The Government was facing the biggest single industrial setback of recent years last night, after the announcement that the Seagate Technology plant in Clonmel is to close with the loss of 1,400 jobs.
The US computer company blamed "downward price pressure, intense competition and increasing market fragmentation" for the closure. The Tanaiste, Ms Harney, said the company told her it could make its products more cheaply in the Far East.
Last night Mr Peter Knight, director of Seagate Technology in Clonmel, said that the way the information was released to the workforce was "rather unfortunate." Some workers had heard it on the radio or TV before entering the final meeting to inform staff, he said
The Tanaiste and IDA Ireland had been aware since October that the Clonmel plant was being included in Seagate's international corporate review, he said. A final decision to close the plant was taken at headquarters on December 5th, he said. The Tanaiste and IDA Ireland were informed yesterday morning.
The company regretted having to make the decision, he said, but "management must go on and make decisions to close operations which are making losses we cannot sustain," and a "generous severance programme had been issued to the employees".
Employees are to be given details of their severance packages in the coming weeks, and it is understood they will receive cash worth between 11 and 15 weeks' pay. Seagate will also pay back most of the grants it has received from the IDA. Ms Harney, visiting Clonmel as the news was broken to employees, said she was "deeply shocked" at the closure, while in Dublin the Taoiseach said it was "terrible news".
Promising the establishment of an employment taskforce for the area, Ms Harney said the closure had been a "very sudden decision". She had asked the company to explain how it had not been able to predict its business accurately. "They certainly got it wrong" she said. She had "tried very hard" to persuade Seagate to keep the Clonmel plant open when she first heard of the threat. The company had a problem with over-capacity after acquiring another firm and "they also tell me that they can make these products in the Far East for about a third of the cost of making them in Clonmel". The Taoiseach said the announcement was "devastating for Clonmel, especially coming only two and a half years since the company announced it was coming to the town". He said the Government had no more warning than the workforce. It had been discussing the difficulties with the company, but the closure had come as a "complete surprise," he said.
"The talks we were having with them concerned market difficulties and difficulties with supply. We thought there might be temporary cutbacks, such as other big companies like Intel have had in the past. Delaying certain things was being discussed, but certainly not closure. That was clearly not part of the discussions."
Yesterday's news was the second major setback for Clonmel this decade. The Seagate project was itself a replacement for the town's Digital plant, which closed in 1991 with the loss of 350 jobs. Major doubt now hangs over plans by Seagate to expand in Derry and establish a new plant in Cork. An expansion to the Derry plant, where Seagate already employs 1,400 people, has now been postponed and a final decision on whether to proceed with a new 1,000-job project in Ringaskiddy, Co Cork will not be taken until next spring.
The Clonmel operation received almost £10 million in IDA grants last year, the second-largest amount after Intel, which received over £26 million. Its full grant allocation of some £16 million is now to be repaid to the IDA.
Opposition parties last night questioned the roles of both the company and the Government in the handling of the closure. Labour concentrated its criticism on the management at Seagate but said the closure of a plant supported by the State "raises questions about the kind of company we encourage to locate here".