Meyer Werft, one of the world’s biggest cruise ship builders, will receive government support to patch up its budget deficit.
The German government will step in to save ship maker Meyer Werft from sinking, said Chancellor Olaf Scholz on Thursday.
During a visit to the Papenburg-based shipyard in northwestern Germany, the Chancellor noted that the state “will contribute its part to the solution”, but added that there is a “clear expectation that all other participants join in”.
Meyer Werft, an over 200-year-old firm that employs about 3,300 people in total, is battling with a €2.7 billion hole in its balance sheet.
According to German media, the ship builder needs €2.3 billion in working capital and €400 million in equity to cover losses and restructuring costs.
Meyer Werft’s financial woes are partially linked to how ship building is financed, rather than a lack of demand.
On 12 August, the firm shared that it had secured a new agreement with Disney Cruise Line, meaning that it now has eight Disney ships in its order book.
Before this, the company said it had full order books through to 2028.
It is, however, common practice for ship buyers to pay 80% of their fees upon delivery, meaning that manufacturers must hold cash reserves to cover construction costs.
Meyer Werft’s cash cushion was hit hard by dampened demand linked to the pandemic.
Added to this, Covid-19 caused a spike in the cost of materials and labour, further eating into the ship builder’s finances.
Scholz praised workers at Papenburg on Thursday and stressed that 17,000 jobs across Germany depend in one way or another on Meyer Werft.
Details of state support were not revealed, with the Chancellor adding: “There’s still a bit of detailed work to do.”
German media have suggested that federal and state governments could temporarily take over at least 80% of the shipyard and offer €400 million in equity.
