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Spain - Shipbuilding Industry

In 1985, the Spanish commercial shipbuilding sector initiated a wide restructuration program due to the deep crisis sustained from 1975 as a consequence of the surplus shipbuilding capacity and an order book reduction related to the oil crisis. This restructuration program has been developed in several phases the main features of which are related to capacity and workforce adjustment by one side and technological updating by other side.

Spain was incorporated into the European Economic Community (EEC) in 1986. New restructuring programs for the shipyards were presented, but this time within the EEC Directive for Shipbuilding Aids. The following results were achieved due to these programs. Additional workforce adjustment from 30,000 to 18,000 workers (55% from the 1984 situation), were made. Additional closing of capacity from 455,000 CGT until 400,000 CGT (60% over the initial situation) was effected by closing another 7 shipyards definitely and changing the activity of another shipyard to repairs.

The Shipbuilding Sector Agency instructed the shipyards to present performance programs for the 1991- 1993. Construction capacity was maintained at full production until 1992. Then it descended substantially. The workforce dropped from 18,000 to 14,900 workers (a 63% drop from the start of the reconversion).

In 1997 the Commission approved restructuring aid to a series of public Spanish shipyards amounting to € 811 million¹ on the condition that no further aid could be provided thereafter. Subsequently, a number of transactions took place between SEPI and its subsidiaries Astilleros Españoles (AESA), the holding company of the public shipyards, and Bazán, the military shipbuilding group. These transactions led to the merger of all public (civil and military) Spanish yards into Bazán, which then changed name to IZAR. As these transactions might contain State aid not justifiable under the EC Treaty the Commission, on 12 July 2000, initiated a formal investigation procedure² which on 28 November 2001 was extended to further measures not covered by the initial opening decision.

On 27 May 2003 the European Commission extended the formal investigation concerning the potential grant of further restructuring aid to public Spanish shipyards. The Commission intended to clarify whether a sum of € 515 million was granted to the public yards that today are owned by the IZAR group. The potential aid apparently took the form of capital injections and loans. At this stage, it appeared that this money had been provided by the State holding company Sociedad Estatal de Participationes Industriales (SEPI) in 1999 and 2000. The Commission had doubts whether this might not constitute further state aid which, after the approval of a restructuring package of € 811 million in 1997, would not be compatible with EU shipbuilding aid rules.

In another decision the Commission opened the formal investigation concerning capital injections of around 1500 million euro provided from SEPI to IZAR during the years 2000 to 2002. The Commission has doubts whether the capital provided by SEPI to IZAR does not confer economic benefits to civil shipbuilding which it is unlikely to have received from commercial sources. Capital provided to IZAR via SEPI or any other public source therefore may constitute incompatible State aid.

By 2005 Spain still had a significant commercial shipbuilding industry, but it was entirely owned by the Spanish government, which was under direction from the European Union to privatise it as soon as possible. On 01 June 2005 the European Commission approved, under the terms of the EC Treaty’s rules allowing Member States to take measures to protect essential security interests linked to defence industries (Article 296 of the EC Treaty), a reorganisation of the Spanish public military shipyards. These yards were formerly owned by IZAR but had recently been taken over by a new company called Navantia. The solution allowed Spain to protect its essential security interests by rescuing its military shipyards, while ensuring that there will be no undue distortion of competition in the market for civil shipbuilding and ship repair. The solution also takes account, to the greatest possible extent, of the social and regional problems involved in this case.

Naval Ships Division Ferrol Shipyard to New Izar/Navantia1 January 2005
Gijón Shipyard Ocean-Going Ships Division Cartagena Shipyard to New Izar/Navantia 1 January 2005
Fene Shipyardto New Izar/Navantia1 January 2005
Sestao Shipyard High-Speed Vessel Division Puerto Real Shipyardto New Izar/Navantia1 January 2005
San Fernando Shipyardto New Izar/Navantia1 January 2005
Sevilla ShipyardRepair & Conversion Division Carenas Cadiz to New Izar/Navantia1 January 2005
Carenas Cartagenato New Izar/Navantia1 January 2005
Carenas FeneCarenas Ferrolto New Izar/Navantia1 January 2005
Carenas San Fernandoto New Izar/Navantia1 January 2005
Propulsion & Energy DivisionManises (Valencia) Motores (Cartagena)to New Izar/Navantia1 January 2005
Turbinas (Ferrol)to New Izar/Navantia1 January 2005
Systems Division FABA Systems





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