Crisis Storms Romanian Shipbuilding Industry Damen - Galati Loses 3 Contracts, Reports Losses

After having reported losses of some 19 million EUR for the last two years because of exchange rate fluctuations and massive workforce migration, the Damen Shipyard in Galati, Romania, has also reported losses for the first half of 2009. Although the exact value of the losses was not disclosed, company representatives said the main causes of the current situation were exchange rate fluctuations and the loss of three contracts for building as many ships at the beginning of the economic crisis.

The outlook is grim too, as the shipyard only has orders for 27 ships, which are scheduled for delivery by 2011. "We cannot work at full capacity, so we"ve had to let go approximately 600 employees," sources from Damen - Galati told BURSA. The company has already given notice to 114 skilled workers, who will receive severance and start unemployment in August. "Employees whose length of service is up to 5 years will receive 3,000 RON net. Those with a length of service between 6 and 10 years will receive 5,000 RON, while those with 11-to-15 years will receive 7,500 RON. The severance payment for a length of service between 16 and 23 years is 9,000 RON net, while those with more than 23 years of employment will receive 10,500 RON," said Gheorghe Valentin, union leader at Damen - Galati.

The company will give notice to another 130 employees in August and to the rest up to 600 in October 2009. Inside sources told BURSA that the management was considering further layoffs in 2010, should the world shipbuilding industry not recover. The only certainty is that there is no intention to completely close the shipyard. The sources also said that Damen Group had announced a change of strategy and a distinct focus on highly complex ships and military ships, as the world demand for cargo ships was currently insignificant and decreasing. The new strategy includes important layoffs and massive investments in acquiring the capabilities to produce high value-added vessels. For the time being, Damen - Galati is the only shipyard in the Group that is implementing investments. On the bleak side, the current number of 2,900 employees is planned to decrease to a little over 2,300 employees through six layoffs.