Production problems hurt Masa-Yards profits

Difficulties focus on relations with subcontractors

The Norwegian-owned Finnish shipyard group Masa-Yards is continually struggling with difficult production problems. Controlling the production process is not working as it should at the Turku and Helsinki shipyards. It is feared that it could lead to further losses, like those experienced last year. With its FIM 23 billion in outstanding orders, the losses could easily mushroom. They would be covered mainly by the owner, the Kvaerner concern, which has dealt with most of the financing of the construction phase of the ships on order. A number of working groups have been set up to deal with the problem. The shipyard has a project called "securing future operations" with three different working groups. In addition, the shipyard has commissioned the services of an outside consultant, the Boston Consulting Group.

The key figure in the development of shipbuilding is the working group consisting of the shipyard itself and its large subcontractors, which began operations in April. With funding from Finlands National Technology Agency Tekes, It has commissioned a report on problems related to the operation. The report was drafted by Jouko Toivonen, a researcher at the Turku School of Economics, who wrote his doctoral thesis on the relations between a shipyard and its most important partners in production. Toivonens paper is confidential, and the author will not give any comments on its content. However, Helsingin Sanomat has found out that the report reveals considerable problems in the operations of the shipyard. Poor planning leads to delays, structures that have already been built sometimes have to be dismantled, material costs mushroom, and workers end up working overtime to meet the deadlines. Toivonen has interviewed 23 people, including representatives of Masa-Yards customers. According to their assessments, the shipyards management structure is a throwback to the 1970s, and the past ten years have mainly been years of regression.

The problems affect both the Helsinki and Turku shipyards. The subcontractors give last summers final stretch of the work on the cruise ship, the Costa Atlantica in Helsinki as a good example. Hundreds of workers had to work through the Midsummer holiday, and the final touches were made as the ship was sailing on its way to Italy. The bill for overtime was huge. The head of one of Masa-Yards subcontractors sees the situation as very difficult. He says that planning is so deficient that some of the sections of the Costa Atlantica were as much as four months late. The delays caused serious problems throughout the production process, and as many as 20 subcontractors reportedly went under during production. Masa-Yards was established in 1990 after its predecessor, Wdrtsild Meriteollisuus, had gone bankrupt, burdened by losses stemming from a massive amount of outstanding orders. Now there is trouble brewing among the subcontractors of Masa-Yards. Even fairly large manufacturers have either gone bankrupt, or just closed up shop. At least one of them plans to sue Masa Yards for breach of contract. The company in question has not been paid by Masa-Yards, and consequently has not been able to pay its own subcontractors. Therefore, the entire chain of operators has been in serious trouble. However, there is a reluctance to speak openly about these problems. Despite the difficulties, everyone is hoping for more subcontracting work in the future.

http://www.helsinki-hs.net/news.asp?id=20000919IE1&pvm=20000919

-- Doris (reaper@pacifier.com), September 19, 2000