The employees of the Fruit of the Loom companies in Derry and Donegal will have been much encouraged by assurances on job security, if only in the short-term, given on Tuesday by senior management. The company says it foresees employment levels remaining as they are, at least through to the end of next year. Not many companies operating high employment levels in an intensely-competitive market can offer job security assurances of any kind. The dispute between the multinational company and three of its Irish executives has overshadowed the fact that the Irish operations are performing well and the European market into which it sells has picked up - for the moment. However the company produces fashion garments - T-shirts, sweatshirts, sportswear - for a notoriously fickle youth market and that carries with it unpredictability of a high order. As the company's employees fretted over their prospects through the last week no doubt they will have noticed that the staff at Klopman in Tralee and Gaeltex in Letterkenny have virtually no prospects at all. Gaeltex has been in business for 30 years, Klopman once employed over 1,000. No matter how successful the `Celtic Tiger' is, there will always be job losses and they will occur mostly in low-skill, labour-intensive companies.
Sewing is a case in point. Fruit of the Loom employs over 700 at its Buncrana sewing operations and has undoubtedly has considered moving the function to a low-cost country. Buncrana employees earn an average of over £200 a week; in Morocco - where Fruit of the Loom is already established - they would work for £30 a week. There is not much training involved and machines are easily transported. The Buncrana employees have most to fear when the company's employment assurance to the end of next year has passed.
The other employees are involved in capital-intensive operations such as spinning and weaving. Such machinery is not so easily transported; if the company was tempted to shift some of it overseas it would face a hefty bill on repayment of grants, at least until next year. The company has nevertheless shown commitment to Ireland through difficult times. It will be aware that the benefit in relocating operations to low-cost countries is not clear-cut. Cost per unit is much influenced by the labour bill but also by productivity, quality of finish and proximity to markets. It is simply not the case that a Fruit of the Loom pull-out is historically inevitable. Mr Jim McDaid, please take note.
The irony is that the company, as well as being one of the largest on the island, is also perhaps the most integrated manufacturing base we have; it does virtually everything except grow the cotton. But it is not autonomous. The European headquarters is in Zug, Switzerland, where the crucial decisions are taken on selling, marketing and distribution. The US operations, it is said, are out-performing the European ones. The vast majority of the European jobs are in Ireland but the success of the European division is influenced greatly by people outside Ireland. Small wonder that the IDA has been cajoling multinationals in Ireland - with some success - to make their operations here more autonomous.