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End of Hadrian's Wall
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SWAN HUNTER TO BRITISH SHIPBUILDERS
By Eur Ing Dr Peter Milne BSc, PhD,
CEng, FIMechE, FIMarEST
Peter Milne was Managing
Director for Swan Hunter Shipbuilders when it was Nationalised in 1977. He was
then seconded to the headquarters of the new organisation and was a Board Member
of the Corporation from 1981 to 1990. The paper describes some of the events
Peter Milne was involved in starting with a student apprenticeship at Wallsend
Slipway and Engineering and his thoughts on each of these developments. Swan
Hunter was a very successful company with entrepreneurial ideas in marketing,
considerable commercial skills, it had a strong technical team and produced a
wide range of ship types including warships. It was a world leader in the early
application of computers to design and production. Despite that it had to
survive difficult market conditions in the 1970’s when the Group Board
threatened to close the operation if the losses were not recovered.
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The first years of Nationalisation which happened in
1977 were driven by the need to avoid high regional unemployment and the
large organisation was too big for the people appointed to control it. At
the start there were 38,800 people in merchant shipbuilding. Progress was
made on the employee negotiating procedures and the first restructuring
agreed at Blackpool in late 1979. A Divisional structure was then
introduced and management control improved. A separate team was formed to
deal with Performance Improvement and Productivity and capital expenditure
increased including a big investment in computer graphics. The market
however remained difficult with Far Eastern builders quoting prices that
hardly covered material costs.
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The first years of
Nationalisation which happened in 1977 were driven by the need to avoid high
regional unemployment and the large organisation was too big for the people
appointed to control it. At the start there were 38,800 people in merchant
shipbuilding. Progress was made on the employee negotiating procedures
and the first restructuring agreed at Blackpool in late 1979. A Divisional
structure was then introduced and management control improved. A separate team
was formed to deal with Performance Improvement and Productivity and capital
expenditure increased including a big investment in computer graphics. The
market however remained difficult with Far Eastern builders quoting prices that
hardly covered material costs.
A strongly unionised, loss making, nationalised
operation did not have much chance when a Conservative Government was
elected in 1979. As a first step they decided to privatise warshipbuilding
the only profitable part of the business. In addition senior management
time was further diverted by problems at Scott Lithgow on offshore
contracts. This was not easy to deal with together with mounting losses on
merchant shipbuilding much of it due to underutilisation caused by a
shortage of work.
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By March 1985 the number
in merchant shipbuilding and enginebuilding had fallen to 10,000 and this came
down to 7,000 for the total Corporation by March 1987. Despite the depressed
market conditions the Government decided in April 1988 to sell or close the
remaining companies. The view was that they should be
sold at any price to avoid future losses although limited subsidies would remain
available for private companies. By March 1991 the full cycle of formation and
disintegration had been completed with only a handful of people at headquarters.
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Towards the end of the paper some views
are given on the part played by trade unions. Prior to Nationalisation the
industry was sometimes top of the national league for strikes and lost
time. The problem was often between unions on issues such as demarcation or
wage differentials. It was a massive and unnecessary diversion of
management time. Some of the union leaders at yard level later posed as
saviours or champions of their yard when in reality they had caused many of
the problems leading to the decline.
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Consultation was difficult to establish because
most employees felt it was a management’s job to manage and they did not
wish to be associated with the hard decisions being made particularly after
Nationalisation. Surplus capacity drove ship prices down and in some cases
they only increased by 25% in almost 10 years. At the same time costs rose
steeply. Currency movements made the situation even worse and prices barely
covered material costs.
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Japanese and South Korean
yard made losses and the latter who were the world price setters had to be
rescued by their Government. A country had to have the political will to stay
in the business and this was not available from the Conservative Government who
felt market forces had to prevail regardless of
whether they were fair or not. Productivity improvements would have helped in
selling the Corporations case but there was no possibility that they or other
economies could have bridged the gap. In hindsight more ruthless action should
have been taken in reducing capacity at Nationalisation but at that time the
priority of the Labour Government was to avoid higher unemployment.
Peter
Milne
December 2002
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