Shipyards' future looking bleak

Cabinet will soon discuss the fate of Malta Shipyards, whose future is looking increasingly bleak, a government spokesman told The Sunday Times.

According to a multi-million plan agreed with the EU in 2002, by this year the Malta Shipyards should have broken even or made a slight profit. Instead, the company is again expected to record "substantial" losses, according to the spokesman.

"Although it is early to say what the losses for this year will be, based on recent performance the projected loss is expected to be substantial," he said.

Since the start of a restructuring programme in 2002, aimed at putting Malta Shipyards back in business, the government invested €825 million (Lm354m), which amounts to some €5,800 (Lm2,490) per Maltese family.

A total of €700 million (Lm300m) in debts accumulated over the years has been written-off and €124.4 million (Lm53m) was provided to the company in operating aid, training grants and capital subsidies. But despite this massive financial injection, Malta Shipyards continued to register losses, which are becoming more substantial over time.

The restructuring programme will come to an end in December and under EU laws the shipyards cannot receive any more subsidies from January.

Sources close to the European Commission told The Sunday Times that the EU executive is very concerned about the situation and is insisting with the government that a decision must be taken on the shipyards' future.

"We discussed the situation with the company's management and the Maltese authorities some months ago during a series of meetings held in Malta. Now the ball is in the government's court to take the necessary action," the Commission sources said.

When asked whether the government will be considering the option to declare the company bankrupt at the end of the year and close shop, the government spokesman said it was premature to comment.

"The government will be taking the necessary decisions in the national interest. This is what the government has done consistently since the restructuring process started in 2002. The government will obviously be talking to everyone, including the taxpayers who till now have sustained the shipyards year in, year out."

Clear indications that a decision is imminent emerged a fortnight ago during a dispute between the government and the General Workers' Union over a conversion contract. The government had declared then that the shipyard is in a precarious and unsustainable financial situation.

The government also accused the union of shirking responsibility for the low productivity of its members in the shipyards, which is considered to be the main problem the company is currently facing.

In an interview with The Times before the last election, then Investments Minister Austin Gatt had said that the only way the shipyards could survive after the restructuring programme was through a collective and genuine effort by the GWU and workers to increase productivity.

Asked what the government planned to do if the shipyards still made losses when these funds ran out, Dr Gatt said that the government did not want to close down the shipyards.

"Restructuring is not a finite process. It is a continuous drive towards commercial improvement. We will continue doing our bit.

"I will continue to tell the employees the truth, notwithstanding how tough this might be. I do not see why we should want to close the shipyards - but the future does not depend on our intention alone."

Figures on the shipyard's financial performance in recent years show that although until the end of 2004 the amount granted in subsidies was actually lower than that projected in the restructuring plan, in 2005 and in 2006 subsidies amounted to €1.4 million (Lm600,000) and €2.3 million (Lm1m) more than originally projected. The figures for 2007 have still not been published.