German Shipyards Closer to Partnership

After years of carefully testing the waters, Germany's two biggest shipbuilders are now in the midst of active discussions about a potential partnership, executives say. It was said that that the negotiations between HDW and Krupp's two big shipyards - Blohm+Voss and the TNSW yard are "in full swing." With profits in the European shipbuilding industry squeezed by intense competition from South Korean yards, some German shipbuilders are pushing to establish a North German shipyard group that would have as many as 7,000 workers.

HDW and its parent company, the German machinery and engineering company Babcock Borsig, want to take the lead role in the proposed alliance. The Kiel-based HDW has annual revenues of more than $600 million, and its contracts to build submarines and other ships for the German Navy have allowed it to remain profitable in recent years despite the downturn in commercial shipbuilding. However, last year's profits of about $36 million were lower than normal.

German shipbuilders hope to take advantage of the economies of scale achieved through an alliance to become more competitive against their Asian counterparts. While Germany remains the world's No. 3 shipbuilder, it has slipped in recent years behind the leaders - No. 1 Japan and No. 2 South Korea - and could drop by another position as Chinese shipyards continue to expand.