The federal government and the state of Lower Saxony are collectively buying up 80% of the firm, as the shipbuilder struggles with a nearly €2.8 billion hole in its balance sheet.
The German federal budget committee approved the government’s plan to save shipbuilder Meyer Werft on Wednesday morning.
The proposal involves the federal government purchasing a roughly 40% stake in Meyer Werft for €200m.
Germany also plans to provide the company with a loan guarantee worth €1bn, meaning the state will cover the loan if Meyer Werft is unable to pay.
However, this guarantee still has to be approved by the budget committee, as the amount exceeds €700m.
The state of Lower Saxony additionally intends to match both the €1bn loan guarantee and purchase about 40% of Meyer Werft for €200m.
ASB Zeitung reports the total acquisition of 80.7% of the company will put the shipyards in Papenburg and Rostock-Warnemünde, both in northern Germany, under government control.
The Meyer family will remain in control of the Meyer Werft in Turku, Finland.
By 15 September, Meyer Werft needs to raise nearly €2.8bn to finance new ships through to 2028.
The company’s financial crisis largely results from the Covid-19 pandemic, which raised the cost of energy, raw materials, and labour.
Contracts established before the pandemic do not account for these price hikes.
Additionally, 80% of the construction price is paid upon delivery in the cruise ship industry. This means Meyer Werft must hold cash reserves to pay for manufacturing.
The German government partially took an interest in assisting Meyer Werft for military reasons, as reported by DER SPIEGEL.
Should it become necessary in the future, the shipyards could become important for navy shipbuilding.
Along with military motivations, German media reported that Meyer Werft also directly employs over 3,000 people at the shipyard.
KfW, a German state-owned bank, states on its website this number “even increases to 20,000 if we count the close to 800 mainly mid-sized suppliers that are also involved in construction”.
ADVERTISEMENTThe involvement of both the federal government and Lower Saxony is to be time-limited, but at the moment, there is no fixed exit date.
Source: Euro News
