Indian Defence Review

Steering Through Shipbuilders Dilemma

Immense pressure is being placed upon the shipbuilding sector as the global economic crisis continues to loom large over the entire world. Government procurement contracts may sustain the selected industry in the short term, but these will be completed within next few years. In anticipation of the axe falling on the ship acquisition programmes, the shipbuilders are striving to identify and develop an industrial strategy that will ensure further prosperity.

Survival through Mergers — European Example

The European region shipyards have completed a lengthy process of consolidations and mergers. There exists one major shipbuilder within each of the big countries. Six large companies dominate the European naval shipbuilding. These include a mix of state owned and privately owned yards. In UK, BVT surface fleet was created in June 2008 as a privately owned joint venture (JV) between BAE systems surface fleet Solutions and VT Group’s shipbuilding interests. The JV took place at the behest of the UK government to create a national shipbuilder.

India does not have a Shipbuilding Ministry in the Central Government to steer, support and direct shipbuilding in the national interest. Indian shipbuilding industry is like a ship sailing without a rudder”¦

In France, State owned Shipbuilder DCNS was created in April 2007 with the sale of Thales Naval Business to DCN. In Germany, Thyssen Krupp Marine Systems (TKMS) became the national shipyard in 2005 with the merger of three main shipyards ie Blohm+Voss in Hamburg, Nordseeverke in Emden and HDW in Kiel. In Spain the military yards of shipbuilder IZAR were transferred to government owned company Navantia in 2004 which became the national shipbuilder. In Italy, the Fincantieri builds both commercial and military vessels and has grown through gradual mergers of government owned yards since its creation in 1959.

Dutch owned Damen Shipyard group is a global commercial and naval shipbuilder with yards in 17 countries worldwide that comprise activities such as maintenance, repair as well as new construction. In Netherlands, after nearly two decades of government ownership, the government privatized Royal Shelde by selling it to the Dutch owned Damen Shipyards group in 2000.

Survival through Consolidation

Russian shipbuilding is one of the largest national industries. This industry has been going through the process of consolidation. On March 22, 2007, President Vladimir Putin signed the decree on the creation of the state run “UNITED SHIPBUILDING CORPORATION” (USC) joint stock company. The United Shipbuilding Corporation will have sub-holdings partners comprising Nevoskoye Design Bureau JSC, the Western Shipbuilding Center JSC, the Northern Shipbuilding center JSC and the Far Eastern Shipbuilding and Ship repair Center JSC. The Severodvinsk-based Zvyozdochka Machinebuilding Enterprise FSUE has been reorganized in Zvyozdochka Shiprepair Center JSC.

Several companies have joined the new center. Five dozens of design, scientific, research and development organisations and institutions have been grouped under the umbrella of the holdings such as Granit-Electron Concern JSC, Morinformsystema-Agat Concern JSC, Avrora Scientific and Production association Concern JSC, and Electropribor-Central Scientific and Research Institute Concern JSC. The State run Krylov Central Scientific and Research Institute has been reorganised in the Krylov State Scientific Center FSUE. All the Russian State run central design bureaus are reorganised in joint stock companies under the control of the United Shipbuilding Corporation (USC). These design bureaus include Severnoye Design Bureau, ALMAZ Central Marine Design Bureau, Zelenodolsk Design Bureau, Rubin Central Design Bureau of Marine Engineering, Malakhit Saint-Ptersburg Marine Design Bureau and Onega Scientific and Research Design Bureau.

The world famous Central Research Institute for Shipbuilding Technologies FSUE has been reorganised in the Center for Shipbuilding and Shiprepair Technologies JSC. The consolidation process is not yet complete in Russia. For example the future is not clear for the concern of medium and small tonnage shipbuilding JSC (CMSS), the Marine oil and gas projects JSC and Fast Fleet Financial and production group.