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Meyer Werft, one of the world’s largest builders of cruise ships, is nearing a bailout by the German government after surging energy and raw material costs drove it to the brink of collapse.
Chancellor Olaf Scholz on Thursday pledged to help rescue the “industrial crown jewel” at a meeting of the company’s works council in the north-western town of Papenburg.
The group is experiencing the worst crisis in its 229-year history. With many of its contracts negotiated before the Covid-19 pandemic and not adjusted since then to take higher raw materials and energy costs into account, it needs €2.7bn to finance construction of the ships on its order book.
A rescue package could involve the federal government and the region of Lower Saxony becoming shareholders in the company, temporarily at least, German media reported.
“They won’t be doing that to remain as partners forever — we aren’t shipbuilders,” Scholz said. “It’s to lay the foundation for a good future in the private sector.”
He cited the example of the government acquiring a 20 per cent stake in Lufthansa in 2020 at the height of the Covid-19 pandemic, which it sold two years later.
Scholz said the federal government, the regional government of Lower Saxony and the owners of Meyer Werft had held talks with banks in the past few weeks on a deal to finance the construction of ships on its order book.
But he added that the deal was not yet done, as the German parliament and the European Commission would need to approve it.
“If everyone else pulls together, the federal government will contribute its share of the solution,” he said. “Shipbuilding here in Papenburg and in the whole region has a future.”
The building of cruise ships is the last area where Europe’s once-dominant shipyards, rather than those in China, South Korea and Japan, continue to have a commanding position.
International cruise lines, such as the US’s Carnival Corporation and Royal Caribbean and Switzerland-based MSC Cruises, order mostly from yards in Germany and Italy. The yards benefit from a strong supply chain of companies making carpets, furnishings and other items to the high standards demanded by cruise passengers.
But the problem facing groups such as Meyer Werft is that its customers pay the lion’s share of the purchase price for cruise ships upon delivery, with the company having to borrow heavily in the meantime to cover construction costs.
Stephan Weil, prime minister of Lower Saxony, said the region was planning a “massive commitment” to save Meyer Werft with the largest rescue package it had ever put together for an industrial company.
He said the shipyard had a “really strong future”, pointing to its €11bn order book, and added that it paid €500mn a year in taxes and social security contributions. “I have no bad conscience about saving such a company,” he said.
The group’s underlying business remains robust. Just a few days ago it won the biggest contract in its history when Disney commissioned it to build four cruise ships.
It also recently started building converters that transfer wind energy generated offshore to land.
A collapse of the company would be a disaster for the surrounding region: about 18,000 people are directly or indirectly dependent on the shipyard for their livelihood. Meyer Werft was already planning to cut 340 jobs in the coming years, leaving it with a workforce of 3,100.
Additional reporting by Robert Wright in London
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