State bailout for Meyer Werft?

On Wednesday, the budget committee of the Lower House of the Bundestag is scheduled to debate the situation of the Papenburg yard, which will require substantial additional funds until 2027. 

The financial issues currently impact Meyer Werft Papenburg only, not Meyer's other ventures at Rostock, Wismar and Turku.

Solid orderbook but inflation takes a toll

Meyer Werft's orderbook remains solid. Following Silver Ray's delivery in May, the yard is building another five cruise ships, a research vessel and the steel construction for four offshore converter platforms, keeping capacity utilized until 2027.

The five cruise ships are 2024's Disney Treasure, 2025's Disney Destiny and Asuka III and, in 2027 and 2028, one Excel-class ship each for Carnival Cruise Line.

To realize all its projects, Meyer Werft will require additional funds of some €2.7b to €2.8b from this autumn until 2027. This includes pre-financing for construction and higher costs for energy and materials due to inflation. At least some of the newbuild contracts do not contain adjustment clauses for these price increases.

Additional bank loans and funds provided by the Meyer family will not cover all the capital needs.

A possible solution would be guarantees by Germany and Lower Saxony, but even if such guarantees were provided, they most probably would not be available to cover Meyer Werft's needs until 2027, leaving a gap of at least €400m.

Lower Saxony could take a stake

So additional capital will be required. It's possible Lower Saxony could become an investor in family-owned Meyer Werft, making the yard a partly public-held venture. No decision has been reached.

The results of a restructuring study are expected later this month. Wednesday's budget committee hearing will indicate the political will to support Meyer Werft on its difficult course.

Job cuts

Meanwhile, the shipyard faces a restructuring to improve its finances and international competitiveness. Chief Restructuring Officer Ralf Schmitz said at the end of May that about 440 jobs needed to be cut.

Most cuts are likely to impact engineers and other employees of a division that develops new products and business segments. The planned job cuts sparked massive protest. In one action, representatives of the IG Metall trade union set up a lifeboat next to the Papenburg yard on Monday.

It remains to be seen if the cuts will take place. Should Lower Saxony take a stake in the yard, it is doubtful the level of redundancies outlined would be politically acceptable.

About 18,00 jobs dependent on Meyer Papenburg

Meyer Werft directly accounts for approximately 3,300 jobs, with many more suppliers and service partners dependent on the yard. It is estimated Meyer generates some 18,000 jobs directly and indirectly, including 10,000 in and around Papenburg.

Given this importance, it is likely that both state and federal politicians will do everything to keep the yard viable.