§ Motion made, and Question proposed, That this House do now adjourn—[Mr. Durant.]
11.59 pm§ Mr. Michael Hirst (Strathkelvin and Bearsden)Any factory closure is usually a matter of great sadness, for the management, the work force, suppliers and the local community. When news of a closure is preceded by an announcement of a substantial new investment programme, which is started and then abruptly cancelled, that must surely be a matter of more than sadness. It is a matter of outrage involving justifiable accusations of rank bad faith. That is, in essence, the experience of the Caterpillar factory at Tannochside, Uddingston. A number of my constituents and constituents of other hon. Members derive their living directly or indirectly from that factory.
Caterpillar at Uddingston is typical of many of the United States-owned factories in central Scotland which have set up during my lifetime. By and large, these United States firms have been excellent employers and responsible corporate citizens. I am pleased that the hon. Member for Motherwell, North (Mr. Hamilton) is present, because I am sure that he can testify to my points as he has for many years represented the constituency which incorporates the factory. Caterpillar has known good times as well as difficult times. Over the past 30 years it has been a profitable and worthwhile operation. The management and work force have co-operated to respond positively to the many challenges that the automotive industry has faced through competition from the Japanese, through technological advance and through world economic and market conditions.
Given the concern about the number of factory closures in west central Scotland recently, it is hardly surprising that there was universal acclaim when, just a few weeks ago, senior executives of Caterpillar announced a major investment programme at Tannochside. The factory was to be designated a PWAF, a Caterpillar acronym meaning "a plant with a future". Some £62 million was to be spent re-equipping the plant with the most sophisticated robotic machinery in order to create a factory capable of achieving the significant production cost reductions necessary to be internationally competitive. A further £8 million was to be spent redesigning the factory layout and training the employees in the new technologies.
That investment programme was supported by a promise of substantial Government assistance. All that good news was announced during a visit to the factory by my right hon. and learned Friend the Secretary of State for Scotland. Indeed, the Caterpillar press release rightly identified the need for an ultra modern factory. The plant director was able to say on the occasion of the Secretary of State's visit:
Fortunately because of the new products that we are adding to this facility namely fabrications and transmissions, our manpower requirements in 1989 are forecasted to be approximately the same number—1,200 —of people as we presently employ. The £62 million investment can be looked upon as insurance against the loss of 1,200 jobs. There is no alternative to investment and training.I dare say that many people on the occasion of the Secretary of State's visit would have said "Hear, hear" to that. I am glad to say further that the plant director acknowledged in pretty generous terms the support that 462 the Minister's Department was giving to that investment as well as the fact that the company intended to apply for assistance under the advanced manufacturing technology scheme administered by the Department of Trade and Industry.
Caterpillar thus symbolised the new hopes for Scottish manufacturing business, where employee skills and commitment, allied to the latest technology and flexibility in work practices, could manufacture a world-heating product.
All was presumably well with this new investment programme, because in the early part of this month a very expensive robotic machine was installed and started test production exactly two weeks ago, just hours before an announcement from Caterpillar's headquarters in Peoria, Illinois that not only was the whole investment programme to be abandoned, but that the whole plant at Uddingston was to close. PWAF— a plant with a future: how sick these words must sound in the ears of the work force. Understandably, the announcement has caused dismay and outrage among the work force, the suppliers, the local community and in Government circles in Parliament.
Caterpillar has signally failed to provide a persuasive explanation for its decision, so soon after starting a major investment programme, to abandon it and close the factory. What has happened in the short time since that announcement to invalidate the corporate strategy that supported the new investment? Caterpillar's senior executives should have been aware of future market trends and production requirements when they made their announcement in September. Every hon. Member must know that investment decisions are made on a medium to long-term basis and are generally unaffected by short-term market hiccups — if that is what prompted the Caterpillar United States decision.
Why have the executives of Caterpillar in the United States been so unforthcoming about their reasons for closure? Can my hon. Friend the Minister, who met them last week, shed some light on the reasons for their abrupt decision? Caterpillar cannot slide out of its obligations as a major employer. It must explain its conduct, especially in view of the high-flown declaration of business ethics in Caterpillar's "Code of Worldwide Conduct and Operating Principles", from which I rather ruefully quote. It states:
We intend to hold to a single high standard of integrity everywhere. We will keep our word. We won't promise more than we can reasonably expect to deliver; nor will we make commitments we don't intend to keep. The goal of corporate communication is the truth—well and persuasively told.In the light of that and the earlier admissions by the company, I am prompted to think that, at best, the senior managers at Caterpillar have been guilty of gross incompetence in the planning of their corporate strategic objectives. At worst, their conduct borders on corporate treachery.
I accept that those are strong words of accusation, but do not the circumstances of this unique case suggest that Caterpillar has deceived a loyal and co-operative work force, that it has dealt shabbily with its suppliers and sub-contractors, many of whom have recently become recognised sub-contractors and, to do that, turned away business that might otherwise have been available to them, and that, more than anything else, it has betrayed a local community that is struggling to cope with unemployment at 20 per cent.? I do not generally support the occupation 463 of a factory by its work force, but I can readily appreciate the sense of betrayal that prompted the Uddingston work force to take the dramatic action that it has.
I have some questions for my hon. Friend the Minister, and I hope that he can give me some answers. Where do matters stand with Caterpillar's senior management? When does he or my right hon. and learned Friend the Secretary of State expect a reaction from Peoria—a reaction which I understand was promised when the president of the company met him last week? Can my hon. Friend say whether the Government have made any contribution to the investment support which they promised? What contingent plans will be made to try to protect employment at Uddingston if Caterpillar pulls out? Is my hon. Friend aware of another manufacturing operation that could secure a future for the huge Tannochside factory? Will he confirm that the United Kingdom does badly out of the decision, and that Leicester will not benefit materially from the closure of Uddingston?
We all recognise that business conditions change, sometimes rapidly, and that no factory has a God-given right to remain in production for ever. Caterpillar's decision might have been easier to understand, if not to accept, had it warned in September of overproduction or market problems rather than made that bullish announcement of investment plans. The whole House will wish to join me in condemning the actions of the senior management of Caterpillar in the United States and in supporting the valiant efforts of my right hon. and learned Friend the Secretary of State and my hon. Friend the Under-Secretary of State to persuade the Caterpillar management to reconsider its decision to close the factory.
§ 12.9 am
§ Mr. James Hamilton (Motherwell, North)It is most unusual for an hon. Member to have an Adjournment debate on a factory in another hon. Member's constituency, but on this occasion I welcome it because it means, in essence, that the Government very much condemn the action taken by the Caterpillar management. I have been associated with Caterpillar since 1956. As a member of a local authority, I greatly assisted it. We gave it every possible assistance. We demolished houses to give it a green field site. We built new houses for people whose houses were demolished, and we built houses for incoming workers. At the outset of our negotiations with the company, we found that, true American company that it was, we had great industrial relations trouble. However, we managed to right that problem, and since 1956 industrial relations have been of the best order and the product has been excellent. They are not my words but those of management.
My first intimation about the closure was when the shop steward, who happens to be a friend and constituent of my hon. Friend the Member for Hamilton (Mr. Robertson), phoned me at my home to tell me that, in Illinois, consideration was being given to closing two or three of the factories within the Caterpillar combine, and that our factory was one of those under consideration. To say that I was shattered is to put it mildly. I was absolutely flabbergasted; indeed, I thought that the shop steward was going stark raving bonkers.
464 When the Queen made her speech opening Parliament, I met one of the top management of Caterpillar in London, at his request. He told me how fortunate I was because our factory was doing well. He mentioned the £62.5 million investment. It is not just true to say that the right hon. Gentleman the Secretary of State for Scotland visited the factory, but it was set up that he should go and assist the general plant manager to make the announcement himself. He made that announcement. Indeed, in his new year message, in glowing terms he also praised the investment that had been made by the Caterpillar tractor company.
All this was done in September last year. A few short weeks afterwards — in fact, to be precise, on 16 December—the shop steward sent for the work force, and told them that the factory was to close. This closure was to be done without any consultation with the unions, the shop stewards and, indeed, me. Bearing in mind that, before the advent of the Advisory Conciliation and Arbitration Service, I performed many miracles in the factory by acting as a mediator to keep good industrial relations, these are the thanks that we got from the company.
The Secretary of State for Scotland, it is true, met the Illinois top management. The trade unions met the Illinois management, and I met them before they boarded their plane to go back to America. We put the case to them and pointed out that it was not only a case of 1,221 men becoming unemployed, but of smaller companies that were dependent on Caterpillar also going to the wall. On that basis, many of the workers had given loyal service to the company for 25 years—some of them for nearly 30 years. They were being thrown on the scrap heap with no possible chance of getting employment anywhere because there is 22.1 per cent. unemployment in Lanarkshire.
That is the thanks that we get from an American company. To say that it is scurrilous is to put it mildly. The Minister was present at the Caterpillar negotiations—if one can call them negotiations—when we tried to get the company to keep the factory open. What is the up-to-date situation with the negotiations? What inducements were given or offered by the Government to keep Caterpillar at Tannochside? What is the situation with the Belgian factory? My information is that the work from Tannochside will go to Belgium. What is the Belgian Government giving that we cannot give? What do multinational companies have that we do not? All these questions must be answered.
I am pleased that the hon. Member for Strathkelvin and Bearsden (Mr. Hirst) stated that he fully supports the union members' sit-in at the factory. It goes without saying that Labour Members support them 100 per cent. Indeed, some Labour Members have visited the factory on two occasions, and I intend to do so again on Friday morning. I want these men to know that we recognise that they are fighting for their very existence. If they do not fight now, and fight all the way, their jobs will be lost for ever.
I also want a catergorical assurance from the Minister and the Secretary of State—indeed, from the Cabinet as a whole—that they are prepared to support us 100 per cent. in our fight to ensure that that factory is re-opened and its workers returned to full employment.
§ Sir Hector Monro (Dumfries)During a week when we have had some particularly good news about new jobs, it 465 is sad that we have tonight a united House condemning the disastrous decision of Caterpillar to close its works. Our sympathy — and, I hope, a great deal more—goes to those who will lose their jobs.
I want to show that the repercussions go much further a field than Lanarkshire. In my constituency of Dumfries, Penran Engineering has provided the cabs for Caterpillar —worth £1.6 million last year, which is 41 per cent. of its sales. Fifty jobs will be lost if Caterpillar does close its factory. Penran was, of course, encouraged by Caterpillar to invest £150,000 last year in robot machinery, and because of the confidence shown by Caterpillar in the very large investment that it promised to make, Penran had gone ahead with other preparations to step up production.
Hopes have been sadly dashed, and tonight I want to support my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) and the hon. Member for Motherwell, North (Mr. Hamilton) and urge my right hon. and learned Friend the Secretary of State to keep up the pressure being exerted on the directors of Caterpillar. I am sure that he is supported by my hon. Friend the Minister, who is responsible for industry. We all feel that every endeavour must be made to persuade the directors of Caterpillar to change their minds and retain what is a thoroughly efficient and effective factory that provides jobs not only in Lanarkshire but, indirectly, further a field.
§ The Parliamentary Under-Secretary of State for Scotland (Mr. Ian Lang)I welcome the opportunity given to me by my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) to explain the circumstances surrounding Caterpillar's declared intention to close its Uddingston plant. This decision has aroused feelings of shock and anger and has led to accusations of deceit, and even betrayal, from within all political parties—not only at the decision to close, but at the manner in which it was taken and announced. Many of those sentiments are widely shared by the public at large, and the Government, through the statements of my right hon. and learned Friend the Secretary of State for Scotland, have made their concern known.
I especially welcome the speech of the hon. Member for Motherwell, North (Mr. Hamilton) and the unity of purpose displayed in his remarks. I pay tribute to him for his work over the years with Caterpillar, which is in his constituency. I am sure that the House will readily understand his strong personal feelings about what has happened and his concern for his constituents in these circumstances. He and my hon. Friend asked a number of questions, and I shall try to answer as many as I can in the time available.
In December 1985, Caterpillar of the United States of America announced a five-year 600 million dollar modernisation programme to automate its manufacturing facilities worldwide. In the light of group investment intentions, Caterpillar management at Uddingston put together a five-year investment plan which my officials were advised had received group approval in principle, subject to the availability of an acceptable level of financial support through regional assistance. The intention to invest was widely publicised at that time throughout the Uddingston plant, which had been designated by the company as a PWAF — the corporate acronym for a "plant with a future".
466 Caterpillar UK Ltd. is a wholly owned subsidiary of the US Caterpillar Inc. The United Kingdom company, with plants at Uddingston and Leicester, employs over 1,900 in the manufacture of tracked vehicles, lift trucks and backhoe loaders, plus spares and components for use in products assembled at other group facilities. The Uddingston factory was established some 30 years ago and now produces the D6 range of earth-moving tractors for sale in Europe, Africa and the middle east; this is regarded as the plant's prime product, although the same range is produced at Caterpillar plants in France, Japan and the United States of America.
The manufacture of replacement parts and components for other product types now accounts for a substantial part of the plant's output in which Uddingston is effectively operating as a sub-contract supplier to the group. The vast majority of its production goes to export markets, via other group plants and subsidiaries. Having at one point employed some 2,500, the 1 million sq ft plant now has a work force of less than 1,200. Until 1979, the Uddingston plant produced three models of earth-moving equipment, but is now reduced to one main product type, the D6 tractor. In 1983, application was made for regional selective assistance in order to secure continuing manufacture of the D6 range, and a substantial offer of selective grant was subsequently offered to, and accepted by, the company. This offer of assistance was in addition to the company's entitlement to regional development grant, payment of which has proceeded in the normal way.
In July 1986 the company received a further offer of substantial regional selective assistance grant towards a major capital investment programme to modernise the Uddingston facility, with the intention of improving its efficiency, driving down production costs, and broadening its product base. This offer of assistance was again in addition to the company's entitlement to regional development grant. The offer of regional selective assistance was accepted by the company in August 1986. However, I can assure the House that no payments of either regional selective assistance or regional development grant have been made to the company in respect of this major project.
My right hon. and learned Friend visited Uddingston in September 1986, and in applauding the development praised both management and work force for their efforts in attracting such an important project which would ensure the plant's future for years to come. In reply, the Caterpillar representative spoke of the need to invest and train, and said that the project could be looked upon as an insurance, as my hon. Friend said, against the loss of 1,200 jobs at Uddingston. All seemed set fair for the future.
It was on 8 January 1987 that my officials first learned of the possibility that the company might not proceed with this major investment programme, and might close the Uddingston plant. The possibility of closure was being considered in the light of a further review of the group's global capacity. On 9 January my right hon. and learned Friend contacted Caterpillar in Peoria, Illinois, urgently asking for clarification of the position and indicating that he had instructed an official from our Locate in Scotland Chicago office to call on the company to discuss the matter. An official from Chicago visited the company in Peoria on Monday 12 January. At that stage the company 467 was not prepared to discuss the outcome of its review but confirmed that one option being considered involved the closure of Uddingston.
There were further contacts with the company the following day, 13 January, but on 14 January Caterpillar formally announced its intention to close the Uddingston plant. The announcement also made it clear that two plants in the United States of America were also to close — one at Davenport, Iowa, and a second at Dallas, Oregon. We understand that the company's plant at Leicester, which manufactures backhoe loaders, is secure.
My right hon. and learned Friend sought urgent talks with the company and on 20 January my right hon. and learned Friend and I met the president of Caterpillar and his senior colleagues in London. We left the company in no doubt about the strength of feeling in the United Kingdom following its decisiion—particularly following the very positive announcement in September. I am sorry to say that we received no satisfactory explanation of the company's change of mind. At the conclusion of the meeting, my right hon. and learned Friend invited Caterpillar to reconsider its decision to close Uddingston. We await the company's response.
Following the meeting with Caterpillar's senior management, my right hon. learned Friend met leaders of the Amalgamated Engineering Union and representatives of the work force.
I have felt it useful to recount this narrative to the House at some length to underline two important points. First, the Scottish Office had little forewarning that the company had changed its plans, but as soon as we became aware of the possibility, high-level contacts were immediately made with the company. Secondly, when the intention to close was announced, my right hon. and learned Friend took immediate steps to make his concern known to senior representatives of the company.
I should also emphasise that the Government's concern arises not from any wish to intervene in the affairs of private companies. The circumstances of this case are highly unusual. In September the company accepted an offer of Government financial assistance for a major new project, the specific purpose of which was to give the Uddingston plant a future. My right hon. and learned Friend, at the company's invitation, participated in the public announcement of the plans. Three to four months later, and with no warning, not only is this major new investment cancelled but it is announced that the plant itself, which has been there for 30 years and which has successful products and a good work force, is to close, with the loss of 1,200 jobs. What happened in those three to four months to cause such a dramatic change of plan has as yet not been explained other than in the most general terms.
The company made plain, both in September and subsequently, its satisfaction with the package of regional aid offered to it. The hon. Member for Motherwell, North referred to Belgium. I can reassure him that there have been no problems over regional assistance. If it were a case of trying to find more regional assistance, and if that would resolve the problem, we would be willing to consider it.
468 In these circumstances, the Government's great concern should come as no surprise to anybody. My hon. Friend the Member for Dumfries (Sir H. Monro) referred to the circumstances of one of the suppliers of Caterpillar, Penran in his constituency. I fully understand the serious impact that this decision could have on that company. All I can say to my hon. Friend at this stage is that if the worst were to happen, we would be anxious to do what we could to help that company find alternative markets.
Having described the circumstances surrounding Caterpillar's declared intention to close its Uddingston plant, it may be helpful to hon. Members if I add one or two comments concerning the wider implications of these events for our policy on inward investment. I know that this has been a subject of considerable comment in recent days.
I do not for one moment underestimate the gravity of the consequences should Caterpillar untimately implement its declared intention to close the Uddingston plant. Nevertheless, we must still not get things out of perspective. Within a few days of Caterpillar's announcement, there were two other important announcements of major new inward investments. Together these will bring to the west of Scotland roughly as many jobs as there are presently at Caterpillar. I refer, as hon. Members will have guessed, to the anouncement by Compaq Computer Corporation to site its new European manufacturing plant at Erskine. I also refer to the announcement made only a few days ago by the Kymmene-Stromberg Corporation of Finland of its intention to construct a new paper mill at a site in Irvine. This will be the largest-ever single inward investment and will provide around 480 new jobs directly and 400 related jobs throughout Scotland. Together, then, these two announcements promise something over 1,200 new jobs within the next few years.
Serious and regrettable though Caterpillar's announcement may be, it is no reason for us to jump to hasty and unwarranted conclusions about the important overall role that multinational firms are playing in Scotland, and I am quite confident they will continue to play as far ahead as we can see.
Turning back to Caterpillar, I do not think it is profitable at this stage to speculate on what will happen if the company is not prepared to review its latest decision. For the moment, as I have indicated, we await the company's response in the light of its meeting with my right hon. and learned Friend and myself. Our objective remains quite clear. It is to do everything possible to try to ensure the continuation of manufacturing operations and employment at the Uddingston facility. To that end, we have indicated to the company a readiness to discuss with it what possibilities of achieving this may exist. We have made it clear that this is not a question of trying to persuade it to do something that is against its commercial interest. We believe, however, that, given the success of the plant's products and the strength of its work force, a careful review of the apparently hasty decision to close is worth undertaking. I and my colleagues stand ready to help in whatever way is possible to find a way forward.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-eight minutes past Twelve o'clock.