Greek shipbuilding industry in crisis
The Greek shipbuilding industry, like the wider European industry, is in crisis due to competition from countries with low labour costs. Greek shipyards have been forced to make a series of structural changes which have resulted in lower employment levels, but which are gradually creating the conditions for Greek shipyards profitably to re-enter international markets. We examine the situation and prospects of Greek shipbuilding in early 2000, and the positions of trade unions and employers.
Taking its cue from the initiative of the European Metalworkers' Federation (EMF) to hold a European day of action in the shipbuilding sector on 5 November 1999 (EU9911208N), and in the absence of any response from Greek trade unions and shipbuilding enterprises on the national level, the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) and Confederation of Public Servants (ADEDY) took the initiative to conduct a series of interviews in an effort to highlight the main problems of the shipbuilding industry in Greece.
The investigation focused on the two major Greek shipyards, Skaramangas and Elefsina. Interviews were held over a period of two months, from December 1999 to January 2000, using the method of open questions. Interviewees included the president of "Triaina", the enterprise-level union in the Skaramangas shipyard, and the president of SENE, the enterprise-level union in the Elefsina shipyard, as well as the vice-chair of the board of directors of the Elefsina shipyard. In order to form a fuller picture of the situation in the Greek shipbuilding and ship repair sector, interviews were also held with the president of the Union of Workers and Employees of Piraeus-Attiki Prefectures and the Islands (NAUSI), representing workers in the Piraeus-Perama ship-repair zone, and with the director of the Association of Hellenic Shipbuilding and Ship-repairing Industries (EENV), a member of the Committee of European Shipbuilders' Associations (CESA) and the Association of West European Shipbuilders (AWES).
Greece's developed shipyards are Skaramangas, Elefsina, Syros and Avlida, which is now in the process of privatisation. An important part has also been played, mainly with regard to repairs, by the Piraeus-Perama ship-repair zone, which operates on the basis of independent small and medium-sized enterprises (SME s). The activities of these SMEs, which in recent years have been in deep crisis, have at times represented more than 50% of total repairs performed in Greece. The ship-repair zone owes its share of the market to the important know-how of the shipbuilding and ship-repair teams that work there. The Skaramangas shipyard is the biggest industrial shipbuilding unit, as far as turnover and number of workers are concerned. During the past 15 years, however, turnover in Greek shipyards has been steadily decreasing, as has the number of persons employed. Up to 1985, Greek shipyards employed about 15,000 primary workers, and around 20,000-30,000 peripheral workers in small industries in Piraeus: at present, they employ no more than 4,500-5,000 workers.
The two main shipyards
The present situation in the Skaramangas and Elefsina shipyards is characteristic of the recession plaguing the shipbuilding industry as a whole and of the dramatic fall in employment.
In the Skaramangas shipyard, employment levels fell from 5,000 workers in 1985 to 2,000 in 1999. The largest collective redundancy, involving 1,000 workers, took place in 1995 within the framework of Law 2367/1995 regarding the regulation of "new financial institutions and other provisions".
Among other matters, Law 2367/1995 regulated the terms and conditions of a transfer of shares in "Greek Shipyards SA" to its employees, as well as redundancy issues. Specifically, it provided for transfer of 51% of the shipyard's stock to the Hellenic Industrial Development Bank (ETVA), a state-controlled investment bank, and 49% to the company's staff. The law forbids the sale of stock to third parties outside the shipyard, thus ruling out the possibility of privatisation. The workers' decision to agree to participate in this unusual 51%-49% scheme was on the one hand aimed at keeping the shipyard united, and on the other at saving a large number of jobs. The redundancy of 1,000 workers was accompanied by a package of social measures, including voluntary resignation, an early retirement plan and self-employment through the Manpower Employment Organisation (OAED) with full compensation. Since then there have been no more staff cuts, and the shipyard has even begun to hire new staff. With regard to turnover, there has been a significant drop-off in both repairs and new shipbuilding, beginning in the mid-1980s. Nowadays the work of the Skaramangas shipyard is primarily based on the construction and renovation of ships within the framework of the equipment programme of the Greek Navy, and railway car construction under agreements concluded with the Hellenic Railways Organisation (OSE) and the Athens-Piraeus Electric Railway Authority (ISAP). Secondary activities include ship repairs for the merchant marine and the recent construction of three car ferries.
The Elefsina shipyard was founded by shipowner and banker Stratis Andreadis in 1970. Since then, it has twice come under state control, in 1975 and 1995, and has twice passed back into private hands, in 1992 and 1997. From 1997 to the present it has been owned and run by the Tavoularis group of companies. In 1974, the shipyard employed 3,500 workers. In 1992, this number fell to 1,800, and at present it employs 1,000 workers on a daily basis, of whom 750 are permanent staff and 250 have been hired under fixed-term contracts or works contracts, depending on workloads. The staff was gradually reduced from 1,800 to 750 permanent employees, and a substantial number of workers resigned, when the Tavoularis group took over the company. The accompanying social measures were of three types: incentives for voluntary resignation, early retirement and transfer to companies in the public and broader public sector. The Elefsina shipyard concentrates on building ships for the Navy and railway cars for the OSE. It repairs an average of 160 ships a year, mostly for the merchant marine, and also carries out extensive "retrofits". Other construction activities include gantry cranes for the Thessaloniki Port Authority, floating platforms, bridges, tanks, one of the biggest building slips in Europe, and a range of other engineering structures for other branches of industry.
In both shipyards, current problems are centred around lower demand from the merchant marine sector.
Crisis and competition
The presidents of the Skaramangas and Elefsina workforce unions and the vice-chair of the board of directors of the Elefsina shipyard attribute the current crisis mainly to the fact that wages in Greek shipyards are higher than in neighbouring countries, such as Turkey and the Black Sea countries, as well as the countries of South-East Asia and South Korea in particular. They state that, despite the fact that labour productivity is higher in Greece due to better organisation and better infrastructure, this superiority of Greek shipyards over their competitors in eastern Europe and Asia does not compensate for the difference in wages. The result is that labour costs are higher in Greece. Alleged unfair competition from competing countries where labour costs are low mainly regards construction of new merchant vessels - ie relatively straightforward shipbuilding work not requiring a lot of know-how. Vessels may be built in those countries at prices with which the Greek and the European industry in general are unable to compete. In the past five years, the crisis in the Greek shipyards has also had a significant influence on major repairs, for which shipowners prefer countries where costs are low.
This situation has also affected domestic competition, which is made more intense by the different structure of the two main shipyards. According to the vice-president of Elefsina, Skaramangas is not a private shipyard, and therefore cannot easily adapt to the conditions of the private sector economy. It may also operate in a marginal way from the standpoint of profitability in order to keep employment at levels which many people believe are too high. Thus, according to the vice-president of the Elefsina workforce union, in order to keep employment levels up, Skaramangas management is forced to pursue a policy of keeping prices down, sometimes even below the cost of production. Efforts have been made during 1999 to introduce changes in management and to hire a foreign manager to impose the rationale of a large private enterprise in the Skaramangas shipyard. To date, however, none of these things have been achieved and Skaramangas continues to make bids at below-cost prices.
However, the president of the enterprise-level union at Skaramangas contends that, in addition to the abovementioned problems, the Greek shipbuilding industry has to face another whole range of difficulties which make its position even more difficult compared with the other countries of western Europe. Specifically, the union president cites the following:
- a lack of orientation and strategy on the part both of Greece's two main shipbuilding units and of the state;
- the long absence, lasting about 15 years, of the big shipyards from the markets for building new merchant vessels;
- the crisis of confidence of investors and banks in the shipbuilding industry;
- the obsolescence of equipment and especially of working methods; and
- the low productivity of shipyards in Greece.
Proposals and prospects
Both main shipyards are making efforts towards technological and organisational modernisation in order to further increase labour productivity and deal with competition from countries where the cost of labour is low.
Both agree that the best way out of the crisis is the renewal of the coastal shipping fleet that will come about once "cabotage" is abolished ( he system which requires a country's coastal traffic to be carried by vessels registered in that country - GR9802156F). Since existing ships are old and their technology is out of date, shipowners will need to renew their fleets in order to cope with foreign competition. The vice-president of the Elefsina shipyard believes that Greek shipyards have a comparative advantage with regard to building ferries and cruise ships. The shipyards of Korea and other South-East Asian countries are lagging quite far behind in construction of these types of vessels, although they have made significant progress in recent years and may in the future be able to command a substantial portion of this market. It has been estimated that 200 coastal shipping vessels and cruise ships will be built within a decade after cabotage is abolished. The price of a single such ship is around USD 50 million, and Greek shipyards could undertake a substantial part of their construction.
As concerns state intervention, European Union rules forbids the state to offer special incentives, despite the fact that Greece's geographical location makes it dependent to a great degree on sea transport and it might seem reasonable to support the sector. Supporting the sector by increasing the subsidy rate on shipbuilding contracts from 9% to 15% was a measure promoted by the former Minister of Industry and Development but without a positive outcome. Increasing state subsidies for shipbuilding and continuing to grant such subsidies after 31 December 2000 (the deadline set by EU Council Regulation (EC) No. 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding), are standing demands of the unions in the sector at the national level.
Another serious problem in Greece is the question of the shipbuilding sector's relations with the financial system. To date, the banks have not become closely involved in the shipbuilding business in Greece, as they have in other countries. The banks do not have specialised teams of maritime and other experts able to monitor the progress of shipbuilding works. Nevertheless, a change in the sector's relations with the banking system and more favourable conditions for granting loans would clearly be favourable developments in the efforts of Greek shipyards to meet the demands of international competition.
The president of the Skaramangas enterprise-level union is of the opinion that, as a necessary precondition for restructuring the Greek shipbuilding industry and making it competitive and reliable, the ship-repair zone must be restored to health and modern SMEs created within it. In this context, the creation of a register of ship-repair enterprises is regarded as being of decisive importance. The unions in the ship-repair zone support these proposals, but take a significantly different position on how they should be implemented; they are also against doing away with cabotage. They cast much of the blame on the present government for the delay in implementing Law 2642/1998 regarding the creation of a register of companies active in the construction, conversion, repair and maintenance of ships, as well as relevant Presidential Decrees (Nos. 187, 245 and 246).
With a view to pursuing a unified policy at the national level, the Elefsina shipyard has from time to time offered to collaborate with the Skaramangas shipyard, but so far has not received a response of any kind.
Greek participation in the European day of action
The sector's unions and enterprises failed to hold any activities at the national level in response to EMF's initiative to hold a European day of action in the shipbuilding industry on 5 November 1999 (EU9911208N). The basic reason for this was the lack of coordination among the unions in the sector and the organisational weaknesses of the Panhellenic Federation of Metal Workers and Employees (POEM).
This absence of activity reflects to a great extent the general weakness of the Greek trade unions in the shipbuilding sector in the areas of European-level participation, representation, communication and information. In the case of POEM and of most of the unions in the sector, the reasons are mainly economic. The question of language, too, is a major obstacle. The position of the president of SENE is characteristic: one of the points he makes is that the Greek unions would reap substantial benefits if they could overcome the above problems and achieve a better exchange of experience, information and knowledge on issues in the sector.
However the Triaina, SENE and NAUSI unions, along with management of the Elefsina shipyard and the EENV employers' organisation, all support the EMF's framework of proposals, at least as regards the need for a coordinated policy for the shipbuilding industry on the European level, aimed at resolving the problem of unfair competition which has been presented mainly by South Korea. In EENV's view, political pressure should be brought to bear on South Korea, and the International Monetary Fund should exercise tighter control on financing to that country. EENV also thinks it is important to boost funding for research and development programmes, the main objective being to increase productivity in the European shipbuilding industry.
The Greek shipbuilding industry is in crisis due to the competition it is facing from countries with low labour costs. To be sure, the revaluation of the drachma has also played a part in lowering competitiveness from 1986 to the present, by making the prices of Greek shipbuilding products and services higher. Under pressure from international competition, the Greek shipyards have been forced to make a series of structural changes which have resulted in lower employment levels. These structural changes are gradually creating the conditions for the Greek shipyards to re-enter the international markets in conditions where they can enjoy high profitability. The main factors fuelling these changes are privatisations, programmatic agreements with the Greek state, the move towards building vessels not easily built in low-labour-cost countries, and technological and organisational modernisation. The elimination of cabotage and the renewal of the fleet it will necessarily bring about constitute a challenge for the Greek shipyards. Before they can meet this challenge, the sector's relationship to the financial system will also have to change. Finally, as regards unfair competition from the countries of South-East Asia, the EMF proposals are a starting point for creating a unified policy at the European level and coordinating union action in the sector in Europe as a whole. (Evangelia Soumeli, INE/GSEE-ADEDY)