German Shipbuilding

Eastern Germans: Unchain our yards

Kvaerner Warnow Werft

"The Brussels straight-jacket is strangling our business," said Oswald Müller in early August. The Aker MTW yard chief warned that his facility-now one of Germany's top shipyards, could be forced to close down altogether if EU yard production restrictions are not eased.

Agreed to in 1992, when former GDR yards were at death's door and ready to accept anything that meant survival, the quotas are now shackles on the ankles of a modernized, efficient and buoyant east German shipbuilding sector.

They are not due to come off for another five years. However, a review by Brussels is possible next year and that's when the east Germans are hoping for respite. All the signs late summer however were that their appeals were falling on deaf ears. Werner Schöttelndreyer, the head of the German shipbuilding association VSM warned however that as long as nothing is done, the uncertainties of the row would unsettling German shipbuilding.

In 1991 the former Mathias Thesen Werft (MTW) in Wismar was a largely obsolete GDR relic. Quotas seemed more than adequate. In today's very different world, they are a death sentence, says Müller.

With productivity up 35% since the early 1990s, the modernized, compact and efficient new Aker MTW needs only 1.8 million manhours to handle what it is allowed to deliver, leaving 400,000 manhours-the equivalent of about 200 more jobs-unutilized. Those jobs will now go next year, Müller said, if there is no change of heart in Brussels. The closure of Aker MTW altogether would not be long in following, he predicted.

Unions have already spoken of the economic nonsense of spending billions to revamp east German yards and maintain jobs, only to strangle them after modernization. "Our very success has been our damnation," said one official.

The VSM's Schöttelndreyer has proposed an initial quota increase to 400,000 cgt a year, a rise which would at least cover productivity gains."If an improved quota cannot be agreed on, these (east German) yards will have to throttle back to half speed and a revival in jobs will not be achieved," he said.

Shipyard jobs in east Germany have already dropped from 35,000 to about 4,500 since 1992. Rolf Eggert, Economics Minister in Mecklenburg-Vorpommern, the east German Baltic state where Aker MTW is located, fears as many as 600 more will go next year if current EU quotas continue.
Like Müller, he has warned of the "fatal consequences" of maintaining current quotas and the threat to the economic existence not only of shipyards but also equipment suppliers over a wide area.

In June and July the Wismar yard raised eyebrows by winning orders for six big container ships, four of them from NOL in Singapore. Taking in contracts which the Germans are theoretically no longer in a position to win over low-price Korean yards, Aker MTW expressed the hope that Brussels would help build on that spectacular coup by relaxing quotas, enabling more such orders and strengthening European shipbuilding.

The orders were booked because Aker MTW could still offer building slots in 2001 and 2002 without overstepping its quota. However, given the welter of other cruise and container ship work on its books, it seemed unlikely that Wismar could take much more without incurring Brussels' wrath. Hefty fines levelled on fellow east German yard Kvaerner Warnow Werft (KWW) in Warnemünde for violating EU restrictions have shown how unwise that is.

Not taking new orders however, amounts to handing them to Asia on a plate, since no other Germans and few Europeans are now able to match Asian prices for boxships.

When the quota restrictions were imposed, fears were great among some other north European shipbuilding countries, that their industries could be eroded. In return for billions of DM in German state modernization funding, the east Germans agreed to slash production by 40% to 327,000 cgt a year.

That remains the limit, despite modernization and vastly improved efficiency, with quotas now shared out among Aker MTW (which has 106,000 cgt), Volkswerft Stralsund and KWW (both with 91,000 cgt), and Peene-Werft Wolgast with 39,000 cgt. All are now leading German yards. Volkswerft, in fact, headed the table last year, turning out more than even HDW or the prestigious Meyer Werft, while Aker MTW, Kvaerner Warnow Werft and Peene-Werft ranked sixth,seventh and eight on a list of 24 German facilities.

Production in all north European countries has indeed been eroded since 1992. Not by former GDR yards, however, but by the Asians, particularly Korea. The point now made by east Germany is that its success should not be suffocated but promoted--to help stabilize ailing European shipbuilding, perhaps even ensure its survival.

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