A cost-cutting deal which would have secured over IEP 6 million in savings has come too late to save the former state-owned Irish Steel plant in Cobh, Co. Cork- now known as Irish Ispat- from a closure decision taken in mid-June 2001 by the company's owners, Ispat International. Ispat International, which is incorporated in the Netherlands and has its headquarters in London, is part of the Indian-owned LNM Group.
In June 2001, Ispat International, the owner of the Irish Ispat steel plant in Cobh, Co. Cork, announced that the site was to close with the loss of 400 jobs. The decision came in spite of an earlier agreement by the workforce to a major cost-cutting programme.
A cost-cutting deal which would have secured over IEP 6 million in savings has come too late to save the former state-owned Irish Steel plant in Cobh, Co. Cork- now known as Irish Ispat- from a closure decision taken in mid-June 2001 by the company's owners, Ispat International. Ispat International, which is incorporated in the Netherlands and has its headquarters in London, is part of the Indian-owned LNM Group.
The company said that the plant was losing IEP 750,000 per month and that accumulated losses since it was purchased from the Irish government in 1996 now stood at IEP 10 million. Meanwhile, labour costs have risen by 40% since 1996 and there has been a decline in the price of steel. In addition, health and safety and electricity costs have added to its problems, the company argued.
The controversial decision, made at Ispat International's London headquarters, means the loss of 400 jobs despite the fact that the workforce had earlier agreed to double a demand for cost savings made by local management. Ispat initially sought cuts worth around IEP 3 million a year to save the plant. After initial resistance, agreement was later reached by trade unions and management under the auspices of the Labour Relations Commission (LRC) on a programme which would have involved cost reductions valued at IEP 6.1 million a year.
According to the Services Industrial Professional and Technical Union (SIPTU), the final decision announced in June indicated that Ispat had already decided to close down the company. The closure decision also came within weeks of the expiry of Ispat's five-year guarantee to employ a minimum of 300 workers at the steel plant. The guarantee carried a penalty for the company of IEP 10,000 per employee for any redundancies before the end of the five-year period.
The package that was agreed between unions and local management contained some novel initiatives. The workers agreed to contribute 10% of their pay to an employee trust which would be used to invest in plant maintenance, including health and safety and environmental work, as required by the Environmental Protection Agency (EPA). In addition, the workers agreed to almost 50 redundancies (worth IEP 1.5 million in savings), the deferral of productivity bonus payments, the elimination of "excess" overtime and the transfer in-house of certain work performed by outside contractors. The workforce also agreed to defer a 5.5% pay rise due under the second phase of the current national pay agreement, the Programme for Prosperity and Fairness (PPF) (IE0003149F), and committed themselves to a significant raising of productivity levels.
Eurofound recommends citing this publication in the following way.
Eurofound (2001), Steel plant to close despite cost reduction deal, article.
