Planned Shipyard Tie-Up Seen Faltering

With a government-initiated plan for a tie-up between the Thyssen-Krupp shipyards and Howaldstwerke Deutsche Werft (HDW) looking to have run aground, the parent companies have started new talks on extending their existing cooperation in the construction of naval ships.

Herbert von Nitzsch, chairman of Thyssen-Krupp Werften GmbH, confirmed that so far an exchange of capital between the partners had not taken place.

Under the original plans, the two parent companies, Thyssen Krupp and Babcock-Borsig, were to have exchanged 7.5% of the capital of their shipyards by Sept. 30 last year.

In further steps, these cross-shareholdings were to have increased to 15% and up to 49%.

March 31 has now been set as the next date for a share-swap. But industry experts doubt that this deadline will be kept.

While Thyssen Krupp is believed to have a keen interest in an exchange of capital, the position of Babcock-Borsig is less clear.

In this context, the recent investment by U.S. investor Guy Wyser-Pratte in Babcock Borsig has been welcomed by industry observers.

With an eye to the earnings power Germany's only naval shipyard could offer, there is hope that Wyser-Pratte will press Babcock-Borsig to take action sooner rather than later.

Under the existing cooperation between the two groups, shipyard Blohm + Voss (B+V) heads a consortium that includes its sibling Thyssen Nordsee Werke (TNSW) and HDW to construct ships. For the construction of submarines, HDW heads a consortium with TNSW.

Both consortia have exclusive export contracts with trading house Ferrostaal. If the three shipyards decide to merge, Ferrostaal is to be incorporated in the deal.

ThyssenKrupp's shipyards – Blohm + Voss GmbH, Blohm + Voss Repair GmbH and TNSW – generated combined sales in their 2000/01 year (ended Sept. 30) of 424 million euros, down from 842 million euros in 1999/2000, and earnings of 18 million euros, down from 20.4 million euros.

The decline is exclusively the result of a specific difficulty at B+V, while B+V Repair and TNSW posted record results.

The difficulty with which B+V currently has to contend involves the world's fastest cruise ship, the Olympic Explorer.

Since April 2001, Greek shipping group Royal Olympic Cruises has been refusing to take delivery of the Olympic Explorer from B+V, alleging technical flaws.

Now that repairs have been successfully carried out, a court of arbitration will meet for the first time next week to settle the dispute.

But von Nitzsch warned that a lot of time could still pass before agreement is reached.

In the current year, B+V is expecting to win new orders as a result of the recently launched naval corvette program K130, and it also expects orders for four frigates from Chile with a total value of 650 million euros.

In the case of Chile, the shipyard is in direct competition with the United States, which has offered Chile as an incentive the complete maintenance of all turbines of the F16 fighter aircraft used in South America.

TNSW has naval ship orders until 2005. But repair orders are low.

With freight quotas declining, shipping groups are holding back on major projects.

But the shipyard is hoping to win two major orders for the complete overhaul of two gas tankers.