On July 2, 2008 Parliament discussed the privatisation of Malta Shipyards Limited. The following day The Times reported Prime Minister Lawrence Gonzi as follows: “Dr Gonzi said the Privatisation Unit was preparing the necessary documents for an international call for interest to be issued as soon as possible and it was hoped that the privatisation would be concluded by the end of the year.

Dr Gonzi is duty- bound to inform the public whether Palumbo is in default, as is visually evident- Sammy Meilaq

“It was expected that the main criteria for the choice of the best bidder would be: the company which offered to employ the highest number of workers, the company with the best reputation and experience, the company which offered the best commitment for investment, the company which made the best offer and the company which had the best business plan for the future of the shipyard.”

The government went on with the process, not heeding the General Workers’ Union advice to contact directly the major operators in the field to encourage them to bid. Eventually it awarded Malta Shipyards to Palumbo, a relatively small Italian company.

The “best commitment for investment” referred to by Dr Gonzi in Parliament is specified in the Investment Plan part of the award contract. It comprises a development expenditure of €23.5 million over a five-year period. During the first year Palumbo was bound to invest a total of €5.45 million, subdivided into €3.45 million for plant and machinery, and €2 million for infrastucture. The expenditure for the second year should reach €5.3 million. But if one takes a quick look over the bastions surrounding the shipyard one finds it reasonable to conclude that no such amount of development has been carried out.

Dr Gonzi is duty-bound to inform the public whether Palumbo is in default, as is visually evident. The Labour opposition would do well to demand from the government a detailed breakdown of the investment carried out to date, also ensuring that normal maintenance costs are not included under investment and development. After all, the lease contract conditions are an agreement between Palumbo and the people of Malta, as represented by the government.

The next consideration is for Dr Gonzi’s “the company which had the best business plan”. The resulting facts are very unusual. After operating for 18 months Palumbo has simply failed to make better utility of the existing capital facilities, netting only the smallest of contracts. Profitable major refits and major repairs are absent. This would now seem to be a company policy. The two most qualified and experienced managers who could deliver on major contracts, Vince Micallef and Vince Pulis, are no longer employed by Palumbo.

Now all this is indeed very strange. Ship repair profitability obeys the law of economies of scale, at least till reaching an upper limit. In ship repair the average cost per unit of production falls relative to increased scale. Unnecessary under utility of capital is nonsense, unless other latent objectives exist, in which case the matter, besides remaining within the domain of the employer, becomes also one of social concern. The situation seems even stranger considering that ship repair operations were already profitable before the yard was privatised and leased to Palumbo.

The recovery in ship repair work during the last quarter of 2007 and the first quarter of 2008 was an average of 235 per cent on direct labour costs, which shows a clear net profit after allowing for all indirect and overhead expenses. These figures are authentic and were published by the GWU in December 2009. In fact practically most of the subsidy of the last years of Malta Shipyards went into the coffers of the Fairmount sub-contractors. So much for Dr Gonzi’s “best business plan”!

As for Dr Gonzi’s “the company which offered to employ the highest number of workers”, the situation is simply incredible. Did Palumbo offer Dr Gonzi to employ a squad of 50 men, as is the case, or is Palumbo in default even here? This is a very simple question that can be satisfied by a very simple reply.

Additionally, one has to note that the employment is not permanent but temporary. Palumbo managed to secure a 30-year tenure of the shipyard from the people of Malta through the government. Yet the company will only grant three-month or six-month contracts to its Maltese squad, who could very easily be employed on a permanent basis without Palumbo incurring any disadvantages at all. Worse still, Palumbo appears to have done away with the facilities that the workers had been provided with in case of an accident on the job, which, as is well known, can be very nasty in the case of shipyards. These included the services of a doctor, a nurse, a clinic and an ambulance. Even the British imperialists treated the Maltese shipyard workers with more respect in this regard because they provided these services as well.

Considering all these facts, it is no wonder that managing director Antonio Palumbo is refusing to face the GWU as the legitimate representative of the workers. No wonder he feels so uncomfortable. But the workers are union members, as proven by the checks carried out by the Department of Industrial Relations, even though Mr Palumbo has not recognised the GWU. They have a legal right to unite, as established by the laws of Malta, and demand a proper and decent collective agreement that includes job stability. This right derives also from the fact that in private enterprise labour is the other side of capital, so both sides are interdependent. On matters of industrial relations Palumbo is certainly in default.

Mr Palumbo’s provocative behaviour leaves no option for the union except to react and oppose. As for Dr Gonzi, the privatisation of Malta Shipyards has been another of his exercises in delivering the opposite of what he promises.

Mr Meilaq is former chairman of Malta Drydocks.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.