Committee Reports > List of Committees > Joint > 1981 > Committee on State Sponsored Bodies > Report No. 15 - Irish Shipping Limited

FIFTEENTH REPORT

IRISH SHIPPING LIMITED

I INTRODUCTION

1.1 Background

1. In March 1941, Irish Shipping Limited (or Irish Shipping as it is known) was incorporated under the Companies Acts. It was established with the primary purpose of ensuring the availability of sufficient shipping capacity to keep open vital supply lines during the Second World War. Shipping is not normally available to neutral countries during periods of general international emergencies. For this reason most neutral countries find it necessary to build up fleets of deep-sea shipping under domestic control for strategic reasons. Irish Shipping was set up initially to fulfil such a strategic role for Ireland.

2. Irish Shipping continues to have a mandate to operate a strategic fleet¹ although the target deadweight tonnage has been amended over the years. At present, a fleet of 150,000 deadweight tons² is considered adequate to meet basic strategic requirements in times of emergency. Irish Shipping seeks to expand the tonnage of the fleet beyond the strategic target, provided that such expansion can be justified on purely commercial grounds.

3. Since its establishment, Irish Shipping has operated on the international tramp market. In the shipping world, the term “tramping” refers to the shipping of cargoes from port to port as they offer, as distinct from liner or scheduled services which operate under a regular timetable. There is intense competition on the international tramp market and cargo rates fluctuate widely in response to economic and political developments. Over the past fifteen years, Irish Shipping has found it necessary to diversify its activities so as to cushion itself against the losses that are recorded during the many depressions experienced on the international tramp market.

1.2 Ownership and Control

4. Irish Shipping is governed by the Irish Shipping Limited Acts, 1947 to 1980. The Minister for Transport is responsible for the overall policy control of the Company. Proposals involving capital expenditure are approved by him in agreement with the Minister for Finance. The Directors of the Company are appointed by the Minister for Finance in consultation with the Minister for Transport. The Directors are required to furnish a balance sheet, profit and loss account and their report to both Ministers at the end of each accounting year.

5. The authorised share capital of Irish Shipping is £22 million.³ All issued shares are held by the Minister for Finance. The Company may borrow money only with the consent of that Minister (see paragraph 12).

1.3 Objectives

6. The objectives to which Irish Shipping is working at present were set in 1966. The objectives are as follows:

“Within the framework of a profitable Company to provide, maintain, and operate efficiently and economically a basic fleet of vessels under the Irish flag, together with the necessary organisation, management and personnel, to run this fleet. The aggregate size and composition of the basic fleet to be reviewed and agreed from time to time with the Minister for Transport.”

These objectives recognised that a profitable company could not be attained by shipping activities alone. Accordingly, the Company decided, when it defined its objectives, to pursue policies which permitted diversification. Such policies are:—

—To ensure that the strategic portion of the Fleet is at least reasonably economic during the period of low freights.

— To maintain overheads and shipboard costs at the lowest, and operational efficiency at the highest possible levels.

— To operate, in addition to strategic types, other commercially viable vessels.

— To broaden the basis of trading by engaging in profitable projects or services ancillary to conventional shipping so as to have profit areas of activity not subject to cyclical freight depressions.

— To finance all development by the use of the Company’s own liquid resources or borrowing powers; no additional Government capital would be sought.

— To enter into co-operation with private interests at home or abroad, in shipping or related projects, which are commercially profitable. The Company would not, however, initiate any major activity in direct competition with Irish private or public enterprise. The Company would not be deterred from the full development of a project (entered into on justifiable policy grounds) where, to realise the project’s best potential, there would inevitably be a degree of competition with other Irish interests.

— To give priority in employment to Irish citizens and to organise for them on and off the job training schemes so as to provide worthwhile career opportunities in shipping.

—To foster (having regard to the Company’s resources) schemes or projects designed to assist Irish maritime development.

—To assist Irish industrial development by purchasing Irish goods or using Irish services where reasonably economic for the Company to do so.

II FINANCIAL PERFORMANCE AND CAPITAL STRUCTURE

2.1 Profitability

7. In the post-war years, Irish Shipping has recorded profits in 23 out of 34 years. For the past decade the record has been particularly good —profit (before taxation and extraordinary items) has been consistently above £½million. Because of the wide fluctuations in international freight rates, five-yearly annual averages are regarded as a more reliable yardstick of progress than annual figures. Using this “average” yardstick, the profits of Irish Shipping can be seen to have grown from £0.33 million (1966/71) to £2.27 million (1975/80). The results using data for fourteen years are illustrated in Exhibit A.

8. Not only have profits been increasing in nominal terms, but also in real terms (having adjusted for inflation). Irish Shipping’s most recent annual report records a profit of £3½ million for 1979/80. This represents a profit of over £1 million at 1969/70 prices, which is twice the profit actually recorded in 1969/70. In its written submission to this Committee, Irish Shipping stated that the profits in the year ending in March 1981 “almost certainly will exceed those for last year”.⁴ The Committee considers that Irish Shipping has achieved a most satisfactory record of profitability.

9. The Committee was concerned, however, that the continued use of historic cost depreciation by Irish Shipping might be giving too favourable a view of profitability in the shipping industry. The rising cost of new ships raises the question as to whether shipping companies should increase the annual levels of depreciation over and above the levels calculated by reference to the historic cost of ships. Irish Shipping writes off the cost of its ships over twenty years. However, the Chairman of Irish Shipping argued that “we have one thing in our favour—we do not allow for any residual value on the ships. Thus we are to an extent over-depreciating”.⁵ So far this depreciation policy does not seem to have affected Irish Shipping’s ability to replace its fleet. As was pointed out in evidence “in the seventies we spent £50 million on ships without recourse to the Exchequer”.⁶ More recently, the Company has been actually accelerating the repayment of some of its loans, anticipating “that interest rates would rocket ... thus saving ourselves and the

EXHIBIT A

IRISH SHIPPING: GROUP PROFITS

Annual net profits (five-year averages)

country a considerable amount of money”.⁷ This resulted in Irish Shipping’s net current assets being in an adverse position in 1977/78 and 1979/80. However, the Company’s Financial Controller assured the Committee that “this current asset deficit will be reversed this year.”⁸ The Committee considers that while Irish Shipping has adopted a flexible though prudent approach to fleet replacement and loan repayments, the Company should nevertheless consider speeding-up the depreciation of its ships in its accounts, by reducing the number of years over which costs are written off.

10. The Committee was also concerned about the impact of current cost accounting on the published accounts of Irish Shipping. It has noted that Irish Shipping in common with other large companies will be expected to include current cost accounting in their annual financial statement from 1980/81 onwards under the Statement of Standard Accounting Practice No. 16 (SSAP 16) which has been adopted by Irish and UK accountancy bodies. The declared aim of this statement is to disclose information about the effects of changing prices in a period of prolonged and acute inflation which the traditional historical) cost accounting system does not provide. The General Manager of Irish Shipping told us that current cost accounting “may well be appropriate for shipping companies working on fixed routes against measurable volumes of cargo. But for a deep-sea tramp shipping company it is probably inappropriate...”⁹. The General Manager concluded that “There is no simple answer to that question. Certainly, we are considering it; we are undertaking a study at present”. We agree that this matter needs a good deal of study. We are, however, inclined to the general view that whatever system of accounts is adopted, it should form a basis for comparison with past years and with the accounts of other shipping companies similarly placed.

11. Irish Shipping is not permitted, under its present Articles of Association, to pay any dividends on its issued share capital. Nevertheless, it was put to us in evidence that the Company has been paying what amounts to a “quasi-dividend”. First, the General Manager claimed that “there is a dividend even at the moment in that the strategic fleet is being provided at a profit to the nation”.¹⁰ Second, he informed us that the Company had not benefited from shipping investment grants that were made available to other shipping companies and “the totality of that amounts to £10 million which of course worsens our current balance sheet figures by that amount, so here again I think we are paying a fairly handsome dividend”.¹¹ Finally, it was pointed out that “if you run into a series of Departments, one acting after the other, you can run into massive delays. On one such occasion the delays cost us as much as …£2 million”.¹² While we have been unable to quantify the full effect of these three factors, together with the impact of the non-payment of dividends as conventionally measured, on Irish Shipping’s accounts, we nevertheless believe that the net impact would be to show Irish Shipping’s financial position in an even better light.

2.2 Capital Structure

12. The authorised share capital of Irish Shipping is now £22 million and there is a limit of £15 million on borrowings guaranteed by the Minister for Finance. These figures compare with an authorised share capital of £200,000 and borrowing powers of £2 million when the Company was incorporated in 1941. In the interim, the authorised share capital was raised to £5 million (in 1947) and to £12 million (in 1959). The borrowing limits under Ministerial guarantee were set at £2 million in 1947 and £5 million in 1959. At the end of March 1980, the issued share capital was £11,427,000.

13. Against this background of facts about the Government’s equity investment in Irish Shipping, there is one major issue which we feel should be addressed. That is the question of debt/equity ratio. Table 1 presents statistics on Irish Shipping’s debt/equity ratio for a number of years.

TABLE 1

Irish Shipping’s Capital Employed

Source: Irish Shipping Memorandum to the Committee and Annual Report 1979/80.

The presentation above indicates a debt/equity of 113 per cent in the financing of Irish Shipping as at 31 March 1978, which represented a peak borrowing level of over £23 million. This, in turn, reflected the capital cost of acquiring the fleet of deep-sea vessels and car ferries, all without recourse to the Exchequer. Since 1978 the Company has been reducing its loan/lease obligations. As a matter of Board policy, it was decided to curtail further fleet expansion until the level of borrowings had been reduced to more reasonable proportions. As to what constitutes a reasonable proportion, it is sufficient to note the comment of the Company’s Financial Controller that “the debt/equity ratio could go up to 50 or 60 per cent, which is the maximum it should be”.¹³ The Committee agrees that this is an appropriate debt/equity criterion for Irish Shipping.

2.3 Foreign Exchange

14. As a result of the international character of its operations Irish Shipping earns most of its revenue from sources external to the Irish economy. While much of Irish Shipping’s expenditures are also made abroad, there is a sizeable inflow of foreign exchange to Ireland. From Table 2 it can be seen that the group operations of Irish shipping in the year 1979/80 produced an estimated net inflow of foreign exchange of £12.6 million—nearly double the estimated inflow of £6.4 million in 1975/76. This represents a growth of 21 per cent in real terms¹⁴ over the four years 1975/76 to 1979/80.

TABLE 2

Irish Shipping Group—Net Foreign Earnings

Source: Irish Shipping.

III OPERATIONS

3.1 Areas of Operation

15. Irish Shipping’s operations are in three broads areas:—¹⁵

—International Shipping Service,

—Car Ferry Service,

—Ancillary Activities.

It would be impracticable to examine all of Irish Shipping’s areas of activity in detail. We will confine our comments in this Section of our Report to issues which seem to us to be important.

3.2 International Shipping Service

16. Irish Shipping operates its deep-sea fleet on the tramp market. Ships engaged in this form of shipping are involved in time charter business and voyage charter business. The time charter business involves contracting a ship for a specific purpose at a specific price/freight rate for a definite time, either in months or years. The voyage charter business involves “one-off trading” situations—a ship undertakes one voyage for one customer and on completion of this voyage another customer is sought. Of the six bulk carriers which Irish Shipping owns, two are on time charter and four are on contract business in the Celtic Bulk Carriers Pool.¹⁶ This Pool is engaged in contract business between Europe and North America. Irish Shipping also charters-in ships to contribute additional tonnage to the Pool, depending on the demands of the market. The latest annual report lists eight such ships on charter to the Company.

17. Irish Shipping’s fleet is required for a dual-purpose. It is required for commercial trading purposes, as outlined above. It is also required for strategic purposes. As the Chairman of Irish Shipping told us “Our mandate is to maintain a strategic fleet. We have added to that mandate in our own objectives in that we will do it within the framework of a profitable company.”¹⁷ Even though Irish Shipping has part of its fleet out on charter it has the legal right to repatriate its ships in the event of war.¹⁸ Moreover, the type of ship operated by Irish Shipping “would be perfectly suitable for the deep-sea ocean trade and absolutely suitable for a strategic effort.”¹⁹ The Committee was impressed by the manner in which Irish Shipping has provided a strategic fleet for the nation within the framework of a profitable commercial operation.

18. Irish Shipping’s deep-sea fleet operates largely outside Irish waters. As the Chairman of Irish Shipping put it “we are operating abroad carrying other people’s goods and earning foreign currency in doing so”.²⁰ Irish Shipping’s deep-sea fleet directly services Irish foreign trade flows to a limited extent only. However, it does provide rollon/roll-off services on the car ferries operating to the Continent. The roll-on/roll-off services on the Irish Continental Line’s car ferries between Rosslare and Le Havre/Cherbourg provide transport for through flows of imports and exports. Of the total outward cargo on the ferries about 80 per cent is meat.²¹

19. Irish Shipping’s deep-sea fleet is comprised of bulk ships. These ships are oriented towards miscellaneous bulk trades, such as steel, lumber and phosphates; they are also quite capable of carrying grain or coal. Irish exports, however, are mainly composed of non-bulk commodities and so the scope which Irish Shipping’s deep-sea fleet has for servicing Irish exporters is limited. In short, Irish exporters and importers do not, at present, have sufficient cargo in bulk lots to enable a deep-sea fleet to trade profitably to and from Ireland.

20. There may be some scope in the future for direct bulk trading with Ireland. First, Irish Shipping has commenced discussions with the Electricity Supply Board with a view to shipping coal for the new electricity power plant at Money Point which is due to come on stream in 1984 or 1985. ²² Second, the General Manager told us that “there is the new Irish petroleum company which will be bringing in oil and we hope there will be a role we can play”.²³ These developments in bulk-trade flows provide real opportunities for Irish Shipping to expand its direct bulk trading links with Ireland. The Joint Committee believes that such market opportunities should be explored and decided upon by the Company only on the basis of commercial considerations.

3.3 Car Ferry Service

21. Irish Shipping’s Car Ferry Service is under the control of a subsidiary company—Irish Continental Line Limited—in which Irish Shipping has a 99.96 per cent shareholding. Irish Shipping had a limited stake-holding in the direct car ferry service to the Continent operated by Normandy Ferries between 1968 and 1971. There was no direct service in 1972. A new service commenced in 1973 with the introduction of the m.v. “Saint Patrick”. Irish Shipping owned 50 per cent of the vessel; the other 50 per cent was held by Norwegian and Swedish interests. A new company, Irish Continental Line, was formed to operate the new service. In February 1977, Irish Continental Line bought out its Scandanavian partners and in 1978 acquired a second car ferry, m.v. “Saint Killian”. Irish Continental Line, which is now 100 per cent Irish owned, operates a regular service between Rosslare and Le Havre/Cherbourg.

22. The car ferries operated by Irish Continental Line cater for passengers (and their cars) and freight (see paragraph 18). According to information given to us by the General Manager of Irish Continental Line the growth in the number of tourists coming to Ireland has tapered-off in recent years.²⁴ At the same time we were disturbed to learn that freight was down by about 20 per cent in 1980 by comparison with 1979.²⁵ On the cost side, there has been a strong upward pressure. The main cost pressure has, of course, been fuel prices. Between October and December 1980 fuel prices increased by 45 per cent. In addition, Irish Continental Line’s services were affected by the French fishermen’s blockade during summer 1980 “which was very costly”.²⁶ In spite of the increase in costs, including the cost of the French fishermen’s blockade, and the deterioration in the trading environment, Irish Continental Line is expected to announce profit of around £½ million for 1980/81. Nevertheless, the General Manager of Irish Continental Line stated that “while the service has been highly profitable in the past there are now question marks”.²⁷

23. In these circumstances, the Committee believes that it is paramount that Irish Continental Line, subject to the maintenance of a good standard of service for passengers, should constantly exert every effort to keep down those costs which lie within its control. At the same time, the Irish Continental Line should explore the economics of lengthening the ferries with a view to reducing the unit cost of passengers and the unit costs of freight.²⁷

24. We examined the question of liaison between Irish Shipping and the B+I Line in our report on the British & Irish Steam Packet Company Limited.²⁸ The Joint Committee does not see any benefit in reviewing the history of the relationship between these two State-sponsored Bodies in the context of the development of Irish Continental Line’s ferry services.²⁹ Rather we feel we should reiterate the view expressed in our report on the B+I that any new services to the Continent should only be introduced following consultation and co-ordination between B+I Line and Irish Shipping (through its subsidiary company, the Irish Continental Line). The Department of Transport has informed us that the Minister has noted our view on this matter. We are pleased to record that positive liaison took place between the two State-sponsored bodies in question, with the chartering of the Irish Continental Line’s m.v. “Saint Patrick” by the B+I Line for a period of over six weeks from December 1980 to mid-January 1981.

3.4 Ancillary Activities

25. As we pointed out in paragraph 6, Irish Shipping found it necessary in the mid-1960s to diversify its activities so as to cushion itself against the losses that are recorded during the many depressions that are experienced on the international tramp market. Irish Shipping emphasised in its submission that “the shipping industry in general, and the tramp shipping in particular, operates in a very volatile market”. In order to remain profitable, Irish Shipping has expanded its base in such a way that “the base itself is not impinged on by what is happening to international freight rates”.³⁰

26. The ancillary services that have been developed by Irish Shipping cover a wide range of businesses, which are allied to shipping to a greater or a lesser extent. These activities embrace:

(a) Insurance

Irish Shipping’s involvement in insurance pre-dates the diversification policy outlined at paragraph 6 above. In fact, Irish Shipping became involved in underwriting most classes of marine insurance during the Second World War. However, in 1946, Irish Shipping’s insurance business was transferred to the Insurance Corporation of Ireland Limited, in return for a substantial block of shares. Irish Shipping pointed out that these shares have grown considerably in value—reaching £5.8 million by the end of March 1980 and that “the Insurance Corporation of Ireland is the jewel in our crown and is very important to us”.³¹

(b) Stevedoring

This is the business of loading and unloading ships. In 1970 Irish Shipping merged its stevedoring activities in the Dublin port with those of R. A. Burke Ltd. to form Port Services Ltd. In 1978 the stevedoring activities of Port Services Ltd. were merged with those of George Bell & Company to form Associated Port Terminals.

(c) Agency Services

The agency services started when Irish Shipping withdrew its ships from liner service on the North Atlantic. The Agency Division acts as an agent for the operating services of other shipping companies. It acts for some of the biggest liner companies in the world. Irish Shipping has taken a decision in principle to turn the agency division into a subsidiary company.

(d) Property

Irish Shipping got involved in property in 1972 when Property Corporation of Ireland (PCI) was set up by Irish Shipping (50 per cent of equity) and Insurance Corporation of Ireland (50 per cent of equity). PCI was set up to develop an office block at Merrion Hall (now the headquarters of Irish Shipping); it is now seeking further opportunities for investment.

(e) Consultancy Services

Irish Shipping makes available its accumulated experience in maritime law, marine engineering, nautical science, chartering and ship broking to Government Departments and other bodies through its consultancy services. These consultancy activities produce feeincome which helps defray overhead costs of the Irish Shipping departments involved.

(f) Ship Management Services

The ship management services division was established in 1979 to provide ship management services for other shipowners. This division is now managing some small ships for Irish shipowners.

(g) Other activities

Irish Shipping has interests in holiday homes (through Irish Residence Limited), freight forwarders (through Celtic Forwarding Limited) and shipping and marine activities (through Irish Mainport Holdings Limited). Irish Shipping’s involvement in the latter amounts to a 20 per cent stake in Irish Mainport Holdings (IMH). In turn, IMH is engaged, through its subsidiaries in coastal shipping, stevedoring, warehousing, haulage and offshore servicing of the oil and gas industries operating from Cork, Waterford and Tralee.

27. In the balance of this sub-section we will discuss a number of more detailed points in connection with the ancillary activities of Irish Shipping. First, we refer to the financial results of the ancillary activities. The Chairman of Irish Shipping confirmed that all of the Company’s activities are profitable.³² As some of Irish Shipping’s ancillary activities are carried out in conjunction with private enterprise, detailed financial results are not published. However, Irish Shipping did supply us with information regarding the positive contribution which the ancillary activities have made to the overall profitability of the Company in the past five years. The Committee decided to treat this information in confidence and not to publish it with this report. It is sufficient to note the comment of Irish Shipping’s General Manager that over the period from 1970 to 1980 the profit emanating from associated companies did “vary from a low of about 9 per cent to a high of about 50 per cent. But, the average over the whole period might be approximately one-third coming from associated companies”.³³

28. Second, the Committee would like to refer to the disagreement between Dublin Port & Docks Board and stevedoring companies at Dublin port.³⁴ Irish Shipping has an equity stake in one such stevedoring company (see paragraph 26 above). The Committee is conscious of the importance of stevedoring for the port of Dublin and the economy as a whole. While the Committee is not in a position to make any detailed comment on the disagreement it would hope that Irish Shipping would use its good offices to try and ensure an amicable settlement to this disagreement.

29. Finally, there is the question of the mix of ancillary activities in the future. The General Manager of Irish Shipping told the Committee that “we would not foresee our total revenue from shipping diminishing significantly in terms of our total operation, certainly in the immediate future”.³⁵ At the moment there are no new ancillary projects in the pipeline.³⁶ However, the Committee does note that Irish Shipping has decided in principle that the Agency Division should be formed into a separate company which will be a wholly owned subsidiary of the parent company. The Committee trusts that Irish Shipping will continue to keep in view the objective of a positive cash flow for the benefit of the shipping business from this (and any new ancillary activity). Similarly, in the case of ancillaries which fail to realise their potential, early divestment should be actively pursued.

IV ADMINISTRATION

4.1 Board and Management

30. The Directors of Irish Shipping are appointed by the Minister for Finance in consultation with the Minister for Transport. The Directors are required to furnish a balance sheet, profit and loss account and their report to both Ministers at the end of each accounting year. According to the most recent annual report the Board of the Company now has seven members, including the General Manager.

31. As regards the management of the Company, direct responsibility for the execution of Board Policy and day-to-day performance rests with the General Manager. Unlike other State-sponsored bodies, the Company has no assistant general managers. Instead, the Company has five individual heads of division who report directly to the General Manager. The divisions deal with administration; finance; agency services; operations and chartering; and technical matters. In each division, there are departments that are managed by department managers who report to the divisional heads.

4.2 Staff

32. The number of headquarter staff has fallen in recent years. As the Chairman of Irish Shipping told us “some years ago we employed 150. people shore-based to run the fleet. That figure is now about 50. Nobody has been declared redundant. Profitable work has been obtained through ancillary activities for 100...”³⁷

33. The staff numbers in general have shown significant increases. This is due to the widening of Irish Shipping’s base and the insistence on profitability in each centre of operations. In 1970, the number of seamen was 470. This increased to 670 by 1980. The number of shore-based staff increased from 108 (in 1970) to over 500 (in 1980). As irish Shipping’s General Manager told us “in total the group staff has gone from 580 to 1,252 in a ten year period.”³⁸

4.3 Training and Industrial Relations

34. In evidence to the Committee, Irish Shipping pointed out that “the operation of a fleet is not just concerned with the fleet itself, it also presupposes expertise to build and run ships.”³⁹ With a view to training the navigating officers of the future to the standard required by Irish Shipping, a Cadet Scholarship Scheme was established in 1943. Subsequently a similar scheme was introduced for training engineer officers. The products of these schemes are now the Masters and Chief Engineers of Irish Shipping’s vessels. Moreover, the Company has provided officers for many other shipowners, both foreign and Irish. As the Chairman of Irish Shipping put it “... our officers and crews can be found on every ship in Ireland, from the B+I to Irish Lights”.⁴⁰

35. It appears to us that there are a number of factors that contribute to the good industrial relations in Irish Shipping. First, many of the shore-based staff have been with the Company since its establishment. Second, the Company has not got a big shore-based staff and this helps to ensure good internal communications. Third, the Irish Shipping crews “work as a very united team under a master.”⁴¹ Last, and by no means least, Irish Shipping’s General Manager drew our attention to the “constructive attitude of our staff and their Unions.”⁴¹ The Joint Committee was pleased to note these facts.

V THE FUTURE

5.1 Future Developments

36. The general approach adopted by Irish Shipping with regard to planning is one of flexibility. As the Company pointed out in its submission to us, “There are unfortunately all too many examples of shipping companies going to the ‘wall’ because of the rigid adherence to fixed plans and their commitment to replacement tonnage”. Irish Shipping’s view of the future is essentially pragmatic: “business will not come to us; we must go out and get it”.⁴²

5.2 Irish Shipping’s new bulk carrier

37. Irish Shipping informed us that it had been instructed by the Government to place an order with Verolme Cork Dockyard to help with the potential unemployment in the Dockyard.⁴³ Irish Shipping had not intended to build a ship at present. It would have preferred to have waited until current loans were run down before investing in another bulk carrier.

38. The Irish Shipping Act 1980 was enacted to make provision for the capital and borrowing requirements of Irish Shipping in respect of the new bulk carrier and for the financial needs of Irish Shipping over the next few years. The contract for the new vessel—a Panamax bulk carrier of 72,000 tons deadweight—was signed in February of this year. The final cost of the vessel will be “in the region of £25 million”.⁴⁴ Irish Shipping will pay £14 million for the vessel which will be funded by borrowings (50%) and equity (50%). The balance of the cost i.e. £11 million will be made up by a direct subvention from the Department of Industry, Commerce and Tourism to Verolme Cork Dockyard. The Committee has already outlined what it described as “quasi-dividends” which Irish Shipping has had to pay (see paragraph 11). The purchase of the new bulk-carrier may well fit under this description. Sufficient details are not available at present for the Committee to make any definite comment on the matter. However, the Committee is of the view that where costs of a non-commercial nature have to be incurred by Irish Shipping on the instruction of Government, such costs should be clearly identified in the accounts and an indication given of the extent, if any, to which they affect the commercial performance of the Company.

5.3 Relationships with Government Departments

39. Irish Shipping appears to have good working relations with the Department of Transport and all other Departments.⁴⁵ The General Manager in his evidence to us, stated that, “we enjoy an exceptionally good relationship with our parent Department”.⁴⁵ However, he went on to state “if you run into a series of Departments, one acting after the other, you can run into massive delays”. We believe that decisions which affect the commercial success of Irish Shipping should be taken by Government Departments with the minimum of delay. We agree with the Chairman of Irish Shipping when he said “everybody knows that business decisions have to be arrived at and put into practice promptly, and delays make matters more difficult”.⁴⁶

40. The Chairman of Irish Shipping referred to the control of its chief executive’s salary in the course of giving evidence to us. He stated that “we were adamant that the determination of the chief executive’s salary should be a matter for the Board. We have been doing that, but always taking note of guidelines”.⁴⁷ On this point, we can only reiterate a recommendation made in some of our earlier reports⁴⁸ that the salaries of senior managers should be kept under continuous review, particularly with respect to the effect present policy has on the quality of recruitment to senior managerial positions.

VI CONCLUSION

41. The Committee congratulates the Board, management, staff, masters and crews of Irish Shipping for the highly efficient manner in which they have discharged their responsibilities.

42. The knowledge and practical experinece of Mr. Thomas P. Ferris in the field of transport economics proved of great help to the Committee in the course of this inquiry.

(Signed) EOIN RYAN

Chairman of the Joint Committee

3 March 1981

¹ Evidence (Question 1).

² In brief, deadweight tonnage is the maximum number of tons a ship will carry.

³ Symbol £ in this Report denotes Irish Pounds.

⁴ Appendix 1.

⁵ Evidence (Question 60).

⁶ Evidence (Question 37).

⁷ Evidence (Question 50).

⁸ Evidence (Question 51).

⁹ Evidence (Question 64).

¹⁰ Evidence (Question 63).

¹¹ Evidence (Question 75).

¹² Evidence (Question 10 and Question 11).

^* Includes loans and leases.

^** Estimated.

¹³ Evidence (Question 48).

¹⁴ Having adjusted for inflation.

¹⁵ Appendix 1.

¹⁶ Appendix 1.

¹⁷ Evidence (Question 1).

¹⁸ Evidence (Question 4).

¹⁹ Evidence (Question 6).

²⁰ Evidence (Question 27).

²¹ Evidence (Question 69).

²² Appendix 1.

²³ Evidence (Question 28).

²⁴ Evidence (Question 68).

²⁵ Evidence (Question 67).

²⁶ Evidence (Question 67).

²⁷ Evidence (Question 68).

²⁸ Prl. 8063.

²⁹ Evidence (Question 26).

³⁰ Evidence (Question 20).

³¹ Evidence (Question 75) and Appendix 1.

³² Evidence (Question 24).

³³ Evidence (Question 23).

³⁴ Evidence (Question 65).

³⁵ Evidence (Question 20).

³⁶ Evidence (Question 74).

³⁷ Evidence (Question 73).

³⁸ Evidence (Question 71).

³⁹ Evidence (Question 18).

⁴⁰ Evidence (Question 63).

⁴¹ Evidence (Question 70).

⁴² Evidence (Question 35).

⁴³ Appendix 1.

⁴⁴ Dáil Debate, Col. 707, 9 December 1980.

⁴⁵ Evidence (Question 10).

⁴⁶ Evidence (Question 12).

⁴⁷ Evidence (Question 19).

⁴⁸ Eighth, Tenth and Eleventh Reports of the Committee.