Tense situation at Mangalia Naval Shipyard: 1,500 employees at risk of losing their jobs

The Free Navalist Union from the Mangalia Naval Shipyard (DSMa) yesterday sent an open letter to Prime Minister Marcel Ciolacu presenting the dramatic situation faced by the economic operator and its 1,500 employees.

The cited document states: "The purpose of this petition is to obtain the necessary support for protecting jobs and rehabilitating the shipyard in Mangalia, considered a strategic objective of national interest, where the Romanian state, through the Ministry of Economy, owns 51% of the shares. The shipyard in Mangalia (DSMa) is facing a drastic decrease in the volume of work, and in the absence of concrete measures, there is an imminent risk of temporary interruption of activity for most employees for a long period. Negative financial results and colossal debts to creditors (DAMEN Group) increase the risk of insolvency, and disagreements between shareholders can lead to litigation at the Court of Arbitration. We are deeply concerned about shareholder disputes and their potential negative consequences for DSMa employees. It is essential that the interests of the employees are taken into account and special attention is paid to establishing a strategy that ensures the continuity and stability of jobs in the Mangalia shipyard. In conclusion, the current situation of the DSMa shipyard in Mangalia is particularly urgent and critical, and the future of jobs and the local community depends on the solutions and actions that must be taken urgently. Mangalia's economy is largely based on the revenues generated by the shipyard, which is the main local employer".

The employees' representatives ask the head of the Government for a meeting on the platform of the shipyard to discuss "the way of managing the shipyard in the event of the withdrawal of the foreign partner, taking into account the notices regarding the termination of the association contract and the request for compensation sent by the foreign partner Damen Holding BV ".

According to some representatives of the trade unionists, the amount of compensation requested by Damen in the international arbitration procedure that it opened in Paris amounts to around 500 million euros.

• Damen retired from the management of the Mangalia Shipyard

We mention that at the beginning of August 2023, the representatives of the Damen Holding BV company announced that they were withdrawing from the management of the Mangalia Naval Shipyard because by the adoption of Law no. 187/2023 (normative act representing a reform milestone in the National Recovery and Resilience Plan) it was canceled the legal framework under which the association between the Romanian state and the Dutch company operated with regard to the economic objective in Mangalia. The new regulatory act on corporate governance in companies with majority state capital (at the Mangalia Naval Shipyard the state holds 51% of the shares through the Ministry of Economy) violates the conditions offered, agreed and guaranteed in favor of Damen by the Romanian State and its structures in 2018, invalidating completely the principles that were the basis of Damen's decision to invest in the respective shipyard, the representatives of the Dutch company showed in a press release.

The cited document states: "This fact comes after more than three years of other blockages in the decision-making process, no other type of help, involvement or funding from the Romanian partner. In the last four months, Damen has repeatedly tried to prevent any impact negatively on the shipyard, the workforce and the customers. For example, we have extensively informed the Romanian authorities and relevant entities about the impact of the new law on this partnership, even before its adoption, and requested immediate actions to prevent it. (. ..) Damen faces not only a breach of contract, but also a breach of trust by the Romanian state. In this sense, after a previous notice of breach of contract in which Damen expressed for the last time its willingness to to find a possibility for the continuation of the association, to which no solution was offered by the Romanian side, Damen had no other option but to issue the notice of termination of the Association Agreement concluded in 2018 with the Romanian partner".

The company's representatives claimed that upon taking over in 2018, the Mangalia Naval Shipyard no longer had orders, it had the situation negative financial positions, i.e. debts of over 730 million euros in the accounting records presented when Damen took over the activity. They showed that Damen supported the costs of relaunching the site in the European and international market, and at Mangalia, products aimed at developing offshore projects in the field of energy were made.

The Damen company specified that it is not leaving Romania and that it will continue its activity at the Damen Naval Shipyard in Galati, an economic operator that over 30 defense and security vessels for 14 naval forces and coast guards around the world, including for NATO and EU countries, but also many civilian industrial ships.

• Who is to blame for the Mangalia failure?

The forced removal, through the effects of the corporate governance law, of the Damen company from the management of the Mangalia Naval Shipyard represents the crowning of a trap prepared for the Dutch since the time when PSD was led by Liviu Dragnea. What is worse, according to our sources, is that the corporate governance law, a project that was initiated by the Ministry of Economy, under the direct guidance of State Secretary Daniela Nicolescu, who is one of the PNL leaders, contributed fully to the completion of the social-democratic approach.

Thus, as we showed in the pages of the BURSA newspaper, those from Damen believed the PSD leaders' promises from 2016-2019 regarding the awarding of the contract for the corvettes assigned to the Romanian Naval Forces and chose to come to the support of the Romanian state, in 2018, when the social democrats were unhappy with the withdrawal of the South Korean giant Daewoo from the Mangalia Shipyard. The negotiation regarding the takeover of the majority stake, 51%, from the Korean company DMHI was a difficult one, due to the serious financial situation in which Mangalia Naval Shipyard was. At the beginning of 2018, the Dutch from Damen Shipyards Group announced that they had reached an agreement with the Koreans from DMHI to take over the Mangalia Shipyard for $26 million.

After this agreement, following negotiations that lasted more than half a year, the Romanian state and the Damen group determined how they will jointly manage the Mangalia Naval Shipyard. Damen ceded 2% of the majority stake to the Romanian state, free of charge. Through this assignment, the state became the majority shareholder, and Damen was to have operational control, i.e. to hold the positions of directors and effectively run the Mangalia Shipyard. Because the legislation did not allow the majority shareholder to transfer operational management to the minority one, the Dăncilă government even changed the law in the field. Thus, through an emergency ordinance adopted in mid-July 2018, the Dăncilă cabinet gave the opportunity to the Dutch from Damen to take control of the Mangalia Shipyard. The project was initiated by the Ministry of Economy and the Ministry of Finance.

Practically, through all the actions of the PSD leaders regarding the Mangalia Naval Shipyard, they were solving an economic and social problem that was about to explode and indirectly gave Damen assurances that they would be able to build the corvettes intended for the Romanian Naval Forces in that location, after the procedure of acquisition, which was in full swing at the time, will be completed. Unfortunately for the Dutch from Damen, things were not to be like that at all. The main criterion for awarding the multipurpose corvette contract became the lowest price, although the Minister of National Defense at the time, Gabriel Leş, claimed that technical criteria would also be taken into account.

The contract regarding the corvettes was awarded to the Franco-Romanian association Naval Group-Şantierul Naval Constanţa, which from July 2019 until July 2023 did not reach an agreement with MApN and refused to sign the contract.

Later, on March 14, 2024, the Ciolacu government repealed HG 48/2018 abandoning the multifunctional Corvette program.