Grangemouth Brinkmanship

morstar

http://www.bbc.co.uk/news/uk-scotland-24631342

Ouch. Takes me back to the miners strike. Immovable object, unstoppable force.

Overseas buyers the most likely outcome? More UK infrastructure in foreign ownership.

daviesee

The owner's are doing what it takes to try and get their grubby hands on a Government bail out.
They tried to get the union to look like the bad guys by going on strike but when they didnt, the owners closed the plant anyway. That act gave away their true intentions.
That, and that they claim to be losing £10 million a month but that includes future investment hints at "creative accounting". Can you make a loss on future investment in a plant that is closing down? Hmmm.
As it supplies 75% of petrol and diesel to Scotland and the north of England it will cause major problems to the infrastructure, and the price of fuel in general, if supplies have to be shipped in.
The owners are gambling that the Government will bail them out but Westminster says no and I dont think Hollyrood has the power, far less the cash, to do so.
A buy out is the only long term solution so fingers crossed.

I would suggest that the Government do them a favour by taking such a loss making plant off there hands. Since it is losing so much money, they would give it away for free. No? Then sell it on the cheap but for a profit to another petro-chem firm. Sounds to simple to be viable.

PS :- I am interested in what Petro-China have to say about developments having invested hundreds of millions into the venture.

mr_goo

BBC Radio 5 Live state that some reports claim the management delivered the news of 800 job losses 'with a smile on their face'.

grey_area

The unions have been playing poker with a hand that they can't see. If you don't have access to the detailed financials then you are guessing what the management know. I don't know of one business that would do this unless it was the right financial outcome. I'm not saying that it is the best outcome but it will be their BATNA (best alternative to a negotiated agreement). The added advantage of this strategy is that it gives the unions an opportunity to come back and accept the changes to conditions and so the company get either their first or second best outcome.

I'm also not trying to be provocative (but I'll probably succeed) but having sat opposite senior union officials I find them to be insufferable idiots that are more interested in their own power trip than on achieving the best outcome for their members. They never try to look at outcomes that work for both parties and always try to "win" the negotiation. I think that if I was delivering that news then I would probably have a wry smile on my face but more because I would believe I had them beaten at their own game than any joy at the decision itself.

The union will accept the changes now and the plant will reopen (just my belief) and I hope that is the case as I have ex-colleagues whose jobs are dependant on that plant.

daviesee

That all sounds logical and as I dislike unions for similar reasons that would normally be my view.

What makes this situation different is the answer to this question.

When the union backed down from striking last week and had yet to accept or refuse the pay & pension plans, why did the management shut the plant down anyway?

The plant was shut down last week. The union refused the plans on Monday. Yesterdays announcement was only making the shut down permanent.

crescent

grey_area wrote:

I'm also not trying to be provocative (but I'll probably succeed) but having sat opposite senior union officials I find them to be insufferable idiots that are more interested in their own power trip than on achieving the best outcome for their members. They never try to look at outcomes that work for both parties and always try to "win" the negotiation. I think that if I was delivering that news then I would probably have a wry smile on my face but more because I would believe I had them beaten at their own game than any joy at the decision itself.

I'm afraid that this is also my experience of union officials having worked in the petrochemical and engineering industry for 30 years. Many I have encountered were not technically competent in their 'real' job and saw a union position as a means to raising their own profile and used to thrive on industrial unrest as it gave them their moment in the spotlight. It would be unfair to tar them all with the same brush, but I have to say this was true for the majority I have come across.

grey_area

daviesee wrote:

When the union backed down from striking last week and had yet to accept or refuse the pay & pension plans, why did the management shut the plant down anyway?

I would guess that it was because they had thought through the options, priced up the expected values and made a logical decision. It's the way I would do it and quite probably the way they have. If you believe there is an 80% chance of a strike and the cost of that is £60m then your expected cost from that action is £48m. If closing the plant costs fixed costs and no variable costs (Electricity etc will be big here) and that would be anything less than £48m then you close the plant.

Most big organisations are very logical about decisions such as these (and apologies if I am teaching you to suck eggs )

daviesee

They shut down operations at the plant last week but didnt close the plant.

That means that fixed cost's were the same but no way of receiving income. Financially it didnt make sense.
An immediate closure would have made sense.

Why go through the charade?

IMHO the management are playing a game of poker hoping to reduce operating cost's but mostly too get a government bail out, ie free cash.

grey_area

It's the reduction in variable costs that will be the saving, if you're not making something then you're not consuming those costs. I'm not sure what the cost base is for a refinery but I would guess that it is heavily skewed towards the up front cost of the plant, if you take that as an economic sunk cost then the cost of the plant wouldn't even enter your decision. All you would be interested in are the variables.

Unfortunately I'm a little like the unions now and can't comment without seeing the actual figures, but I would stand by the belief that the playing for a handout or trying to bluff the unions or government is highly unlikely. You just don't take those sorts of risks with the sums involved. That's how management end up getting sacked themselves.

daviesee

Ask the people in Saltend how they feel about Ineos.
This is a running trend.

grey_area

I think the problem is we live in an anglo-saxon capitalist society and either you accept that and the harsh reality that decisions will be made purely from the perspective of increasing shareholder wealth. Or you campaign to have a wider stakeholder responsibility such as they have in Europe.

Easy to say, harder to do, ultimately this country has done some things right and some things wrong and we and our children must live with that legacy and those historical decisions (just as the US must tolerate their mucked up government system).

The truth is though that the owner has no responsibility to provide jobs if he is losing money, he is a business not a charity but I make no comment as to whether he is a nice man or not

daviesee

Fair enough.

But why offer a "rescue plan" and shut down the plant anyway?
And say that you are not looking to sell the plant?
Notice that the owner's have not shifted there plan's even though the unions have caved in?

I maintain that something fishy is going on regardless of what the unions do.
Time will tell.

grey_area

I read that the cost to shut down the plant is £20m and takes 2 weeks (although I'm always wary of what I read on the internet ). Apparently an exec from Ineos said that they weren't prepared to take the risk of shutting down and reopening the plant as the costs were massive. Hence close it down whilst the discussions are going on and at least the cost is a known.

I think the reality is we'll never know the truth of the matter as it will always be a little he said she said, we can only hope that the decisions are logical and in good faith, but we'll probably never know that either.

napper

My guess is that most of the workers at Grangemouth earn good money, probably well above national average, and I'm sure many have had secure employment there for 10, 20, 30+ years.

In their shoes, I would not be rocking the boat as I don't suppose they'll find similar secure employment nearby.

Union have messed up here.

napper

Worker's on up to £55k I've heard!!!! ffs.

Frank the tank

Regardless of how much you earn, no one likes having their wages cut.

If you're on a "good number" you try not to rock the boat, but, once the cuts start where will they end? Of coarse it's natural people will endevour to resist attacks on their income/benefits.

I know people who work locally that have taken wage cuts on promises from their management of future investment in their plant and four years down the line inspite of the sacrifice and change in Ts&Cs no investment has been forthcoming.

moffatt666

I think a constructed close-down was the owners' plan from the very start. Ineos never really wanted the hassle of actually running the place; they just wanted the profits. Why else would they base themselves in Switzerland?

daviesee

Moffatt666 wrote:

I think a constructed close-down was the owners' plan from the very start. Ineos never really wanted the hassle of actually running the place; they just wanted the profits. Why else would they base themselves in Switzerland?

HMRC wanted VAT money. Ineos said, sod that and went to Switzerland.
One example of global business in action for those that think companies wouldn't move from a high tax UK.

tim_wand

Royal mail have balloted to go on strike on 4th of November.
The CWU realises it cant reverse privatisation but wants to secure current terms and conditions beyond the 3 years of the current deal.

Part of that deal is an 8.6% pay offer and as the pensions are still part of the National Kitty, (transfered to Civil service scheme) all members rights to date are reserved (admittedly future rights to be agreed)

Part of the planned action is to stop carrying DSA (or competitors subcontracted mail) this is over 40% of current volume and only likely to increase in the approach to Christmas.

I don't know of any Private employer who has agreed T+C s with its workforce for the next 3 years including a pay deal.

Businesses will find it very easy and tempting to switch carriers if the mail is disrupted on the run in to their busiest period.

Okay the Sell off was extremely under valued, but the staff now hold 10% of those shares.

What is the CWU hoping to achieve, it just feels like posturing from the Union and the deal got done behind their backs before they could do anything about it.

Sometimes I feel (as mentioned previously in this thread) That Unions don't look at the best outcomes all round they just hammer on their own rhetoric which has no real consideration of what the realistic operating conditions are.

I used to be a Branch Chair of a Union in the Public sector (ultimately in a round about way what cost me my job) but now I find it difficult to consolidate the position of the Unions with regard to pay and pensions, with real world economics.

crescent

tim wand wrote:

Sometimes I feel (as mentioned previously in this thread) That Unions don't look at the best outcomes all round they just hammer on their own rhetoric which has no real consideration of what the realistic operating conditions are.

^^^ Couldn't agree more.

daviesee

The good news.

"The Grangemouth petrochemical plant near Falkirk is to stay open after a new deal was struck with workers."

The complications.

"It added that Unite had agreed to taking no strike action for three years, moving to a "modern" pension scheme and a three-year pay freeze."

The bad news.

"It stated: "The Scottish government has indicated it will support the company's application for a £9m grant to help finance the terminal and the UK government has given its prequalification approval for a £125m loan guarantee facility.""

The worse news.

"The company has already laid off about 2,000 contractors since it shut down the complex."

I await the plea for further funds in the future.

Mikey23

Can't blame this one on thatcher...

ballysmate

Mikey23 wrote:

Can't blame this one on thatcher...

They will find a way.

Frank the tank

Ballysmate wrote:

Mikey23 wrote:

Can't blame this one on thatcher...

They will find a way.

I blame Thatcher.

ballysmate

Frank the tank wrote:

Ballysmate wrote:

Mikey23 wrote:

Can't blame this one on thatcher...

They will find a way.

I blame Thatcher.

I knew I could rely on you Frank.

Frank the tank

Ballysmate wrote:

Frank the tank wrote:

Ballysmate wrote:

Mikey23 wrote:

Can't blame this one on thatcher...

They will find a way.

I blame Thatcher.

I knew I could rely on you Frank.

It's a gift.

daviesee

Frank the tank wrote:

It's a gift.

Always thought you were gifted Frank.