Shipyard reform plan unveiled

Malta Drydocks Corporation and Malta Shipbuilding are to be dissolved and their assets and liabilities transferred to the government, Social Policy Minister Lawrence Gonzi told parliament yesterday.

A new company, called Malta Shipyards, will absorb 1,700 workers from the current workforce of 2,600 under new conditions, including a shift system which will substantially reduce overtime. The company will rent dockyard facilities from the government.

The remaining 900 workers, who have already been selected by the management on the basis of their skills, will be offered early retirement schemes and those who refuse will be absorbed by another new company, called Industrial Projects and Services Ltd, and posted to the civil service and public-private partnerships. The transfer of workers to the new company will not be considered as an interruption of service.

"This is an exceptional agreement drawn up to address the root of the problems and challenges facing the shipyards...this is the last chance being given by the people for the industry to recover and attain financial viability," Dr Gonzi said in his statement, minutes after the agreement was signed with the General Workers' Union at the Auberge de Castille.

In his nine-page statement, Dr Gonzi started by giving an overview of government policies on the shipyards, including the setting up of the task force which had discussed the restructuring process.

He said that one of the most delicate and crucial points in the restructuring process involved the reduction of workers engaged on shiprepair, metal work and work on yachts.

The two shipyards, including Manoel Island Yacht Yard, to date employed 2,600 workers. According to manning levels established by Appledore and subsequently updated by the current management, the ideal number of workers should be of 1,700, which effectively meant that the shipyards had 900 workers who were surplus to their requirements.

The government had long declared that it did not intend to dismiss anyone as long as a restructuring plan was implemented. This plan also provided for financial restructuring so that the new shipyards' operation would be free from the burden of the existing debts (of over Lm300 million) and recurrent interest payments.

Dr Gonzi said that in terms of this plan, the government would take back all assets held under title by Malta Drydocks Corporation and Malta Shipbuilding. Assets needed by the restructured operation would then be rented from the government according to need.

The commercial development of Dock No. 1 would be transferred to the ministry responsible for capital projects for development in the context of the Cottonera project.

A call for expressions of interest in the development of the site would be issued to the local and international private sectors.

Dr Gonzi said a new, wholly-owned government company, Malta Shipyards, would absorb 1,700 workers who would work under new work practices as agreed in the collective agreement.

Another wholly-owned government company, Industrial Projects and Services Ltd, would absorb what remained of those 900 workers who refused the early retirement schemes offered to them.

Four schemes would be offered - for those aged 56 and over, those aged 50 to 55, those between 40 and 49 and those younger than 40.

Dr Gonzi said the workers had been selected by the management in a process which started in 2001, when the workers in the two shipyards were individually assessed and given points on the basis of their skills, readiness for training, flexibility and suitability for the needs of the shipyards. This exercise was used in the decisions taken last year when the first early retirement schemes were offered, and it had since been updated to take into consideration circumstances which may have developed.

The deployment of the workers to the two companies would be made in terms of clause 38 of the Employment and Industrial Relations Act on the transfer of business, and the workers would be absorbed by the companies with the same rights they currently enjoyed and would not lose their length of service. All this meant that there would be no redundancies.

The restructuring process would lead to the dissolution and liquidation of Malta Drydocks Corporation and Malta Shipbuilding so as to permit the financial restructuring that had already been described.

All workers would be receiving a letter informing them to which company they were being assigned. Those who were in the group of 900 workers would be given details of the retirement schemes they could apply for and they would have two weeks to take a decision.

After those two weeks were up, there would be a further period of four weeks during which the management of Industrial Projects and Services Ltd would analyse the workers who remained and start the process to second them to other places of work where they could be productive. These could vary from work in the public sector, public-private partnerships and even the private sector if the workers so agreed after consultation with the union.

Dr Gonzi said he wanted to emphasise that this exercise was aimed at achieving greater efficiency and productivity from these 900 workers. The truth was that these 900 workers were surplus for the shipyards and their salaries and wages were a millstone for the productivity of the shipyards. The government, however, wanted the workers who refused early retirement schemes to be posted to areas where they could be productive.

Turning to the new conditions and work practices agreed for the workers at Malta Shipyards, Dr Gonzi said the focus of the talks had been for a major improvement in productivity and efficiency. All were aware that a reduction of the workforce, on its own, was not enough to guarantee financial viability. This could only be achieved if the workers changed their culture, mentality and practices. In terms of the new collective agreement a new shift allowance (of Lm2) would be introduced. This should lead to a major reduction in spending on overtime.

Management and middle management had been reorganised so that this group would no longer be paid overtime and it would have broader responsibilities than before. This would lead to better organisation of workers in a way which would encourage them to be more productive.

All industrial and clerical grades had been reorganised and the automatic incremental increases of salaries was being replaced by trade testing, which would encourage workers to seek training and improve their skills.

The workers would also be given incentives to acquire new skills and training so that they could be more flexible.

Performance-related pay, under which the workers would receive additional payment, would be given once the shipyards achieved stable levels of productivity on the basis of the cost of labour.

A new code of discipline was also being introduced.

Dr Gonzi said the Drydocks Employees Provident Fund and the Pension Fund would be wound down and the workers would therefore no longer contribute to them. The rights of those workers already covered by those funds would be safeguarded. Under the first scheme, workers could take paid sick leave for up to a year, he observed. A new insurance scheme to cover injuries at work would be introduced.

Dr Gonzi said agreement had been reached on a whole list of new work practices, including the termination or amalgamation of different sectors which were no longer needed or which had hindered flexibility.

The implementation of these work practices would be the backbone of the restructuring process. The government had agreed that once the reforms were implemented, on January 31, 2004 it would grant a wage increase of Lm1 weekly effective from January 1, 2004 and a further increase of 50 cents per week would be granted on July 31, effective from July 1.

The new collective agreement would be valid for six years from January 1, 2003. On the third anniversary of the agreement the union may submit proposals on the financial package and the government would consider it on the basis of progress achieved by that date.

Concluding, Dr Gonzi described the agreement as exceptional and said the restructuring process was a surgical operation which had also considered the social aspect of all involved. He appealed to the management and the workers to grab this opportunity because it would not be repeated. All sides had managed to clinch an agreement but this now needed to be implemented immediately. The road ahead was not easy, but thanks to the skills of well-organised workers he was sure the shipyards would achieve the targets everyone hoped for. It was up to the workers to understand that success depended on them.

Dr Gonzi thanked the GWU and management officials who had participated in the talks, which, he said, had been long and difficult.

Immediately after the end of his statement Dr Gonzi moved the first reading of a Dockyards Restructuring Bill and also laid on the table of the House copies of the agreements reached between the government, the management and the GWU.

Deputy opposition leader Charles Mangion said the fact that agreement had been reached with the GWU should mean that the workers' interests had been safeguarded. He asked whether there would be workers' representation on the board of the two new companies, and for confirmation that the government would be taking over not only the Drydocks and Shipbuilding's assets but also their liabilities. Would the government be guaranteeing any loans that the two new companies would need to take out from banks to cover capital investment?

He asked if the surplus workers had been identified in agreement with the union. Would these 900 workers continue to enjoy their present conditions of work if they refused early retirement and joined Industrial Projects and Services Ltd? Would they have a probation period at the jobs they were seconded to? Would the GWU have a say in where they were redeployed?

How much was the government expecting the shipyards to save per annum through the restructuring plan?

Since Dock No. 1 was to revert to the government, were there any plans to call for new tenders from new developers and change the ground rents being paid by the present ones?

What plan existed, if any, to strengthen the marketing efforts of the shipyards? Now that the workers had been given the onus of getting the 'yard back to profitability, had top management also been given this onus, including greater accountability?

What would be done with the Drydocks Employees Provident Fund: would the funds be refunded to the workers, and would new insurance premia be paid to private firms by the two new companies or by the government?

Helen D'Amato (PN) asked how training would be offered to the workers. Would the attainment of better skills be based on personal initiative or even on the job?

Helena Dalli (MLP) asked how the collective agreement would be affected by the shipyards' financial performance and the success of the restructuring plan.

Robert Arrigo (PN) asked if there were any projections of sales to offset the costs of the new agreements.

Ms Marie Louise Coleiro (MLP) asked if the task force had discussed the possibilities of finding strategic partners for the new companies; if any workers would be taking smaller pay packets and if the huge salaries and allowances enjoyed by members of the management would be affected by the new plans.

Dr Anglu Farrugia (MLP) asked if the 900 surplus workers already knew their plight. Did the plan already exist during negotiations with the EU and even before the referendum and the elections? Had a study been made of the impact of the closure of Dock No. 1?

Replying, Dr Gonzi said there would not be workers' representative on the two new boards of directors. He recalled that the new Employment and Industrial Relations Act gave a new definition of workers' representatives, and the government wanted management to be exclusively oriented on business.

The assets that the government was taking over would be rented back to the shipyards. The government would also be carrying the cost of the seven-year business plan establishing the companies' requirements. Overall there was a financial envelope that should help the companies to progress to viability based on turnover and increased productivity.

The union had been involved in setting the criteria and the methods of selection of the surplus workers, but not in their identification. This had largely been based on previous individual assessments, but scores were being adjusted to reflect developments over the past 12 or 15 months. The selection was exclusively the management's, based on definite complement criteria in the Appledore report.

Redeployed workers would continue to enjoy their current conditions of work and would not be subject to probation on their new jobs. Neither would there be any interruption of service or seniority.

Dr Gonzi said the business plan established targets for productivity gains and reduction of labour costs, as well as turnover, production levels and maximum government outlays.

Wages would not be decreased, but there would be less income from allowances and overtime. The new practices also involved greater flexibility of groups of workers. Supervisors and foremen would be getting improved salaries in lieu of overtime.

The Drydocks Employees Provident Fund was completely bankrupt, while the pension fund was left with a little credit. Workers would continue to benefit from the pension fund until its assets came to zero, at which time a completely different system would come into operation. The DEPF would cease to exist. In a way, stopping workers' contributions would help them to take home more money.

An exercise had been carried out to find new methods of incentivating workers to go for new market skills. Anybody acquiring such new skills and using them on the job would be given new allowances for as long as such use continued. There would be a new system of regular trade testing - something which existed in no other collective agreement in the country - and each worker certified as having made progress would get higher pay.

Dr Gonzi said some six apprentices who had answered last year's call for applications had now completed their courses and would start working soon.

On strategic partners, Dr Gonzi said that the only strategic partner at the moment would continue to be for super yachts. In the super yacht sector the targets established for 2003 had already been well surpassed. This was another specialised sector that was giving and could continue to give great results, especially with good marketing.

Replying to Dr Farrugia, Dr Gonzi said that the restructuring had nothing to do with the EU except that the latter had approved the government's plans to restructure within seven years and reach all established targets. The government sincerely believed it now had the right formula for progress at the 'yards.

The major impact of the 900 redundancies would be that foreign shipowners sending their vessels to Malta would no longer be subsidised with cheap work. It was very true that marketing would be very important, especially with regard to very particular sectors such as major conversions, which could be very rewarding if well done.

Concluding, Dr Gonzi appealed to all workers to realise that success now depended on them. The workforce had been given a new impetus, and it was essential for all sides to show a businesslike approach. Any surgical operation caused bleeding but was needed for long-term benefit. This was an opportunity not to be missed if the 'yards were to be given new life from tomorrow.