Foir Teo: Good Money after bad

THE GOVERNMENT INDUSTRIAL AGENCY, FOIR TEO, HAS PUMPED 20 MILLION POUNDS INTO AILING COMPANIES OVER THE PAST FIVE YEARS. TOM ANDERSON ASSESSES ITS PERFORMANCE

WHATEVER IT IS about the way moddern industrial economies are developing, it is becoming an almost universal phennomenon that less and less labour is reequired. Mainly this comes as a result of increased automation in almost every industrial activity. The change-over point came when the increase in world productivity outpaced the increase in economic growth. This meant simply that technology had advanced to such a stage that labour was a declining input.

On the periphery of the world stage, Ireland is buffeted about and to a large degree at the mercy of international pressures. These can of course be aggravated by misjudged policies. The I.D.A. for example, has been allowed to follow a course of bringing into the country industries of, in almost every case, a capital-intensive nature. Few of these have any connection with the local economy and have created neggligible spin-off employment effect.

And it is not just the I.D.A. As in many other areas, the Irish Government perversely seems to be trying to make employment worse. The export tax relief scheme on industrial goods has created the dilemma whereby a basic industrial manufacturer is almost forced to ensure that his output is not further processed in Ireland. If he sells his outtput in the country for further processsing, he will lose precious tax exempptions. Thus, for example, if Tara Mines is forced to sell its concentrate to an Irish smelter, export tax relief would be foregone. So too, a company like Irish Leathers, which processes cattle hides into leather, cannot then sell this leather in Ireland for further processing as it would lose its tax relief.

Although almost every Irish Governnment has acted perversely in creating employment, they have more or less accepted the major burden of responnsibility for unemployment. The acceptted view is that everybody should have the right and opportunity to work. It is no good the Government offering palliatives like unemployment assisstance, wage related benefits, and lump sum redundancy payments. These only serve to cover up a social disease. In one of the few attempts to ensure that some existing employments under threat of extinction were preserved, Fianna Fail founded the industrial rescue agency, Foir Teo in 1972.

Over the last five years, F oir Teo has pumped almost £20m into a whole range of Irish companies which would otherwise have gone out of business. It was specifically set up to act as an agency of last resort, that is when all other avenues had been tried and found wanting. This is not to say that its job was to pump money in, at random, to any company that asked for it, in order to save jobs for the sake of it. Foir, in fact, has quite a specific brief that is intended to give it a very positive function.

CHALLENGING TASK

It is Foir's job to save any industtrial company that would otherwise go out of business as long as, and only if, 'it can be restored to permanent viaability'. This is admittedly a challenging task, and one that is not made any easier by the way political pressure is brought to bear on almost every situation in this country. It is difficult enough trying to save a company which has been spurned by every other finanncial agency, and thus more likely to be on its deathbed than simply its last legs. The additional factor of having to deal with political pressure is thus something that makes the task, in some cases, impossible, and doomed to fail from the word go.

Without knowing the inside facts and having access to the consultants' report that has to be drawn up before Foir Teo can grant any money to an applicant, it is difficult to identify the cases where Foir did not act in accordance with its brief. But one can certainly see a nummber of very peculiar situations that have developed. In the last three months, two major industrial complexes in Co. Louth have reached crisis point. One of them has already closed down, and the other will only remain open if further major sums are pumped into it on a continuous basis.

Coming up to an election, Governnment T.D. 's and Ministers are parrticularly sensitive to any major factory close down. Between January this year and the election in June, both Castleeguard Textiles of Ardee, and A.E.T. of Dunleer had called on Foir Teo in desperate efforts to keep going. Castleeguard was in a particularly bad way, for its parent, Seafield Gentex, was losing money so fast that drastic action had to be taken. It could only have been put off by Foir Teo, not just promising but also handing over cash to the group. It is not clear exactly what happened, but from the debate that went on in the Dail in mid-October, it is possible to get an idea.

According to the present Minister of Finance, George Colley, Foir Teo advanced £ 120,000 to the Seafield Gentex group before the Coalition left office, and a further £1,095 ,000 since then. None of this could have been done without consultants' reports, which would have had to be undertaken much earlier in the year. The Seafield Gentex Group had lost £1m in the thirty months up to March this year, and Castleguard alone lost £130,000 in the six months to March '77. Castleeguard losses were accelerating, and clearly Seafield's managing director, Dick Lord, would only have kept it open until September if he felt Foir Teo would come up with the goodies.

The fact that nearly all the negootiations about Castleguard must have taken place before the election, and that some of the money to be advanced by Foir Teo to the Seafield group had actuaily been handed over before the first of July, does suggest that political pressure may have come from the Coalition. As Dick Lord announced the closure of Castleguard Textiles in September, less than three months after this company alone had got £450,000 from Foir Teo, either Foir Teo was gravely mistaken in giving money to a company just about to close down or the suspicion arises that it was acting under political duress.

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LOANS BY FOIR TEO UP TO JANUARY 1977

Name of Company   Amount of Loan
  
A.E.T.   2,800,000  
Allum   20,000  
Arklow Pottery   304,000  
Athlone Apparel Co.   33,332  
Avoca Mines   300,000  
Avongate Milk Prod.   326,000  
B. McDonnell   12,556   Shantan   34,000  
B.H.L. Teoranta   10,000  
Ballingarry Collieries   467,032  
Ballybay Tanners   159,000  
Balman Clothes   100,000  
Beverly Bags.   40,000  
Birr Fabrics   70,000  
Breffni Textiles   10,000  
Burke Higgins McNulty   67,900  
Cahill & Co.   62,322  
Callaghan & Connolly   3,295  
Cappincur Joinery   495,000  
Carbery Milk Prod.   131,029  
Carbery Sea Prod.   20,000  
Carrigaline Pottery   64,089  
Castle Shoe Co-Op   13,000  
Castleguard Textiles   100,000  
Celtic Toys   40,000  
Clover Meats   243,750  
Collier Bros.   15,000  
Colt Twist Drill Co.   120,000  
Connacht Concrete Prod.   5,245  
Connemara Carpets   10,000  
Connemarble Ltd.   14,000  
Constant Laboratories   8,841  
Container Engineering   149,000  
Cork Shoe Co.   163,130  
Crannac Co-Op   50,000  
D. F. O'Sullivan   40,000  
Dubarry Shoemakers   185,459     45,000
Dubtex   100,000  
Duleek Engineering Works 15,000  
Eagle Printing Co.   187,482  
Edward Ryan   21,000  
Eiron   100,000  
Enniscorthy Engineering Co.   15,000      
Erne Tool & Diemaking    
Fane Valley Co-Op   142,000  
Farrell Engineering Co.   15,000  
Fermoy Manufacturing Co. 18,832  
Flemings Fireclays   80,000  
Greenmount & Boyne   170,000  
GW.1.   644,386  
Hampton Mills   100,000  
Hanley Brothers   25,506  
Hill & Sons   155,000  
Hirch Ribbons   10,385  
I. & S. English    6,525  
Ideal Menswear   45,000  
Inch Turf Co.   11,134
Inishturk   140,000  
Irish Biscuits   437,616  
Irish Cable & Wire   250,000  
Irish Decor   3,000
Irish Dunlop Co.   325,000  
Irish Foundries   60,000  
Irish Spring Unit Co-Op   18,800  
Irish Tapestry Co   15,000
J. Birth   30,000  
J. J. O'Leary   67,000  
J. Mandleberg & Co.   25,000  
J. Murphy & Sons   83,800  
James J. Murphy   545,000  
James Kenny & Sons   8,000  
Jay Bee   26,751  
John Hackman Engineering 45,000 
John McLaughlin   60,000  
John Orr   28,000  
Joseph Gardner   21,988  
Joseph H. Fletcher   20,000  
Kerry Precision Ball Co.   100,000  
Kevin Britton & Sons   15,000  
Kilmore Quay Fish Co-Op 15,000  
Kilrush Timber Prod.   40,000  
Kingscourt Bricks   132,600  
Lissadell Towels   130,000  
Lovegrove Fabrics   58,000  
MacGrath Dougles   4,800  
Macroom Carpets   38,000  
Marina Textiles   30,000  
Martin Mahony   240,000  
Masser lronfounders   452,000
Mayco   157,000  
Metal Prod.   300,000
Milplant   25,000
Moloneys of Cappagh   91,000
Montay   20,000
Morco   120,000  
Munster Chipboard   150,000  
National Engineering   30,000  
Navan Clothing   93,000      
North Dublin Growers   50,000  
O'Dea Shoes   40,000  
Palmer Prod.   28,000  
Porcelain Prod.   10,000  
Prodieco   10,000  
Pye (Ireland)   210,000  
Qeleq   80,000  
Rossmore Antsacite   49,000  
Seafield Fabrics   100,000  
SI. Patricks Mills   30,000  
Smith & Pearson   375,000  
South coast Boatyard   50,000  
Spollen Concrete   25,000  
Steadfast   44,000  
Swift Marketing   48,000  
Tailteann Textiles   183,000  
Talcoma   59,000  
Tanco   71,000  
Telectron   242,000  
The Creation Group   175,000  
The Leitrim Furniture Co.   75,000  
Thomas McArdle   200,000   Semperit   900,000  
Thomas Thompson   179,000  
Tyna Knitwear   35,000  
Verolme   2,052,000  
Waterford Co-Op   54,000  
Wayte   234,000  
Webster Hardware   52,000  
Westport Textiles   100,000  

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CABINET DECISION

A.E.T. is in a slightly different posiition, for it is actually a subsidiary of Foir Teo which holds two thirds of 'its eq uity. There was no Dick Lord sitting over this company having to decide to call it a day. This decision could only have been taken at Cabinet level. At the beginning of this year, the company was in dire straits and only kept going by having £2%m pumped into it by Foir Teo, and has had this year a further £lm pumped into it by Foir Teo. Franz Van Der Werff, the man who ran Wavin Pipes and is now in the hot seat at A.E.T., is convinced that the commpany has a future but his intention is to drop one of A.E.T.'s main products, electric kettles, because 'of competition from over the Border. It does not look like' many jobs are going to be left at the end of the day here, even if A.E.T. is saved.

Down in Cork, a somewhat similar situation existed back in the old Fianna Fail days. The two companies there that received Foir Teo fundings were, in this case, the Cork Shoe Co., which got £163,000, and Martin Mahony, the Blarney textile company, which evenntually ended up with £580;000 of State funds. With weak management and a dated product line, there was little future at all for Cork Shoe, even with a major reshuffle. It was, however, kept going with F oir money which was widely believed to have been a political handout. But the attempt has since failed.

Martin Mahony is a different kettle of fish. It was a company quoted on the Stock Exchange, but still tightly run by the Mahony family. In the early seventies, Atkins, the British consultants, were commissioned by the Government to undertake a review of the woollen textile industry. It recommended that three companies be immediately liquiidated, and their plants shut down. It also recommended that a further six woollen mills be closed down, and the remaining companies re-grouped to make better use of their plant.

Sunbeam Wolsey had actually approached Martin Mahony with a view to rationalising production between the two companies. Mahony's however, reefused to co-operate and instead went its own way. And between 1971/73 had plunged into the red and lost a total of £455,000. Despite' this background, Foir handed Mahony £300,000 in 1973, a further £180,000 in 1974, and when Mahony went bang in 1975 had £580,000 outstanding. Other companies in the woollen textile industry suppported by Foir Teo were Mulcahy Reddmond of Ardfinnan, Co. Tipperary, Irish Worsted Mills of Portlaoise and Fine Wool Fabrics in Wexford. All of these companies eventually went to the wall.

By supporting textile companies against the recommendation of the Atkins Report, all Foir Teo did was prolong their existence, and as a conseequence, actually hindered industrial rationalisation.

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GROSS OVER CAPACITY

The structural steel industry is another area where Foir stuck its' nose in, despite the fact that there was gross overcapacity, and some companies just had to go out of business to allow more viable operations to survive. It lent £48,000 to J.Murphy & Sons of Cork, £60,000 to Burke Higgins McNulty of Clonmel, £178,000 to Thomas Thomppson of Carlow and £375,000 to Smith & Pearson, and £100,000 to 1. C. McGloughlin & Co.

Although both Murphy and Burke Higgins McNulty have gone out of busiiness despite Foir Teo's assistance, the remaining companies are still having a very difficult time. J .C. McGloughlin & Co., a subsidiary of the T.M.G. Group, is kept going largely because it is a member of a larger and successful grouping. T.M.G.'s chairman, Michael Smurfit, specifically identifies assistance granted by Foir Teo to companies in the structural steel industry as the major single factor behind the industry's continuing malaise.

There is absolutely no doubt that by taking tough action, even if it means forcing existing managements to retire, that Foir Teo can do a very valuable job of work to save employment that might otherwise disappear. There have been mistakes like Infotronics, which ran into trouble and was refused assistance by Kevin McGuinness and his eighteen boyes up in those nice offices in Adelaide Rd. On the whole, however, he has been doing some valuable work. If only he was allowed get on with it, free from political pressure, he could no doubt be even more effective and would have more funds free for the real job.