French Shipyard Changes?

Will the recent elections in France, where the voters rejected austerity in favor of jobs, lead to new subsidies for Chantiers de l'Atlantique or a devaluation of the Franc, which will make the yard more competitive?

New big-ship orders have recently gone to competing yards in Finland, Germany and Italy instead.

Prior to the elections, it was assumed that the conservatives would win. That would have given support to an expected reorganization at Chantiers de l'Atlantique by the newly appointed yard manager, Patrick Boissier. He is expected to become chairman and CEO, when the present chairman, Jean-Noel d'Acremont, is expected to retire at the end of the year.

A senior French banker specializing in cruise ship financing, who spoke on the condition that he would not be identified, said prior to the elections that the new CEO was expected to take strong measures to get the yard back on track, including what be called "cutting the deadweight." He said he expected the 4,000-member work force to be cut by as many as 1,200.

The banker said that the yard had pursued an "ostrich policy" for the past 10 years and one reason that Chantiers de l'Atlantique has been losing orders, is that the yard is too expensive, which he attributed to its low productivity. He said that the yard should have increased its productivity while it benefited from subsidies, adding that Meyer Werft, for instance, builds cruise ships with only a third of the French yard's work force.

What Went Wrong?

Chantiers de l'Atlantique has also been a victim of circumstances. The company failed to increase its productivity while it benefited from government subsidies, and later was also bit by a double whammy: shipyards in Finland and Italy benefited from devaluation of their currencies and from subsidies, while the French government cut back on its support and the Franc grew stronger. "We would have had the 130,000-ton Eagle-class order," said d'Acremont in an interview with Cruise Industry News. "if Kvaerner Masa has not beaten us on subsidies."

Yard Improvements

While the critics are quick to point fingers, the existing management, which now may be on its way out, has instituted a number of changes to improve the yard's efficiency and in turn make it more competitive.

According to d'Acremont, such efforts include the general modernization of the yard in the areas of bull construction, pre-fabrication and pre-outfitting.

The bottom line, according to d'Acremont, is that cruise lines are not willing to accept price increases. Hence, the yards must find ways to become more efficient and to cut costs. He also noted that "the main shipowners also know the market very well and know to place their orders at the best moment, so they are able to benefit from the competitive situation between the yards."

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