Fortnight Publications Ltd.

What Goes on at Harland &Wolff?Author(s): John SimpsonSource: Fortnight, No. 92 (Nov. 1, 1974), p. 8Published by: Fortnight Publications Ltd.Stable URL: http://www.jstor.org/stable/25545204 .

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8/FORTNIGHT Harland and Wolff is too big to stay out

of the news. Every order, every work

stoppage and each management change is reported by the media. In the recent past the news has covered the

building of the second Goliath crane, the omission of the firm from the nationalisation plans of the British I

Government, the decision to move to a i

majority shareholding by the Northern Ireland government and then the admission that financial losses in 1973 exceeded ?30m.

The accounts of shipbuilders have

peculiar interpretation problems. Or ders take several years from design to

delivery. Contract prices vary, in limited

ways, as costs vary. Profit depends on

successful management and a reason

able estimate of the impact of inflation. Losses (or profits, if any) are calculated each year on the basis of the changing financial position of ships which are

still to be completed. Consequently the latest losses are on ships, many of which

have not been completed. Despite the hopes of earlier years, the

profit position of Harland and Wolff

appears to have deteriorated. Modern

isation, rationalisation, specialisation and government participation have all been introduced, but the cost per ship still exceeds the price at which contracts are obtained. Two further strategies are now being divulged; worker participa tion and further rationalisation. The former is an attempt to bridge the gulf between management and worker?an

attempt to make them credible to each 1 other and, in the final analysis, to put

j some of the responsibility for any

unpalatable decisions on the represen tatives of the workforce as well as

management. Once again an outside firm of

financial consultants is to make a

report on the viability of the yard. No

prizes are to be won by suggesting that the consultants will try to discover some

types of work which are most unlikely to be viable and then recommend that the firm should contract to a smaller size and drop the most unattractive work.

They might also be advised to make a

separate analysis of the engine building and of the now dormant ship repairing business.

Way back in 1960 the shipyard employed some 25,000 people. Over the

years since, this figure has shrunk to

its present level of 9,800 people. When the firm first ran into financial difficulties in the 1960s any suggestion of closing it down was unthinkable. The

yard directly provided over 10% of the

employment in the Belfast area and

allowing for ancillary trades and the

spending of pay packets in the local

I What Goes On I at Harland & Wolff?

John Simpson economy the total proportion of Belfast's personal income which was

generated by the yard was nearer 25%.

At the same time another engineering firm, the aircraft company, was in a

temporarily shaky position which

ultimately led to major redundancies. The assumption that a closedown is

unthinkable still exists. However the

blow, although large and serious, would not now be fatal. Direct employment in the yard is now less than 5% of that in the Belfast area and the impact of this reduced because of this change in the

type of vessel under construction which creates less ancillary employment. The successful industrial development ofthe Belfast area in the past ten years has

produced a situation where the

engineering skills of shipbuilding are in demand in other major firms. The unthinkable closure, in the present state of the Northern Ireland economy,

allowing for reemployment in other firms might reduce total incomes in the Belfast area by 3% to 5% and reduce

employment by a slightly lower fraction. None of this makes closure desirable, nor does it remove the prospect of individual hardship, but it does mean

that closure is possible. Looking back, the logic of past

decisions on specialisation in building bulk tankers looks less sensible than it earlier appeared. When new industry comes to Northern Ireland one of the desirable features is that it should

import new techniques which use skills which are not readily available in less

developed countries. The gamble that the economies of specialisation would

more than offset the difference in

earnings per unit of output with other countries seemed worthwhile, but does not seem to have worked. Together with

the mistaken assumption about the

demand for large tankers, made when

the Suez Canal seemed to be

permanently closed and before North

Sea oil seemed likely to be a major source of output, this produces a yard

specialising in a product where building capacity, on a world wide basis, may be

too large and unable to compete commercially with some of the others.

(Where is the man who said that the

yard should have stayed in the business of building oil rigs?)

The nature of Harland and Wolffs

present operations need to be set out

starkly. They look something like this: ! 1973

Estimated losses.?33m

Wages and salaries.?19m

(Estimate based on average

earnings.) The comparison of the losses with the size of the wage bill is dramatic. At first

sight it would be tempting to conclude that it would have been better to pay the I

employees not to build ships but to

repair the social failure of the Belfast area. This would be an uncharitable view of the situation. The losses are on orders still to be delivered. Some

portion of the loss could be argued to be attributed to other years, provided inflation or other factors do not repeat the situation again. Further, by common consent, 1973 was seriously affected by a prolonged dispute in the

most sensitive steel handling areas.

Ther is no doubt that, even with the best possible interpretation, the losses must have come near to the point where someone examined whether to cancel the orders and incur the penalty which is presumably built in to the contracts.

Over the past ten years the Government financial involvement in Harland and Wolff has been reputed to be nearly ?70m. If the further losses are

added, since these have been assumed to fall on the public purse, the total looks like ?100m. If this had been

correctly forecast in 1966, it is doubtful if a decision to continue would have

been made. In 1966 Belfast needed sites for new industry and space was at a

premium. Yet Queen's Island could

provide one of the most attractive sites in Western Europe for industrial

development. Even now, such a site

might be an attraction to some major firms.

In today's terms ?100m of govern ment money should be the equivalent of finance for more than 10,000 new jobs. In normal times, it might even be

enough to attract firms to employ twice as many. However such a discussion is

sterile, the decisions of 1966 cannot be retaken.

The choice now is one of where the

yard goes from here. Will it increase or

decrease the prosperity of N. Ireland to

continue, to retain a large shipbuilding unit since the capital has now been invested and you cannot sell a building

dock for export? Until recently a

suggestion of closure or further contraction would have been unthink

able. The cost however has reached

unacceptable proportions. Major sur

gery may be needed to prevent the

unacceptable from causing the un- |

thinkable. i

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