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Shipbuilding

According to the Global Competitiveness Report, Finland is the most competitive economy in the world. Besides holding a leading position in Information Technology, Finland has a strong paper and shipbuilding industry. Every fourth cruise line ship in the world is made in Finland. Finnish shipbuilders have concentrated into special vessels. Besides the spectacular and well known LNG carriers, luxury cruisers and ice breakers also naval ships, research vessels and many other design belong to the most advanced in the world. Finland possesses some of the highest expertise in the field. At peak times, the sector directly provides work for more than 20,000 people and nearly two thousand companies. The sector's top products are an important part of Finland's brand as a successful industrial nation. The relatively long history of Finnish shipbuilding is partly due to the war repartions Finland was forced to pay the Soviet Union after the Second World War in the form of different products such as ships. There were shipyards in Finland before that time, but this situation forced the shipyards to strengthen their operation and efficiency. The ship deliveries of these war reparations were then in a way continued in the form of bilateral trade. During the trade with the Soviet Union both Finnish shipyards were producing ships in long series that comprised the production of 5-7 similar ships. These 5-year contracts were very profitable for the Finnish shipyards and helped to further establish the shipbuilding expertise.

The nature of shipbuilding industry involves constant ups and downs with nearly no stable periods. Changes in workload are also inevitably abrupt, the demand does not decrease gradually but can stop completely if the shipyard fails to close new deals. A problem occurs if there are no new projects or if there is a time gap before the next project. Finnish shipyards have had crisis situations, consolidations and other transformations, but have witnessed great success and high seasons as well. These include the legendary bankruptcy of Wärtsilän Meriteollisuus in 1989, a high number of mergers and the record high order backlog that started around 2004/2005.

By the late 1980s, Finland's shipbuilding industry ranked fifteenth worldwide. The country boasted eight major shipyards, which employed about 14,000 highly skilled workers. Unlike many other countries (including nearby Norway), Finland had avoided large investments in petroleum tankers, a choice that proved to be a blessing when the world tanker market slumped in the late 1970s. Instead, Finland had specialized in high-priced vessels such as icebreakers, luxury liners, car ferries, ocean exploration vessels, and container ships. Starting in the 1970s, shipbuilders also had branched out into offshore oil-drilling platforms and equipment. Finnish icebreakers were world-famous -- the country had produced about 60 percent of all icebreakers in service by the late 1980s. Finland also specialized in vessels designed to operate in arctic conditions. Such projects were well suited to Finnish expertise, and they yielded higher-value-added products that compensated for high input costs.

Shipyards exported up to 80 percent of their production, which made them heavily dependent on world market developments. The shipbuilding industry had survived the difficult years following the 1973 and the 1979 oil shocks without subsidies from the government (except for occasional favorable financial packages); these years had seen a wave of mergers and large-scale investments that had improved competitiveness. Above all, the industry owed its success to continued orders from the Soviet Union in a period when demand lagged in Western markets. Finland was thus the one European country in which the number of shipyard workers had increased after 1975. During the same period, the Finns built two new shipyards for oceangoing vessels, established a heavy engineering works for oil-drilling rigs, and modernized older yards.

By the late 1980s, however, it appeared that shipbuilding was entering a crisis. The decline in the price of oil in the middle of the decade caused a reduction in Soviet purchasing power, limiting new orders for ships (see Regional Economic Integration , this ch.). Moreover, Soviet buyers, who had long preferred Finnish ships, had started to place orders with other countries, including East European firms that enjoyed lower labor costs. At the same time, certain Finnish specialties, such as icebreakers, were attracting competition from more advanced shipbuilding countries such as Japan.

The crisis in shipbuilding led to a decline in employment and to further restructuring. In July 1986, two of Finland's four major shipbuilding companies, Wartsila and the Valmet Group, merged their shipbuilding divisions and planned to eliminate about 40 percent of their 10,000 jobs. Another several thousand workers were out of work, and the increased competition from the new firm threatened the two remaining firms, Rauma-Repola and Hollming. Indeed, competition had already undermined an arrangement under which each firm specialized in a particular field: Wartsila in icebreakers and luxury liners, the Valmet Group in cargo ships, Rauma-Repola in offshore oil equipment, and Hollming in high-technology research vessels. As the crisis continued, industry analysts began to question whether the industry could survive without government bailouts.

A maritime cluster formed by several branches of industry exists in Finland. For example, seafaring, marine industries and port activities in the public and private sectors belong to the maritime cluster. Finnish shipbuilding and manufacturing of ship equipment such as motors and port technology such as straddle carriers for handling containers, mobile cranes and terminal tractors for handling trailers are extremely advanced by international comparison. In recent years, Finland has controlled one fifth of the export market of passenger ships. Finnish companies hold a similar share in the market for marine motors and terminal equipment, if production facilities abroad are taken into account.

In practice, Finnish shipyards have been development laboratories where demanding ship types have been built using the latest technology. The list of companies born from the shipbuilding industry is extensive. Many of these companies such as Wärtsilä (diesel engines), Deltamarin (ship design), ABB Azipod (propulsion units), Mac Gregor (cargo hatches and elevators), Marioff (fire protection systems) and Evac (waste disposal) have been able to grow into world market leaders.

Although the shipbuilding industry is international, there are still a number of companies in Finland who are almost fully dependent on a sole customer, the local shipyard. As the shipbuilding business is highly fluctuating, these companies face severe difficulties when there is a slump in shipbuilding, as has been the case recently. In order to stay in business, these companies would need to find new customers and markets outside the Finnish borders, as well as move into new business areas to reduce their dependency on shipbuilding.

The industry has undergone major global transformations since 1970s and many European shipbuilding companies are no longer in business. Finnish shipbuilding since 1980s revolved around two companies: Wärtsilä based in Turku and Helsinki and the shipyards located in Rauma - Rauma Yards and Hollming - which merged in 1992 to form Finnyards. In late 1980s all of these shipyards were owned by Finnish investors, but in the 1990s Norwegian shipyards entered the Finnish shipyard industry, purchasing large shares of the two Finnish companies. Wärtsilä Marine went bankrupt in 1989, but production continued in a new company called Masa-Yards, named after CEO Martin Saarikangas. In 1991, the Norwegian shipbuilder Kvaerner joined their forces with Masa-Yards, creating a company called Kvaerner Masa-Yards. In Rauma, the Norwegian Aker rescued the financially catastrophic situation in 1998.

The mergers continued in 2002, when Aker and Kvaerner joined forces and formed Aker Kvaerner Yards. Kvaerner's time in the Finnish shipbuilding was running out and Aker bought Kvaerner's share of the shipyards. Finally, in 2004 Aker consolidated the Finnish shipyards under the same roof. Aker Yards was established and this brought the three Finnish shipyards, the old competitors, under the same roof for the first time.

In August 2008, Aker Shipyards was purchased by STX Shipbuilding, a Korean company, and is now known as STX Europe. STX bought the European shipyards of the former Aker Yards in Norway, Finland and France. Aker Yards ASA had three business areas, Cruise and Ferries, Commercial Vessels and Offshore and Specialized Vessels. The company had altogether 18 shipyards in 8 countries, including Brazil, Finland, France, Germany Norway, Romania, Ukraine and Vietnam). These shipyards employed 20,000 employees and produce a turnover of 3.5 billion euros. Kvaerner Masa Yard is now part of STX Finland.

There are only three qualified players in the global competition to build cruise ships: Aker Yards (headquarters in Norway), Fincantieri in Italy and Meyer Werft in Germany. In Finland the success of the branch has rested squarely on turning out a stream of large cruise liners, for instance the giant vessels delivered to the likes of Royal Caribbean Cruise Lines. Of late, however, no massive new orders for these floating palaces have been received. "The nearly 90 per cent drop in the number of orders received by shipbuilders last year was a huge blow to the industry around the world. The immense structural changes shaking the sector will also have a significant impact on Finland. Old orders are swiftly being completed and very few new orders have been received," noted Mauri Pekkarinen, Minister of Economic Affairs, upon receiving a report by the shipbuilding industry task force on 14 January 2010.

In the report presented to the Minister of Economic Affairs, Mauri Pekkarinen, on 14 January 2010, the shipbuilding industry task force appointed in September 2009 proposed a package of measures designed to support Finland's shipyards. The aim of this package is to facilitate the survival of Finnish shipyards and related companies through the present economic crisis. The global shipbuilding industry is immersed in the worst crisis in its history. In Finland, the situation is most critical at the Turku shipyard, where a lack of new vessel orders means that employment will cease for all shipyard employees after the delivery of the cruiser M/S Allure of the Seas in November 2010.

The support and financing measures planned by the task force are designed to create a work load of approximately 50% for the STX Finland Oy shipyard in Turku, which would allow the shipyard and its satellite companies to remain operational until market-based demand returns to normal levels. The package also includes vessel orders from the government aimed at providing employment for smaller shipyards, in order to bridge their passage through the recession. Measures were also proposed for redirecting production operations and maintaining the competencies of subcontractors. All in all, extensive support would be needed from the government to fulfil the measures proposed in the report.

On Tuesday 23 March 2010, the Government agreed on a supplementary budget proposal for 2010 and on the Government spending limits for the period 2011-2014. The increases in appropriations proposed in the supplementary budget will be targeted especially towards measures to alleviate unemployment. An authorisation to grant an additional EUR 10 million will be targeted to the innovation support for shipbuilding. A one-off loan authorisation of EUR 500 million is proposed to the refunding of ship loans. The proposal is to grant the Finnish Border Guard an authorisation to purchase ten new patrol boats. In addition, the acquisition of ships with oil spill response capabilities will be made sooner than originally planned. These measures aim to ensure the survival of the shipbuilding industry employing 21,000 people in Finland through the current economic situation and to combat unemployment in the sector. A EUR 15 million environment support will be budgeted for new ship acquisitions.

Finland has advocated worldwide elimination of shipbuilding subsidies through the OECD Shipbuilding Agreement. The EU decided that payment of shipyard subsidies would end at the end of year 2000. According to Finland's year 2000 supplementary budget, subsidies were granted on ship orders up to a total value of FIM 6 billion ($930 million) and the industry granted an appropriation of FIM 140 ($21.7) million, in order to secure the competitiveness of the shipbuilding industry. Since spring 1996, Finnish shipyards have received 1.1 billion FIM ($169 million) in direct production support. The EU ministers discussed in mid July 2001 a plan to reintroduce subsidies to their shipbuilders as a "temporary support mechanism" to protect the industry from South Korean competition, which was said to benefit from unfair subsidies.

The long traditions of shipbuilding in Turku reach to the year 1737. Thus, during the years there has been built many different kinds of vessels for the seas of the world. At the beginning, the shipyard function was located at the mouth of the river Aurajoki in Turku. For more than one hundred years they built wooden ships, until the Scot William Crichton bought the shipyard in 1862, when they began to build ships with a steel hull. A smaller shipyard, Åbo Mekaniska Verkstadt, later Vulcan Shipyard was born beside the Crichton Shipyard in 1870's. These two were combined in 1924 and formed Ab Crichton-Vulcan Oy.

In 1938 the shipyards fused to Wärtsilä Company. In the same year was built a passenger ship called Bore II, that was the first domestic vessel after the depression in 1930's and the First World War. Finnish shipbuilding industry produced after the war more than 1200 ships for Soviet Union, carried out an impressive renovation of the Finnish commercial fleet, and opened stronger and stronger markets to the West. The first "fully welded" vessel was built in Turku in 1950, when welding replaced the old-fashioned riveting method. The first polar ice-breaker Moskva was built in 1960 and the first cruiser for the Caribean Sea, called Song of Norway, in 1970. Because of the growing sizes of ships it was decided to build a new shipyard Perno in Turku in 1974.

In 1986 Valmet Oy and Oy Wärtsilä Ab announced the field rationalization of their shipbuilding and paper mill industries. The government of Wartsila Marine Industries Inc. decided to close down the shipyard of their daughter company Oy Laivateollisuus Ab in Turku by the end of 1988; and production at the shipyard Vuosaari in Helsinki was also closed down. Wartsila Marine Industries Inc. went into bankrubtcy on the 23rd of October 1989.

Masa-Yards Oy was founded with the leadership of Martin Saarikangas on the 7th of November 1989. To guarantee a growing production, in 1991 the ownership of the company was transferred to Kvaerner Group. When the world market of shipbuilding industry got tough; the international concern of oil, design, building and shipbuilding fields Kvaerner announced on the 4th of February 2002 together with Aker RGI Holding, that they had agreed about founding of shipbuilding management company, that will be owned together. The concerns own totally 12 shipyards in Europe and one shipyard in the USA and one in Brazil.

The newest turn in the history of Finnish shipbuilding industry was made on the 1st of January 2005, when Kvaerner Masa-Yards Oy and Aker Finnyards, according to the announcement they made autumn 2004, combined to one company called Aker Finnyards Oy. The national economy effect of shipbuilding fi eld in Varsinais-Suomi and Satakunta is great. The industry employs some 30,000 people in Finland and if families are taken into account, the effect is considered to cover some 100 000 people.

Aker Yards

Aker Yards Oy is a Finnish shipbuilding company with long traditions. Special know-how of the company is to design and carry out successfully ships, that are technically demanding, and it has a large experience in building luxury cruice vessels and car-passenger ferries. Over ten years, more than 25 % of all cruice vessels of the world have come from the shipyards in Helsinki and Turku. Passenger ships have been built at the shipyards of Aker Finnyards for more than 30 years. The shipyards have a great experience in building ice-breakers and cable ships, and in building special ships for the oil industry, such as floating storage ships, fl oating production ships (construction of hulls) and different kinds of service ships.

As a result of the union of Kvaerner Masa Yards and Aker Finnyards, that took place on the fi rst day of year 2005, the shipyards in Helsinki, Rauma and Turku are all owned by the same company, Aker Finnyards Oy. The revenue of Aker Finnyards was 580 million euros in 2004 and the company employs about 4200 people. The number of co-operation companies' personnel varies depending on the orderbook and the standard of equipment of ships, between some hundreds and two thousand.

The shipyard of Aker Yards in Turku is one of the largest in Europe. At the meantime the size of shipyard area is 160 hectars, from which some 25 hectars are formed by covered hall and offi ce space. Shipbuilding methods have changed with the development of technology, but even in today's products one can see the handprint of professional masters. Turku Shipyard is also one of the most modern shipyards, thanks to the investments and development programs carried out during some years. The size of the dry dock is 365 x 80 x 10 meters and it is equipped with a 600 tons gantry crane. The latest big invests at the shipyard have been made to increase the capacity of block factory.



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