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A walk towards Cottonera creek will reveal a large ship repairing yard adorned by rusted steel hangars and a never ending parking lot indicative of the workers toiling at massive maritime vessels that are berthed in one of the four active docks.
The shipyard looks busy and sources confirm that it is fully booked until the end of August and the work will be carried out at very good international market rates. But that is not the whole story. There are still problems that need to be tackled to achieve viability. The state-owned Malta Shipyards formerly Malta Drydocks and Malta Shipbuilding as one of the largest employers have long been in the news. During the British colonial period, the dockyard was the cradle of industrialisation in Malta, employing a large proportion of Maltese workers and at its peak amassed a payroll reaching 13,000. In 2003, the state-owned Malta Drydocks and Malta Shipbuilding were restructured after lengthy negotiations between the government and the General Workers' Union and created Malta Shipyards. This entity absorbed 1,700 workers from the total workforce of 2,600 under new conditions, including the introduction of a shift system which in theory was scheduled to substantially reduce overtime. Under new terms, it will rent dockyard facilities from the government. Nearly half of 900 surplus workers as evaluated by the management have accepted early retirement schemes. The remaining workers have been absorbed by another new company, called Industrial Projects and Services Ltd. In turn these were largely posted to report at various local councils. This week the results for the last year were published and Dr Gatt, the minister responsible for the Drydocks said turnover hit Lm19.8 million from a projected Lm16.8 million but this still carried a sour note showing losses of Lm8.7 million.
Chris Bell, the chief executive was also surprised how the company had exceeded its turnover targets, yet this did not reflect a proportionately lower deficit. The truth is that while every effort was made by management to improve the viability of the enterprise, this was still far short of the projected productivity agreed in the seven year plan. Dr Gatt lamented that over the past five years, each family in Malta had forked out Lm3,400 in subsidies for the shipyards. This is a substantial amount and some may comment that it could have been allocated elsewhere.
One columnist even recommended that the writing off of Lm300 million in financial assistance could have been utilised to set up wind farms and photovoltaic cells across the island which over the years would reduce the current need for the 67% electricity surcharge. With hindsight one also remembers the myriad attempts by politicians of various creeds to restructure this loss-making behemoth. As far back as 1966 we saw the birth of proposals contained in the Appledore Report, which had been commissioned by the 1996 Labour government. This was a bolts and nuts approach by a consultancy firm that specialises in industry turnabouts. The yard was then shouldering the load of over 3,000 workers and losses were draining its resources and that of the country. Some draconian measures were mooted in this report and among these we find that surplus workers should be sent home on basic pay. At that time in 1997, the labour government has already declared that the workforce at Drydocks needs to be trimmed down by 900. Not withstanding a number of cost cutting measures and reforms ,in 2003 the entity reported a loss of Lm15.2 and its accumulated debts total more than Lm310 million. It was no consolation that most of the debts are with the government or government-owned agencies. Naturally being heavily unionised the solution to redeploy this workforce was a formidable political problem. Party apologists sounded the war drums crying out that it was the last opportunity to save the yard. Going back over the years, one recalls how the yard had experimented with empowering the representatives of the workers in the decision making and the general running of the business. Historically, worker board-level participation dates back to the 1970s when the then newly elected Labour government vowed to take a new economic direction and adopt a new form of industrial relations in which worker participation was to play a leading role. The original concept, involving board-level employee representatives, was inspired by the socialist ideology of worker self-management.
However, since those days worker participation at board level has increasingly come under pressure. By 1975, at the shipyard all eight directors were to be elected by the workers in a self-management system. In 1997, however, the number of elected employee representatives was reduced to four or half the board and later on in 2000 to a single representative. More recently as part of the restructuring plan the Government abolished the workers right to elect board-level employee representatives. Many commentators have expressed the hushed advice that in view of past practices there cannot be any painless surgery. Now years later after the medicine was being administered we are still hearing about substantial losses being incurred. This mainly arises because old work practices die hard and unfortunately these are a legacy of the days when the yard was run as a naval yard financed by the Colonial Office’s ample purse. Years later, when it was converted to commercial use workers’ attitudes did not automatically transform to match the higher efficiency needed to compete with other shipyards where wages and employment conditions were more competitive. In other words, a higher throughput and more efficiency is only assured when higher allowances and overtime was paid. By sheer contrast in the past decade following the onset of globalisation, we notice the seamless way that a number of foreign or locally owned manufacturers have managed to restructure their operations and entered into untapped export markets with innovative products thereby assuring themselves of commercial viability. Nothing so happened in the yards and this is a pity.
In the words of Dr Gatt, one of the consequences of not meeting targets, would be to either cut take-home pay or redundancies since subsidies are no longer an option.
EU law regulates state aid paid to this sector. In the main, the kind of subsidies that we grant the yards are prohibited under EU law because they do not support improvements, such as investments, that need to be made to return the industry to competitiveness. Exceptionally EU law allows aid for restructuring purposes, provided it is given on a "one-time-last-time" basis. It also permits regional investment aid, aid for innovation, research and development, training aid and aid for environmental protection. Following the announcement by Dr Gatt, every worker must by now realise that the yards operate in a very competitive market and it is imperative that every effort is made to finish the job on time and within the budgeted costs. In the past, attempts were made to patch up its poor image with overseas clients. This is a slow process yet no expense must be spared by the management to effectively market any strong points of a restructured and leaner workforce. Naturally re-training and re-tooling must go on relentlessly and no effort spared to diversify from purely repair work to more profitable conversion or oil rig-building orders. There seems to be no end to the yard’s saga over its struggle to become commercially viable in today's world of ever growing competitiveness. As the 'yard continues to pile up losses year after year, a sense of urgency is once again being felt by the management. Wisely, the chairman, John Cassar White summed it all up when he said: "It is a painful reality that, in many cases, the more work we have, the bigger our losses". Although turnover has in fact improved over the years since the labour force reform, yard losses won't be reduced to an acceptable level. This means that after bailing out the yard’s losses and accumulated debts which in all reached Lm400 million, the end of the tunnel is still not in sight.
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