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Kvaerner, Daewoo Calling It Quits In Shipbuilding Businesses

April 1999, in years to come, could prove to be a watershed in the shipbuilding business. While shipbuilders around the globe have openly and loudly complained about stagnate pricing and too much capacity, two of the world's biggest players — faced with mounting financial crises on the corporate scale — decided to completely pull out of the business of building ships. Meanwhile, General Dynamics bid to become the dominant shipbilding force in the U.S. via the acquisition of Newport News Shipbuilding lacked the necessary political and defense department backing, and thus fell to the wayside less than a month after the billion plus dollar deal caused chins to collectively drop. Skeptics, however, panned the deal from the start, noting that placing 75 percent of U.S. Navy shipbuilding business in one company's coffers was a long-shot at best.

The decision by Kvaerner ASA and Daewoo to sell off their shipbuilding assets is ironic, indeed, considering that the two companies were central figures in the above-mentioned controversy of piling on additional commercial shipbuilding capacity in the face of low ship prices. Subsidies, politics and industry in-fighting aside, though, the decision by both companies largely took the market by surprise, and could effectively help to shift the balance of shipbuilding power for years to come.

For instance, Daewoo was (at press time) in discussions to sell its shipbuilding business to Japan's Mitsui. With Japan and Korea jockeying for shipbuilding supremacy for the past half decade, the sale to Mitsui or another Japanese yard would clearly shift the balance of power to Japan In Kvaerner's case, the divesture of shipbuilding assets will more than likely not be as clear and easy, as its holdings encompass more than a dozen yards in four countries. At press time, the company which saw its shipbuilding operation profits plummet from $95.8 million in 1997 to $12.4 million in 1998 was considering several options, including company spin-offs to shareholders, joint ventures and an outright sale. The picture is also murky for the company's Philadelphia project, which May, 1 9 99 is well underway but not yet complete. An immediate reaction to the news has been from a niche, yet high value market of the sector, cruise ship owners and operators. As Kvaerner's Finland facilities in Turku and Helsinki are undoubtedly two of the top cruise shipbuilding yards in the world, their "for sale" status, coupled with brimming orderbooks at the other major European cruise shipbuilding yards in Germany, France and Italy have shipowners eyeing Far East yards for new cruise tonnage, a development that was imminent but until recently still seen as far off




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