Tuesday, 15 March 1988
Dáil Eireann Debate
Mr. Griffin: I should like to thank the Chair for allowing me to raise this important mater on the Adjournment and to tell the Minister for Industry and Commerce that I appreciate the fact that he has seen fit to come to the House to take this Adjournment Debate. I feel strongly about this issue, from a national and local point of view. From the national point of view it is an absolute disgrace that in this day and age we do not have a full bovine tannery industry. One would imagine that in a country where agriculture is of prime importance the IDA, the Department of Industry and Commerce, Córas  Tráchtála and those involved in developing Irish industry, would turn their attention to the improvement of a bovine tannery industry. I was amazed, and appalled, to learn from the Minister's reply to my question, that approximately nine pople are involved in bovine tannery here.
It is worth reflecting on how successful the Danes have been in regard to the pig industry. Their motto was that they would use every part of the pig except its squeal, and our motto should be that every part of our cattle except their bellow should be used. If we adopted such an approach we could create a lot of employment for many of our young boys and girls who are forced to leave their native shore daily. It is appalling to think that at a time when there are 250,000 people unemployed this indigenous industry is not developed, particularly when it is a natural offshoot of agriculture and would create many jobs downstream in the manufacture of by-products.
The Minister should give this matter his full attention. It is important to realise that the creation of one new job costs the IDA, and ultimately the Exchequer, anything from £30,000 to £100,000. If we are serious about import substitution we should look at the tannery industry because quite an amount of leather is imported. In the course of his reply to me the Minister mentioned Carrick-on-Suir and Portlaw. A bovine tannery industry was founded in Carrick-on-Suir by the Hitschmann family in 1938. That family owned three tanneries throughout Ireland and at their peak employed 1,500 people. Unfortunately, the factories ran into difficulties, particularly in the late seventies, with markets and the need for rationalisation. The number employed dropped and by 1985 there were approximately 170 employed in Carrick-on-Suir, a fall from 388, the peak figure.
In July 1985 the firm Irish Leathers Limited went into receivership with the loss of 170 jobs in Carrick-on-Suir. That was a terrible blow and meant the loss of £1.3 million to the economy of the town and the loss of £20,000 annually in rates  to Carrick-on-Suir UDC. At the time Irish Leathers, Plunder and Pollack, as it was called, was the most significant employer in the town. Carrick-on-Suir has not recovered from that death blow. Hopes were raised in November 1985 when Irish Leathers was purchased by Mr. Raymond Lannen, managing director of International Hide and Skin Company. The people of the town felt that a revitalised industry would soon be back in full production but, regrettably, their expectations were not realised. A little more than two years later we find that there are but nine people employed in that industry.
The business people of Carrick-on-Suir, members of the local UDC and others, have assured Mr. Lannen of their full co-operation. However, they are deeply upset because they have seen a great industry taken from their town and not replaced. The plant in the factory is in good condition and a highly qualified workforce is available and anxious to get back to the manufacture of top class leather. The people of the town were so frustrated at the failure to get the industry going that they formed the Carrick-on-Suir Tannery Co-operative Society Limited which is registered in Dublin. The group have embarked on a fund-raising campaign and I understand that they have approximately £100,000 at their disposal with promises of a lot more should they succeed in buying or leasing the premises or coming to some working arrangement with Mr. Lannen. They have the goodwill of the business community and local public representatives who are aware of the potential of the tannery but despite promises by various Ministers for Industry and Commerce and despite the promises made by Mr. Lannen, no worthwhile progress has been made. The Carrick-on-Suir Tannery Co-operative Society undertook to initiate a feasibility study which was produced by the Irish Productivity Centre. I have a copy of that report and from glancing through it I am in doubt whatsoever that a viable bovine  tanning industry can be re-established in Carrick-on-Suir.
There are many interesting aspects dealt with in the report. It states that Irish hides are of excellent quality, free from defects such as warble fly and other insect damage which are common in developing countries. Currently, all Irish hides are exported in the wet salted state or in the wet blue state. These may be technical terms but the underlying message is that all Irish hides are exported. I think that is a shame and I urge the Minister to take it personally on himself to inquire whether this scandalous situation can be turned about. Can the Irish hides which are at present being exported in toto not be made the basis of creating worthwhile viable jobs for our young boys and girls?
We are told that 1.2 million cattle are slaughtered annually at export premises and an Irish tannery processing 2,000 hides per week would require 92,400 hides. The feasibility study went into detail and every aspect of the industry was examined, the availability of raw materials, the export market and the finished product. I have no doubt, having read and re-read this report — and I know the Minister would be convinced if he had time to read the report — that this industry can be re-established in Carrick-on-Suir. It would create the jobs that the town so badly needs.
Carrick-on-Suir has gone through a very difficult period. The tannery was the main industry in the town for generatiions. Unfortunately, Carrick-on-Suir is half-way between Clonmel and Waterford city. It is looked upon more as a dormitory town to supply the workforce to Clonmel and Waterford, but the Carrick-on-Suir people want to reverse that situation. They feel they have in their midst a qualified workforce who have worked in the tannery, like their fathers before them. They understand how leather should be treated to bring it to the finest degree of excellence. They are convinced, given the opportunity, they  can bring back Carrick-on-Suir tannery to the pristine condition it was in before it went into receivership.
I ask and implore the Minister to take a personal interest in this project. I know he has received communications from all the Oireachtas Members in South Tipperary and indeed from other areas urging him to re-establish a full bovine tanning industry. The potential is there. As I said initially, it is a crying shame that all Irish hides are exported, thus creating employment in far-off countries. I maintain that employment should be created here in Ireland, in Carrick-on-suir and in Portlaw and in Dungarvan as there are offshoots of Irish Leathers in those towns.
I plead with the Minister to call in the IDA, FÁS — the recently formed body with responsibility for creating jobs — CTT and all involved to try to persuade Mr. Lannen to develop the industry himself on the fine 22-acre site which is available in Carrick-on-Suir or to allow the Carrick Tannery Co-operative Society to develop it themselves. I am not concerned with who develops it. I am only concerned that it would be developed, whether by Mr. Lannen of International Hide and Skin or by the recently formed co-operative society. I am concerned about jobs and not with the management of the company.
At present the industry appears to be falling between two stools and no one is taking the initiative to re-establish the industry. If the Minister needs any further documentation apart from the report of the Irish Productivity Centre, the local urban district council and members of the Carrick Tannery Co-operative Society are always ready, willing and able to come to Dublin to meet him and discuss with his officials any aspect of the problem.
The people of Carrick-on-Suir have gone through a traumatic period for the past couple of years. The see no prospect of attracting any other industry to Carrick-on-Suir. They only want to work.  They do not want to be redundant and drawing unemployment assistance or benefit. They want to use their skills in what they are best qualified to work at, the tanning industry. They have asked me to make a special plea tonight that the Minister take their cause to heart. The Minister would not only be solving a local problem in Carrick-on-Suir but would be helping to solve a national problem by creating jobs which involve import substitution and which use the by-products of an indigenous industry. There are no import costs involved. If the industry could be established, the country and Carrick-on-Suir would be better off. I plead with the Minister to so something on their behalf.
Mr. Cullen: I concur with what the Deputy has said. Let me explain to the Minister the situation in the two areas. The nail was hit on the head; there are two communities involved, Carrick-on-Suir and Portlaw which do not want to be a subsidiary of Waterford or Clonmel. If the Minister were to go to these areas he would see the devastation and loss of hope in both of these communities. It is quite incredible. Of all the areas I have ever gone to — and I meet the problems daily — there is a special atmosphere about these towns.
It is strange that we are not looking for something that is non-viable. The irony in all of this is that if you examine what the Department of Agriculture and Food have been saying about added value and the utilisation of the products we have, surely this is a prime example of a project that would be viable in the long term. Will the Minister let us know in his response whether there has been any discussion at interdepartmental level between his own Department and the Department of Agriculture and Food on the potential of  a tanning industry in Ireland? I think there should be discussions at that level.
In both towns, Carrick-on-Suir and Portlaw, there is a very high level of skilled labour already available. There is no need to invest sums of money in training. There is a very ready and willing workforce available for work. That is a big added bonus when we look at the cost of creating jobs in other areas. Here we have a real opportunity, at minimum cost, to achieve a high proportion of employment in this area. When we see the very positive way the Goodman industry is developing at present, it would be a shame on all of us to see the potential spin-off from the hide industry disappear for nought, being shipped out of the country, rather than the core business being handled in an area where the experience exists.
In summing up I ask the Minister to consider this point. If the Minister has not got a definitive answer I ask him to take the matter on board. We desperately need to get to the next stage. The communities in both areas are hanging on in hope that somehow, somewhere, some definitive direction will be given in this area. If there was an indication that this was being discussed I assure the Minister it would be treated very fairly by the people in those areas.
Minister for Industry and Commerce (Mr. Reynolds): First, I fully recognise the devastation of the Carrick-on-Suir and Portlaw areas in the aftermath of the closure of Irish Leathers. Most certainly I have had various communications and representations for all the public representatives in the area, from Deputy Griffin, the Ceann Comhairle and tonight we have the added words of Deputy Cullen.
It is clear to everybody that a raw material exists and that there have been skills there since Irish Leathers were in existence. What is still needed is somebody with the necessary wherewithal because it will take a great deal of money  to provide the working capital requirements, apart from other requirements. Above all, we must have marketing skills especially when we take into account the position of the leather industry worldwide. I have met deputations from Carrick-on-Suir, Clonmel and the local development association, and I want to compliment those people on their efforts to do something for their areas.
In my reply to a parliamentary question on this matter on 2 March I indicated that there was no full bovine tannery in this country, that is, the processing of hides from raw to finished leather state in a fully integrated set up. I pointed out, however, that two projects located at Portlaw and Carrick-on-Suir, respectively, made finished leather from the crust or semi-processed stage employing nine people in total. I also said that a further project located at Dungarvan, engaged in the processing of hides from the raw to wet-blue and crust stage, employed approximately 36 people.
The last operation to function as a full bovine tannery was the Irish Leathers Group Limited which went into receivership in June 1985 with a loss of 370 jobs. The assets of the group were acquired by a large hide and skin merchanting group who subsequently applied to the IDA for grant-assistance for the phased reopening of the tanneries at Carrick-on-Sir, Dungarvan and Portlaw. Phase 1 involved the production of semi-processed leather and phase 2 involved the production of finished leather. Following protracted negotiations grants were approved in the autumn of 1986. However, the company in question did not go ahead as planned and no grants on foot of the 1986 approval have ever been made.
In a parallel development, members of the former workforce at the Carrick-on-Suir tannery established a co-op with the objective of formulating their own proposal for reopening that tannery. A feasibility study was carried out by the  Irish Productivity Centre at the end of 1986 into whether the tannery could be re-opened on a co-operative, viable basis. The IDA part funded this study. On the co-op's instructions, the study asssumed that no capital costs would arise, that the only product involved would be finished shoe leather, that any necessary refurbishment would be undertaken for free by the former tannery workforce, and that a combination of local interests and the IDA would purchase the tannery and lease it to the co-op on reasonable terms. On these assumptions, the study found that the total funding required would be £1.5 million in working capital to be provided equally by the co-op, the IDA and commercial lenders. It was envisaged that employment would be provided for some 60 people.
Since completion of the IPC report, the co-op has been trying to raise its share, £0.5 million, of the total working capital required. I understand that, to date, less than £100,000 has been raised. Once the finances were in place, the co-op would then have to submit a detailed business plan to the IDA which would form the basis for an application for grant assistance. The IDA have indicated to the co-op that they would be prepared to consider grant assistance provided the authority can be convinced, by way of a detailed business plan from the co-op, that a viable tanning industry can be established. In so far as the preparation of the business is concerned, I understand that the IDA have already pointed out to the co-op that certain areas of the feasibility study would need to be looked at more closely. These include the adequacy of the envisaged working capital requirement, of £1.5 million, the markets and the availability of marketing expertise, the types and range of leather products that would be produced, the scope for creating the envisaged 60 jobs all at once, and if it was realistic to assume, as the study did, that plant at the tannery could be refurbished without incurring costs.
 The Authority have also advised the co-op that they are opposed to being involved in a purchase and lease back arrangement in respect of the factory, and that consequently the assistance the co-op could expect the Authority to provide would be by way of employment grants. Having regard to sectoral norms for the tannery industry, the total amount of IDA asistance would be substantially less than the amount which the co-op assumed from that source.
It goes without saying that any promoter considering investing in hide processing-leather production will, of course, have regard to the state of the market. In this regard it is important to bear in mind that the leather industry worldwide has undergone tremendous change in the past 25 years or so. The traditional leather industries in Northern Europe, the United States and other high-cost countries have been forced to contract in response to increased competition from developing countries in south and eastern Asia and South America.
Traditionally, footwear manufacturers in developed countries in Northern Europe and North America have sourced their leather from local tanneries. The significant rise in cheap footwear from the developing countries to Northern Europe and North America has eroded the market share of the local footwear manufacturers in these markets. This, in turn, had impacted on the tanneries in the developed countries, forcing many to close.
Those tanneries which have survived in the developed countries, such as the United Kingdom and Germany, have done so by lessening their dependence on their traditional customers, the footwear manufacturers. Specifically, they have developed the production of non-shoe leather and also expanded their export sales to markets where the manufacture of leather products is expanding. The increased competition which footwear manufacturers in developed countries are  facing results from developing countries such as Korea and Taiwan taking advantage of their lower labour costs and lower effluent control costs to produce competitively priced leather products for export.
The worldwide changes which have occurred in the bovine leather industry have had adverse effects on the industry here. The Irish bovine leather industry has gone into a major contraction in the last decade from a situation in the mid-seventies when 66 per cent of the hides produced in Ireland were tanned here, to less than 10 per cent at present. I am fully aware of the extent to which bovine hides are exported unprocessed and I would like to assure the Deputy that the IDA are continually seeking to identify promoters, in Ireland or overseas, who possess the necessary background and ability to establish new projects in hide processing-leather production. Indeed, I understand the Authority are at present in discussions with a number of parties regarding the development of intermediate and final processing of bovine hides.
The extent of restructuring which has occurred in the industry worldwide must of necessity give pause to any aspiring new entrant but I am hopeful that a hide processing project will emerge before the end of the year from the discussions the IDA are engaged in at present.
This is a very serious matter. Three weeks ago I spoke to Mr. Lannen about his plans for the future. I said the sectoral policy I am developing was an area which would not go unattended for much longer, and I would like to know what his plans were. I will not go any further into what the IDA are doing at the moment but I want to assure the Deputies that everything that can be done is being done. Recognising the difficulties which exist, we need to get a promoter with expertise, marketing skills and a fair bit of financial clout behind him. There is a lot of money involved. The members of the co-operative did not seem to take  fully into consideration the amount of working capital that would be required.
I can assure the House that this matter is not being left on the back burner. I have had discussions twice with the IDA and we are in touch with the Department of Agriculture and Food about the  number of hides. It stands to reason that if at all possible the hide industry will be re-established here.
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