Small firms dismiss Iarnrod call for 20% cut in costs

AN Iarnrod Eireann demand that suppliers should reduce prices by 20 per cent has been heavily criticised by small firms' organisations which have called on the semi State to immediately withdraw the request.

The request, by Iarnrod Eireann chief executive, Mr David Waters, stated that a radical cost reduction programme due to be completed next month would call for the support of not only the shareholder and the employees but also the company's suppliers.

Small Firms Association (SFA) director, Mr Brendan Butler said last night that it was ludicrous to expect Irish companies supplying Iarnrod Eireann to cut prices by 20 per cent.

"These companies are already operating against reducing margins and the effect of the demand, if implemented, will be to condemn a number of small Irish firms and their employees to the scrap heap and dole queues," he said.

He added that the SFA had worked closely with Government over the past two years to improve the opportunities for small Irish suppliers to partake in the public procurement market, which currently amounts to more than £3 billion annually.

"To have one of the Government's own agencies breaching stated Government policy requires immediate action from the Minister (Mr Lowry)," he added.

A spokesman for the Irish Small and Medium Enterprises Association (ISME) said last night that it was a ridiculous way to go about cost saving. "It doesn't say much for the company's purchasing policies if it thinks its current suppliers could supply it 20 per cent cheaper."

An Iarnrod Eireann spokesman said last night that the company had written to suppliers seeking cost cuts of "up to 20 per cent". He defended the move saying procurement was one of the areas identified by consultants Lesley Buckley & Co where savings could be made.

"It is not a blanket request," he said. "Obviously some suppliers at working at very low margins.

He said he would be surprised if suppliers were not being created sympathetically. Iarnrod Eireann had hundreds of suppliers, he said, and they were being approached on an individual basis.

The consultants have been asked to find savings of at least £10 million. Areas being examined also include payroll costs.

CIE which gets an annual subvention of £100 million from the State is also employing consultants to find cost savings at Bus Eireann and Dublin Bus.

Mr Butler called on the Minister for Transport, Energy and Communications, Mr Lowry to intervene and have the letter withdrawn immediately. A spokesman for the Minister said that Mr Lowry had already made it clear that cost savings were necessary in the sector.

However, he said it was up to CIE to seek cost savings in whatever areas it chose. The Department had no role in implementing the cost cuts, he said.