STX Finland's late-August announcement put it succinctly: "The company is looking for solutions to save Finland's 300-year shipbuilding tradition and its unique maritime industrial skills".
That was just a portent of greater shocks to come.
Local newspapers reported a few days earlier that the Letter of Intent for a two-ship order from Scandlines for LNG-fuelled ferries would be switched from STX Finland's Rauma yard to the Turku site.
These rumours gained currency when Rauma's yard director, Timo Suistio, abruptly resigned to take up positions with Rauma-based Hollming engineering group. By week's end, a storm erupted in Rauma when it was confirmed that although just an LoI, the Scandlines ships would be constructed in Turku.
Finland's media then began to say outright that Rauma would close, however no announcement was made by the board until the following Monday, when a split developed between local management and the company's Korean masters.
And so it came to pass that Rauma would be "ramped down and that all future work would be transferred to Turku," with workforces at both yards facing total cuts of 700 following legally required 'co-operation talks'. The second walkout in less than a fortnight ensued (the first of which following the transfer announcement).
In a September 16 press release, STX Finland stated: "Like other European shipyards, the Finnish industry is suffering from recession in the global economy. The increase in surplus capacity and the global financial crisis has cut orders and stiffened competition."
An accompanying bulletin of facts and figures noted that the company has built some of the world's largest and finest cruise ships, ferries, icebreakers, research vessels, military and other technically challenging ships. Rauma had recently completed, on schedule, three of the above types for clients in South Africa (an Antarctic research and supply ship) and Namibia (a fisheries research vessel), as well as upgrades for Finnish navy ships and cruise ferries for Estonian operator Tallink. In 2012, the 'Spirit of France' joined her sister 'Spirit of Britain' on P&O Ferries' cross-Channel service.
Changing times
So how did things turn sour so quickly? Finnish shipbuilding has been in this situation before. In 1989, STX's predecessor, Wärtsilä Marine, went bankrupt due to foreign exchange woes and a government-forced merger with state-owned Valmet's shipbuilding division – much against the will of the management of the time. Rising from the ashes as Masa-Yards and specialising in high value shipbuilding, this was followed by multiple owners and name changes.
In the 1990s, Norway's Kvaerner acquired the company and then merged with compatriot Aker. Taking over French company Chantiers de l'Atlantique in 2006, effectively bringing all the major yards in Western Europe under one umbrella, by the following year Aker had sold out its majority stake to Korea's STX. Thus STX Europe was born.
At the time, a positive spin was put on STX. It was a large maritime conglomerate with shipyards of its own, whereas Aker had been an investment vehicle for Norwegian magnate Kjell Inge Røkke. His acumen may now be seen as clairvoyant. Røkke sold out at the top of the market whilst STX paid top dollar to become more highly leveraged than ever. STX Europe soon began selling off subsidiaries outside of Finland and Norway, with STX Finland consisting of yards in Helsinki, Turku and Rauma.
Business has slid rapidly since 2010. Turku had recently handed over some of the world's largest passenger ships: the 225,000GRT sisters 'Oasis' and 'Allure of the Seas', on time and ahead of schedule. Receiving kudos from the client regarding the vessels' performance, innovations and sheer size, the yard fell silent as soon as the twin giants left the slips, with only minor projects occupying a fraction of the yard's substantial capacity.
STX, meanwhile, attempted to spread its substantial risk. The French government bought a 33% "strategic investment" stake in STX France in 2008. In late-2010, Russia's state-owned United Shipbuilding Corporation bought into half of STX's Helsinki yard for a reported sum of just €20 million (US$27 million), re-naming the site Arctech Shipyard Helsinki. At the time, this unit had also been largely idle since delivering the 'Amorique' to Brittany Ferries in January 2009. Ironically, it was Rauma that had been busiest in this period, building high speed and cruise ferries for Norway's Color Line, Estonia's Tallink and P&O Ferries of the UK.
Currently, Rauma is completing a LNG-fuelled patrol vessel for the Finnish Border Guard for a December handover and commissioning. All that remains, work-wise, is the conversion of Fjord Line's ex-Bergenfjord – to be ready by May 2014, after which, failing a miraculous flood of work, the yard shuts down.
Money matters
In a cyclical industry like shipbuilding, two factors are arguably important during an economic downturn: a reliable owner and a supportive government. STX Finland had neither. The relevant Minister, Jan Vapaavuori, made it plain from the beginning of his tenure that he will not be a part of any direct state involvement in the shipbuilding sector.
When STX Finland needed a €50 million (US$67.4 million) loan in working capital to finalise a €1 billion (US$1.35 billion) contract for a third sister vessel to the 'Oasis' (with an option for a fourth), the government refused and the order went to STX France, whose offer was described as "compelling" by the client. 12,000 hours of man-years of work set sail for France, to the delight of France's hard-pressed government.
Speaking at a press conference following the announcement of the closure of the Rauma yard, Vapaavuori revealed that Finland had lost 100,000 industrial jobs in the last ten years, citing high wage costs and productivity problems, as well as a lack of investment.
The situation as it stands
Rauma chief shop steward Raimo Virtanen told state broadcaster YLE "I can't say publicly what I am thinking now, this is serious and what the future will bring, I don't know yet. Six weeks of (statutory) co-operation negotiations will make it clear if 150 jobs remain here or are transferred to Turku."
Pro, the main trade union affected by the closure, was scathing of STX Finland's management, with leader Antti Rinne saying, "one product and one customer represents a too big risk which should be obvious to everyone. Competitiveness has not been looked after enough and investment neglected."
Turku, where around 100 will face the chop, has taken cold comfort from the boost in work, cutting its total labour force to about 1,500, with reports of the yard facing the "Rauma solution" if new business isn't landed within a year. Its situation is not promising: two cruise ships for TUI Cruises are to be delivered by the second half of 2015, with the two LNG Scandlines vessels requiring completion around this time if the order is finalised.
Shipyard expert and former Rauma and Turku chief, Kari Airaksinen, told Finnish media the core problem still lay in Turku's long-term loss making. Rauma's closure won't change that. In fact, it may even worsen. In the past, Rauma built specialised vessels and military craft. Turku has not, and does not have the customer contacts.
Airaksinen pointed out another weakness: "Turku makes ships in series like its Korean owner. They buy in work. Conversely, a network yard buys a result from sub-contractors to be completed efficiently and effectively. Further, STX is in the hands of foreign banks whose actions nobody in Finland has any say over."
By the numbers
In mid-September, the Ministry of Employment and the Economy issued a critical report on state subsidies. Although the official policy is to cut expenditure, the amount of subsidies has in fact grown, with a record €178 million (US$240 million) invested last year – €33 million (US$44.5 million) more than the year before. The report claimed that under half this money was "efficiently invested" with a sixth rated "inefficient".
Of the total subsidies contributed to the marine sector, a significant €79 million (US$106.5 million) went to shipping companies, including Viking Line, Estonia's TallinkSilja, Bore, Neste Shipping and Finnlines. Neste Shipping, a subsidiary of Neste Oil, recently announced its tanker fleet divestment and will operate as a charterer going forward. Finnlines, meanwhile, is two-thirds owned by the Italian Grimaldi family. Lastly, substantially smaller innovation subsidies were granted to STX Finland and Arctech Shipyard Helsinki.
The fact that the government rejected STX Finland's €50 million loan, which would have guaranteed billions in export income, 12-24,000 man years of work, no lay-offs and no long-term government resources to cope with the rise in unemployment and a yard closure is glaring. For a shipyard to survive long-term, co-operation between government and an innovative and committed owner – one that keeps up with advancing technology and productivity demands – is mandatory.
John Pagni