French offer answer to challenges from Asian yards

A French parliamentary report has urged a consolidation in the European shipbuilding sector in order to meet the strong competition from Asian shipbuilders. The report claims that the shipbuilding industry in Europe remains too dispersed but nonetheless offers real consolidation opportunities at the European level based on the aeronautic model, referring to the European Aeronautic Defence and Space company (EADS), makers of the Airbus civilian aircraft.

The report found that South Korea, Japan and China in the past 15 years have managed to capture 85% of the commercial newbuilding market, leaving Europe with 5% and in a precarious position. European builders are no longer competitive in the construction of oil tankers and container ships because of labour costs and currently specialise in ferries, cruise ships and gas carriers. The one bright spot is that Europe accounts for 30% of the market for military vessels, with companies taking advantage of big domestic orders.

The report suggests that France should lead the way towards consolidated European civilian shipbuilding through a tie-up between the state-owned Direction des Constructions Navales (DCN) and the electronics and defence group Thales. It said the French government, which owns all of the DCN and 32.4% of Thales, should promote ‘a constructive partnership’ between the two entities. As a first step, the DCN’s shipbuilding and systems operations could be combined with Thales Naval France in a single enterprise, with DCN maintenance operations to be added later.

The report said a plan by business and government officials to reach agreement on details of a DCN-Thales alliance is to be drafted this year and put into practice in 2005. In a later development a link would be established between DCN-Thales and the German shipyard HDW-ThyssenKrupp, which it said would make ‘the most sense industrially and economically’. Eventually, Fincantieri of Italy and Izar of Spain could be brought on board.