Working in the last chance saloon

It may have taken years and years for the drydocks problem to be tackled head on but it is still by no means clear that the 'yards have a future. Vanessa Macdonald spoke to Social Policy Minister Lawrence Gonzi about the factors that would make or break it and about whether all the decisions made could be justified to taxpayers.

Do you see light at the end of the tunnel?

We have gone through a lot during the past 24 months. The workforce at Malta Drydocks and Marsa Shipbuilding was originally 3,600 - it is now down to 1,600 people. That is a tremendous change.

The collective agreement negotiated introduces new work practices that are radical when compared with what existed at the Drydocks for over 40 years. We had to dismantle systems that grew at the Drydocks over a long period of time.

You were, however, forced a few weeks ago to warn that the collective agreement would not be revisited because, since all these negotiations, there was a change in the General Workers' Union representation. That is a serious development as the whole agreement is based on industrial peace. So, have you managed to buy this industrial peace?

We did not buy anything. We put the message across throughout the negotiations that the drydocks had reached the end of the line, that the time had come to either change radically and save the 'yard - as we do believe that there is potential, if it restructures and changes work practices - or else, if that was not achievable, the drydocks had no future and the only option would be to close it down.

I think the GWU negotiators understood this clear message...

But you are talking about the original section committee.

Yes. I would say a very difficult agreement was reached. So the government did not buy or sell anything. We did not buy industrial peace; we gave the drydocks a final opportunity - and a good one - to become viable over a period of time.

You say that you did not "buy" industrial peace - I would have to agree as there have been two unofficial stoppages, CEO Peter Moore was attacked and you still face a new GWU committee that is saying "No". It lost a Lm1 million contract just because of the threat of industrial peace.

We have been saying all along that our competitors in and outside the Mediterranean are keeping a very close watch on what is happening. Any form of industrial unrest is splashed across international news, on international websites, within two or three hours. The end result is that ship owners who might have been interested in booking their work into the 'yard become scared of sending them here; even if all there is was a hint of industrial unrest.

So the developments after the signing of the collective agreement, the internal unrest within the GWU itself, the change in the committee and the incidents in December were splashed in the news. Immediately the order books were affected. We had two important vessels booked: One was an FPSO contract of quite substantial value, which would have been the first test of the new systems and changed work practices - the December incidents scared the owners away. We contacted them to explain that these were not related to their contract but their final decision was to send the ship elsewhere. So we lost that one.

The second contract we did not lose: I am informed that the ship is now in the Drydocks and work is underway.

Things may apparently pick up - on condition that the workers understand it is now up to them to deliver.

But they must also get that message from the GWU...

Yes, from the GWU, but also from the government: We will not tolerate that any group of workers, whoever they are, to undermine the efforts made, and undermine the final chance given, I would say not by the government but by the people of Malta.

We have written off Lm300 million of accumulated debt at the drydocks. I think I would be fair in saying that the whole population has now decided that this is the end of the line. Now they either get their act together in accordance with what has been agreed or the drydocks will simply cease. That is it. That is the bottom line.

The agreement not only gives them a potential future but the potential to earn money as we introduced a concept that has not yet been put to the test - the performance-related bonus. They can only start to understand the benefits if they start to work efficiently, increase their productivity. And they will find that the drydocks as an operation will gain, while they will also gain as individual workers.

One of the things often said was that the drydocks could never show a profit because of its debt burden. Could it now show an operating profit and when?

I strongly believe it can, not in the short term but through the restructuring. We are now starting the third year of the seven-year plan. If things develop as we hope they do, including the targeted turnovers and productivity, then by the end of the plan, it should be at a break-even position.

Would that require further layoffs - or new blood through apprentices to fill skills gaps?

There are no layoffs targeted in the plan, so we have reached the ideal number indicated by Appledore...

And the right skills mix?

Yes, and the right skills mix. Having said that, we know that there is a natural wastage. In fact, there are 30 apprentices envisaged every year over the seven-year period. They would be trained in the multi-skilling we are insisting upon. The engagement of apprentices started two years ago and my information is that out of a group of about 30, only a few remain working there. However, I am still convinced that, as time goes by, and if things work out as we hope, it will attract young people to train and eventually work there.

It will also require a capital investment to modernise some of the equipment.

Taxpayers may argue that that is throwing good money after bad especially as its future is not yet certain...

We must remember that we have a report by experts, which highlighted the type of capital investment required. The total cost of the seven-year plan included this, so when I say it will break even this is taken into account. The figure should be in the region of Lm10 million. In the plan we had submitted to the European Union for approval this capital investment was included.

I must also point out that the super-yacht business appears to be doing even better than projected. So this is a new source of work and revenue for the drydocks. We have been told that we have the best facilities in the Mediterranean. There is no other dock the size of ours covered to allow specialised painting work.

What was the turnover of the super-yacht facility?

I don't intend to give details for a very simple reason: This is information that our competitors would love to have, both local and foreign.

There was much need to have a strategic partner - however, Palmer Johnson in Savannah has been sold and you may end up without the right to use its brand name. How would that affect your marketing?

We have had success in the past months without PJ next to us, so it is all our own. Of course, a strategic partner would multiply that success and if the PJ partnership does not materialise because of the legal complications - which have nothing to do with Malta - well, it would be a pity as PJ are one of the six best companies in the world in this business. But if not, I am sure we will find another partner.

Do you actually require one?

I think we could go it on our own but a strategic partner with an international reputation will boost the operation, which could turn into an enormous revenue generator.

So we need to take a decision when the time comes as to whether to continue to set up with PJ or to go for someone else.

Let us talk about the 900 people that were transferred from the 'yards. Has productive work been found for them? Many people argue that all we have done is rob Peter to pay Paul, as taxpayers are still paying their salaries...

The 900 are actually 500 as 400 of them opted for the early retirement schemes, etc. These 500 have been placed into positions that we have been preparing for the past nine months.

A month or two after the general election we started to prepare for this move and the first thing we did at Cabinet level, in agreement between myself, Minister Austin Gatt and Minister John Dalli, was to agree to freeze all engagements across the board.

All government corporations, agencies, departments were told, in writing that they would only be authorised to engage industrial staff if they got clearance from Mimcol who were, in turn, instructed to keep a database identifying the vacancies within the whole public sector, blocking them off in the knowledge that when the time came we would fill those vacancies from the Drydocks.

That meant the corporations already had the funds, as those were vacancies that needed to be filled. All we did was fill them by restructuring the public sector, moving them from areas that were not productive to ones that were.

We started with industrial grades but eventually moved on to others. In my social security department, for the past 12 - 15 months - I started even before the election - I asked for the replacement of clerical staff to be suspended. So I had vacancies for about 15 clerks here. Fourteen drydocks staff were allocated to these. I saved the government from engaging 14 new people.

I think that exercise worked extremely well. It was not perfect and still is not. It is being fine tuned as about 220-230 of the 500 were allocated to local councils and that is still being examined as we wanted it to be beneficial for the local council.

But, in fact, it saved the government money.

It is still early and I need to find out whether those transferred to us are actually achieving the efficiency and productivity that we want in our department. But we have to be reasonable and understand that it is a big change. They have to get used to their new responsibilities, to be trained. The first indications in my department - I can't speak for others - is that they seem to be settling down.

I think it could be the ideal model for a restructuring exercise within the public sector.

Back to the Lm300 million debt. Taxpayers are already concerned by the high national debt, even though the Lm300 million was already reflected there through the corporations. However, the government wants to recover some of that debt by taking back the 'yards assets. What is the value of the land at Marsa and how much would you recoup by selling or renting it?

You are again asking for details that I would not like to make public at this stage.

The value of the land does not equal the debt, definitely. But the potential is enormous and we have good ideas, very exciting ones for its future. But it is early days. We will eventually come out with specific plans.

As you know we are taking over all the assets and leasing back to Malta Shipyards what they require to operate - the land, the buildings, the equipment.

So is the footprint covered by the drydocks being constantly re-assessed to reflect the new size of the workforce and the new type of work?

The whole span of land, from Cospicua to Marsa.

Do you anticipate changing the use of some of it, say from industrial to commercial or recreational?

Of course, there are a lot of options. It is in a very interesting position, prime site from every aspect, whether industrial, services, real estate, linked to the Cottonera project, the cruise liner project. It faces Valletta, it is a fantastic area.

The government has plans to develop Marsa - not the drydocks land, but the area near the roundabout, which could be linked to this.

The take-over of the assets also means that the development of Dock One is now in the government's hands and action has already been taken between Minister Francis Zammit Dimech and myself to revisit the proposals that were on the cards and progress is being made.

So when will we finally see something happening?

I hope this year there should be substantial progress on how it will be developed.

So you are hoping to generate revenue to reduce the debt, as you have control over it... It sounds too good to be true. Is it just a politician's dream?

A politician has to dream; without dreams he would be just another pen-pusher. But this is realistic, it can be achieved. There is the asset. There is the potential. There is international interest in the projects we have in mind. Now we have to get it all together.

The Maltese people have taken something back for their Lm300 million.

Much of the money owed by the drydocks was actually owed to the government or government corporations like Enemalta and the Water Services Corporation...

There are not large amounts in terms of Enemalta. The amounts are not as large as people think. Most of the debt is losses accumulated from year to year, covered by the government through loans. The majority is due to banks that are guaranteed by the government.

So will there gradually be repayments?

There will not be repayments. The Lm300 million will actually be set off against the value of the land taken by the government and the rest will be written off.

So long as the drydocks continues to lose money, then the national debt will continue to increase, as will happen for the next five years. This will be added on to the debt until it reaches break-even point. That is one aspect.

With regard to the accumulated debt, that is already in the national debt. What we will do is maximise the assets. If we work it out right and get what it deserves, then we should not only be in a position to address national debt issues but also to generate employment, making use of land that has so far been under-utilised.

One of the assets we have not mentioned is Manoel Island. This used to be one of the profitable parts of the drydocks. What are the plans for that?

It is still profitable. The intention at this stage - as envisaged by Appledore - is to continue to develop it, as it is a successful service to the yachting industry. Work is also carried out in conjunction with local companies and work is being generated not only for the Manoel Island 'yard but for other companies.

As you know, the national strategy is to set up Malta as a centre for yachts with marinas, wintering etc. It is an industry with a lot of added value.

Are there plans to increase hard standing (storage out of the water)?

There must be, as the increase in yachts requires an increase in hard standing space. The problem is that even Manoel Island requires a substantial capital investment.

The Manoel Island development envisages the 'yard staying where it is. But we have to keep our options open. I think we have the theory in place. We now have to see it work in practice and be flexible. Things could change from one day to another and we could find that there is an opportunity for us to amalgamate and improve efficiency and productivity if we move people from one side to the other.

When Mr Moore was beaten in December, no action was ever taken against anyone at the drydocks. We talked about the negative press in international papers: Wouldn't this have been the time to show that the government and the drydocks had a zero tolerance approach?

The information I have is that the management at the drydocks intended to take action. It appears that the workers did not attack Mr Moore at first but the GWU secretary Alfred Cassar. Peter Moore intervened to protect him and, in the end, Mr Moore, Mr Cassar and GWU deputy general secretary Manwel Micallef, who went on site, were all involved.

Those are the facts as they were reported to me. I said that we should take action against those who were in some way involved in this incident. But the problem was that you have to identify whom. There were about 500 people gathered around the area...

Dr Gonzi, please, are you telling me that nobody there could identify those involved?

That is what I was told.

That is because they did not want to identify them because it was not tactful or diplomatic to do so at that stage of the negotiations.

I don't think that Mr Moore would simply refuse to give names. If Peter Moore knew who actually hit him, I am sure he would name them.

Unless it was not tactful to do so then.

No, no.

Of course, there were issues that we had to take into consideration...

Yes, you were at the point that you were trying to keep one GWU committee on and not have it replaced by another.

No, not that. Absolutely not. That did not feature at all in my reasoning. What featured was the fact that I knew that two important contracts were on the line and I knew that one particular one was important for the 'yard. And in my priorities, I wanted to make sure it was not lost.

But you lost the contract and still the attackers got away with it.

Yes, the contract was lost. I would not say they "got away" with it as there is still the option for management to take action against those involved. It was less than two months ago so disciplinary action can still be taken, if there is a case.

So, is that going to happen?

I don't know. I need to know that if action is being taken it will be substantiated by evidence. The disciplinary proceedings that will have to be taken will require, like everything else, that evidence against individuals be substantiated by proof. If I am given the proof or shown that it exists and that it can be proved in a disciplinary tribunal in accordance with the new collective agreement then I will certainly insist that action will be taken.

I certainly don't want to start something that will end up strengthening the hand of people who intend to disrupt the whole process.

The new GWU committee's role is vital in the future, especially as it is this section of the union which flexes its muscles not just at the drydocks but elsewhere. Have you met the new committee and how do you see their attitude? They started off on the wrong foot by promising things they could not deliver.

I was told that before they were chosen they said they would renegotiate the collective agreement. If that is correct, I can tell them immediately: "Forget it. We will not renegotiate a single fullstop or comma of that agreement. And if there is trouble it will affect in an extremely negative way the whole drydocks operation and the jobs of those still working there".

Is it alarming that you haven't met them yet?

The committee was only set up officially just over a week ago.

I would have thought it would have been the first thing on the agenda.

Not really. I believe that the first contacts have been made with the drydocks management. As far as I am concerned, no requests have been made to meet me. That is reasonable as I do not expect to be involved in the day-to-day issues.

So the fact that they have not asked to meet you may indicate that they got the message.

It may... The top people at the union - including general secretary Tony Zarb - have made it clear that people will be expected to operate within the rules of the GWU. I appreciate that this message means that all the sectional committees, including this one, now have to follow what the GWU has negotiated and agreed with the government.

I understand that the top people at the GWU are trying to keep things under control. We'll see.

Your message is very simple: All the restructuring efforts, all the marketing efforts, all the government's efforts are only going to work if there is industrial peace.

Let me put it more bluntly. There are 1,600 people working at the drydocks. Their jobs now depend on what they do in the coming months - not on what the government does, not what the union does - but on what they do. Their jobs are on the line.

Is it possible that they do not consider this to be such a terrible scenario, in view of the retirement schemes and termination benefits they might be offered?

There will be no retirement schemes offered to the 1,600. There will be no alternative jobs offered. If this thing fails, they will all be declared redundant and their jobs will be terminated. This is what they are risking: It is not what the government is risking, it is not what the Maltese people are risking. This is what the 1,600 people are risking.

If we did not think it could be a success, we would not have gone through all this; we would have simply called it a day.