Meyer Werft and Unions Agree to 10 Percent Workforce Cuts
Shipbuilder Meyer Werft hard hit by the downturn in the global cruise industry reached an agreement with its union for a better than 10 percent reduction in the workforce. The move is the first of several potential efforts by the company to reduce costs and improve productivity. The depth of the cuts would have been more severe except for new orders, including a newly announced win to build the Ocean Residences condominium cruise ship.
The latest agreement covers the shipyard at Papenburg, Germany, and follows similar efforts at the company’s Neptune Shipyard in Rostock, Germany, and a shipyard at Turku, Finland. Before the pandemic, Meyer’s operations were focused on the cruise ship industry with the Papenburg yard organized to produce two large cruise ships annually with additional capabilities for a smaller cruise ship. Turku was expanding its capabilities to build two large cruise ships and the Neptune yard was building river cruise ships and modules including the engine room blocks for the ships being assembled in Papenburg.
Meyer has a strong order book with ships under construction for P&O, AIDA, and Costa, in the Carnival group, as well as Disney Cruise Line, and the Royal Caribbean Group. Meyer was successful in rescheduling deliveries while scaling back operations to one large ship annually from both Papenburg and Turku.
"Now we are fully focused on the transformation of the group, further digitalization, and on developing climate-neutral solutions for our ships and maritime applications as quickly as possible," says Jan Meyer, Managing Director.
Negotiations with the IG Metall Kuste and the shipyard’s works council began months ago with reports suggesting that Meyer was seeking to reduce the workforce of 3,00 at Papenburg by as many as 1,000 people. Later the figure was scaled back to 660 positions.
Union officials announced last evening that 62 percent of the yard’s employees are in favor of the agreement. Under the terms reached between the yard and its unions, the company is targeted 350 voluntary reductions at the shipyard and an additional 100 positions as its EMS Maritime Services group. It is a three-stage program starting with the voluntary program and a transfer company, a common approach in Germany that helps employees retrain and find new positions. The aim is to avoid or minimize compulsory layoffs and reduce as many jobs as possible by mutual agreement.
German media reports suggest that Meyer is targeting a financial saving of $1.4 billion and the unions have also agreed to steps to seek a consistent improvement in productivity. As part of the agreement, each worker will contribute 100 hours annually to the yard either by working uncompensated overtime or waving special payments. Employees at the service company will contribute 25 hours each year. In addition, Meyer and the unions are still negotiating the details of a change to a two-shift model.
Meyer cited competitive and pricing pressures in the shipbuilding industry saying that these factors have increased significantly in the past year. Further, the revised delivery schedules have slowed contract installment payments to the yard and in 2020 the cruise companies delayed deliveries of completed cruise ships.
"The current agreement with the works council and IG Metall is an important step towards securing the Papenburg shipyard site, even though the staff reductions are very painful,” says Managing Director Bernard Meyer. “The adopted socially responsible package for the future only works on the basis of further orders for the years 2024 and 2025. We are continuing on the path of developing new business areas. It's a good chance for a fresh start for cooperation with the works council and the union."
The shipyard said it is currently in danger of having its utilization rates falling below 40 percent in the coming years. Helping to alleviate the future pressure, Meyer won the only new contract for a cruise shipyard awarded in the past year. The company will build a mid-size cruise ship for Japan’s NYK Group. In addition, in its first significant assignment outside the cruise industry, Meyer Neptune is participating in a German navy project to build two tankers.
Meyer also announced that it has reached an agreement with the Ocean Residences apartment cruise ship concept. The project will be with the DIV Group of Croatia, according to the reports in the German NDR news outlet. The project is for a 950-foot cruise ship which will consist of 130 apartment residences. The contract, which is subject to financing, calls for the ship to be delivered in 2025.