NEWS | Sunday, 28 September 2008

Mismanagement at dockyards was deliberate

The Dockyard’s management deliberate policy was to keep everyone working irrespective of the losses made, economist Karmenu Farrugia reveals in an interviewed with MaltaToday.
Farrugia was part of a team of experts commissioned by the former Opposition Leader in July 2007 to investigate the dockyard’s financial situation.
He reveals that the report submitted to Alfred Sant in August 2007 showed that the dockyard was accepting large scale orders without any consideration of whether these were profitable or not.
In some cases the raw material needed for the repairs amounted to more than 80% of the tender price, Karmenu Farrugia says.
“They were accepting big orders without due consideration of whether they were going to make profits or not… there were cases where the raw material used was costed at 80% of the tender price,” Farrugia told MaltaToday.
Sant had commissioned the report after he was asked by the government to look in to the dockyard’s situation.
Farrugia confirms that the authors of the report had no idea that the government intended to privatise the dockyard when they conducted the report.
According to Farrugia the report clearly showed that the dockyard was in a financial crisis and that losses were bound to increase, not just in 2007 but also in 2008.
“There was nothing rosy at all in the picture.”
Farrugia reveals that the report concluded that “bad decisions had been taken to get work for the dockyard,” and that the philosophy reigning in the dockyard at that time was to keep everybody busy at all costs.
“Every job undertaken was intended to keep 1,700 people busy and to that we even added the cost of 500 foreign workers to keep up with the work load. But this was done without due consideration to the profitability aspect.”
Karmenu Farrugia believes that this was not a case of incompetence but a deliberate strategy to create “a feel good factor among dockyard workers” by increasing their work load.
“But this led to a situation where the more people worked, the more losses were made.”
Farrugia thinks that it is inconceivable to increase the industry’s turnover only to make more losses.
“One can understand that an increase in turnover does not correspond to an increase in profits. But for me, increasing turnover, sales and business only to increase losses is inconceivable. If one takes a big contract one should take care to cover the costs and make some profit.”
Dockyard workers now face the prospect of the company’s liquidation after the EU commission indicated that the Maltese government cannot write off the company’s debts before selling the company.
“Whatever the outcome the government is going to fork out millions of euros. Even if the government is forced to liquidate, it will have to fork out more money in retirement schemes. For it is probable that all workers will now take the schemes.”

Full interview with Karm Farrugia


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Mismanagement at dockyards was deliberate

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