Assembly jobs in the electronics sector and some jobs in the clothing, textiles and consumer products areas will always be high-risk jobs in the economy, according to IDA Ireland chief executive Mr Sean Dorgan.
At risk as well, he warns, are jobs in multinational companies where managers of the Irish plants are not pro-active within their groups in seeking new products and new technology for their own plants.
After the announcement this week of 670 job losses in three plants, Mr Dorgan says Irish producers are operating in a global economy and to survive they must be able to produce at a viable cost or be able to differentiate their product through adding quality. Companies in the low valued-added end of the market such as assembly or low fashion clothing are competing on cost and unless they change over time to add value to their operations will not be able compete with plants in lower cost countries, he warns.
Every year IDA expects job losses of about 6 to 7 per cent of the total employment in IDA-assisted companies. This year it is projecting 7,800 job losses, which compares to just under 7,200 in 1998. While the number of jobs created is rising, the numbers being lost is on the increase as well, though the proportion of jobs created to jobs lost remains about two to one.
Every year global events will cause some job losses in Irish companies - such as the impact of the collapse of the Russian market on Tarkett in Mullingar. These events are difficult to forecast and their impact is difficult to avoid.
Then there are particular sectors or parts of sectors where worldwide market conditions deteriorate and companies start to prune back jobs to try to remain competitive and save the remaining jobs (sometimes this action will fail), or where the operation is part of a group with a number of plants the closure of one or more plants may be made to save the group. In recent years computer manufacturing companies and the lower end of the component suppliers within the information technology sector have suffered. AST of Limerick and disc drive maker Seagate of Clonmel are examples of companies that have failed.
And then there are particular companies that will be at risk because they have not developed beyond basic assembly or production of commodities. They will eventually lose out to lower-cost producers in other countries.
IDA rejects criticism of past decisions to bring in companies offering low value added products and low-skill jobs - the jobs that are now being lost to low-cost producers.
"We had an unemployment crisis. We went out and got sustainable jobs. We recognised that there were considerable risks in some projects. Some worked and some did not. It was not the wrong decision to go for some jobs which were not going to be very long term - 20 to 30 years. Of the riskier projects we got some 10-year jobs out of them," Mr Dorgan says. The fact that the failure rate of companies in Ireland is broadly in line with that in other countries, he adds, justifies those project decisions.
IDA policy now is to go after high-skill/high value-added operations. Having these type of operations is seen as a protection against losing jobs to low-cost countries which would not have the skill bases to take them on.
It is IDA policy, too, to encourage the managers of the Irish operations of multi-nationals to do a lot more than manage production on a week-to-week basis. IDA wants to see them actively networking within their groups, seeking new products within the group to replace ageing ones, being aware and alert to group expansion, development or rationalisation plans and ensuring they are in pole position to get new products and new technology into their own plants.
"If the Irish management is good at this there is a very good chance that the operation here will not just survive changing markets and conditions but will expand," according to Mr Dorgan.
Every year IDA does reviews to establish the risk profile of companies operating here. About three-quarters are found to be low risk. Of the remaining 25 per cent about one-third are high risk and the balance are medium risk where some jobs may be lost. High risk areas are clothing and textiles, basic consumer products, electronics at the assembly end, low-value medical devices and low-grade engineering operations. They are seen as "not really competitive here anymore", unless they can upgrade or differentiate their products in some way. Fruit of the Loom is an example in the clothing and textile area. It had 2,526 employees in Donegal at its peak. Of the 2,100 employees remaining now, 850 people are expected to be made redundant by the end of April.
In the long-term, all T-shirt manufacture will be moved to lower-cost Morocco and employment is expected to stabilise at around 600. The US group has undertaken to locate its logistics and European management here and to try to introduce higher fashion products.
Electronics, a highly volatile sector, is seen as high risk unless a company is constantly making the transition to new products such as Braun in Carlow. And basic engineering or assembly operations, such as Packard, will always struggle to survive against lower-cost producers, unless they upgrade. Kostal, which employs 1,000 people in Abbeyfeale and is opening a new plant in Mallow, is an example of a company which started as a basic assembly plant but upgraded.
The bottom line message from IDA to companies with operations that are dependent solely on low cost production is "there is no future life if you don't change". IDA is adamant that it has not ignored some regions or areas when it comes to locating projects. But Mr Dorgan agrees there is a "serious imbalance" in regional growth which he accepts IDA will have to work on with other agencies to rectify.
Inadequate infrastructure - roads, air links, water sewerage, telephone links - can be a problem. It is not so much an issue with firms already located in the various regions - a recent IDA survey found that 64 per cent of companies would make the same location decision they originally made. But it becomes an issue when trying to persuade companies to locate in some areas. Other areas IDA considers important include ensuring skills availability in different regions and broadening the range of activities in each area. For example, Donegal has traditionally been seen as a clothing and textiles area and IDA wants to broaden this by bringing international services business into the area. Once one company in this sector operates successfully there, others can be encouraged into the region, thus expanding the depth and range of activities in Donegal. Concern that the Irish market may be too dependent on information technology companies is dismissed by IDA.
"This is a growth industry. It is the way forward. We have a very broad base of companies here and are not dependent on any one sector of the industry or any one player," Mr Dorgan argues.
Could the call centres now providing increasing numbers of jobs be the low value jobs of tomorrow? Mr Dorgan thinks not because, while some of them come in as basic operations, they are quickly adding functions when they see the quality of workers available. Advanced technical support operations are also coming in. And these call centres will form the basis for the development of the huge e-commerce growth area, he predicts.
At the end of the day the IDA cannot ensure there will be no job losses. Though concerned about the human suffering involved in redundancy and job loss, Mr Dorgan says IDA "cannot be in the risk aversion business. We have to be in the risk management business".
