerned, which is all we are
allowed to do under the Treaty of Paris.
151. When did you ask for those things?
(Sir Brian Moffat) The first time was with Mr Byers
on about 7 December, 7 or 9 December, I can look that up in my
diary and get the date for you, and around about 18 December.
Mr Johnston and I met him again last week and, indeed, I got a
letter from him today confirming that he wished Government now
to work with us, our employees, trade unions and local authorities,
to bring that about.
152. So you sought help from the Government
in specific areas?
(Sir Brian Moffat) Sorry?
153. No, it is okay, I will leave that. Could
I ask you about your October 1999 distribution of £686 million
to former British Steel shareholders. Do you think that was appropriate
in the light of current events?
(Sir Brian Moffat) You ask the question and I will
(Sir Brian Moffat) I can answer the question. We made
155. And in the light of current events do you
think that it was an appropriate thing to do? The current situation
did not appear out of the blue.
(Sir Brian Moffat) No, it did not. It was to create
the merger between Hoogovens and British Steel. It was to be a
merger. The Dutch wanted it not on a 70/30 basis, or thereabouts,
which is what it would have been without the distribution of cash.
They wanted it more on a 60/40 basis and to financially engineer
that entailed the distribution to British Steel shareholders of
the money, which was paid by way of a special dividend which the
company had and which it had earned and was there for that purpose
in the event. We wanted to do the merger, it was part of the restructuring
of the European steel industry and something that we had made
public for many years we wanted to do, to embrace more the European
market and to try to ameliorate the situation which we could see
developing in the UK.
156. You say that you have restructured. It
was October 1999 when you carried through the formalities, as
it were, and did the business, but in retrospect was it the right
marriage do you think?
(Sir Brian Moffat) I think for British Steel undoubtedly.
I guess the Dutch, with what has transpired in terms of the UK,
will be thinking very hard whether it was the right thing; possibly
not. From a British perspective it was exactly the right thing.
The only business in flat products that has made money and helped
support the UK in this last year has been the Dutch, nothing else
has made money.
157. Moving on to some general issues. Could
you tell us something about operational problems? Have you had
(Sir Brian Moffat) Yes, we have had operational problems.
It was disclosed in the half year results to June last year, declared
158. Can you tell us something about it?
(Sir Brian Moffat) Again it is on the record, it cost
about £60 million, there were iron works problems in South
Wales, in Teesside and in Ijmuiden. There were plant commissioning
problems in South Wales. I think that is about it.
159. Would that have been a factor in the recent
decisions you have taken?
(Sir Brian Moffat) No, it was a market situation.
From time to time in a process industry like oursit was
unusual to come three or four at a timeyou get incidents
like that. In all heavy process plants you get incidents. It is
a market situation, not an operational one.