BUSINESS OPINION: Once upon a time when the Government tried to close down a State company it took two or three goes before it finally happened. What is striking about the decision to close Irish Fertilizer Industries is that, within days of the Government deciding to pull the plug, the only issue on the agenda is the generosity of the redundancy payments.
Where is the local bishop trying to broker a deal? Or the mysterious foreign investors offering a last minute reprieve that were a fixture of various attempts to shut down loss-making State companies in the past? By tradition, what was announced last week should have been the first in series of crisis that would have seen IFI limp on for a few years before closing - but only after the State had continued ploughing money into the company long after it should have stopped. Instead, we had an announcement followed by a few grumbles from the trade unions and equally swiftly by comforting words from the Tánaiste to the effect that redundancy payments would be generous. End of story. The liquidator moves in.
So what has changed? One thing is that the European Union will no longer allow national governments throw money at uncompetitive national industries. But as European governments have shown time and time again, there are ways of getting around this rule if you are determined enough. And one would have thought that in the current climate, the preservation of 620 jobs - albeit only around 400 in the Republic - was worth ruffling a few feathers in Brussels.
The reality is that IFI could have been kept going by several means. If, as it appears, the proximate cause of its demise was that Bord Gáis stopped extending the company uncommercial credit terms, it would be very surprising if one State company contributed to the destruction of another without at least one call being made to the Department of Enterprise, Trade and Employment. If such a call was made, its contents clearly represented a thumbs down for IFI. This in turn begs the question why?
One answer is that the putting to death of IFI represents the successful conclusion of a process that has seen the State disengage from loss-making or unviable State industries. The process really started in 2001 when Irish Steel was allowed to go to wall. Although the Government had sold the Haulbowline Island-based foundry in 1996, there remained a perception that it would still underwrite one of the largest employers in the Cork region.
It was a perception shared both by the workers and the owners of the company, Ispat International, which made several attempts to extract funds from the Government to stave off closure. When they were not forthcoming, the company closed with the loss of 400 jobs.
The final disengagement from Irish Steel was followed by the knockdown of Irish National Petroleum to US oil company Tosco. Although the Government agreed a price of $100 million for the assets of the State oil company, the net profit was negligible as the State retained the group's €90 million debt and has had to put an insurance policy in place to cover environmental risk as well as footing the €10 million bill for a staff share scheme.
ACCBank was also sold off at a bargain basement price of €130 million, which represented only 90 per cent of the bank's book value. Once again the State had to give the new owners an indemnity - is this case in respect of ACC's involvement in the Four Seasons hotel development - and handed over a chunk of the proceeds, €24.5 million, to the staff. Another significant exit by the State was ICC Bank, which was sold to Bank of Scotland for €280 million despite being valued at €380 million by the Government's advisers.
Taken individually all these deals look pretty disastrous from the point of view of the taxpayer, but viewed together they resemble a coherent strategy to extract the State from a whole range of sectors that it really has no business being involved in any longer.
What has made this possible is the economic progress of the last decade and, in particular, the growth in employment. As the Government was quick to point out, 70 per cent of the people who lost their jobs at Irish Steel have now found alternative employment.
In many ways, the only surprising thing about what appears to have been a decision to put IFI out of its misery is that the Government proceeded with it at a time when employment growth is faltering.
Of course the above is something of post hoc analysis and presumes a degree of high level management of the State's affairs that may be just wishful thinking. Hopefully this is not the case and the decision to close IFI represents a watershed in the State's involvement in industry.
The remaining commercial State companies fall into one of two categories and most fall into both. They are either profitable or of sufficient strategic importance to justify Government involvement.
All of this is of little comfort to the 620 people who are about to loose their jobs and their various dependants.
