Kværner struggling to survive

In autumn 2001, the Norwegian-owned engineering and construction group, Kværner, is in deep financial trouble, and the future looks bleak for a large number of workers both in Norway and elsewhere. At stake in the ongoing effort to rescue Kværner are approximately 35,000 jobs worldwide, of which 5,000 are located in Norway.

The Norwegian-owned engineering and construction group, Kværner, is in severe financial difficulties, and the future looks bleak for a large number of workers both in Norway and worldwide. It has for some time been common knowledge that Kværner is struggling, but the revelations bringing to public attention the scale of the enterprise's liquidity problems in late September 2001 came as a shock to most observers, not least to the employees concerned and its shareholders. The group is burdened with heavy debt and its liquidity problems are so great that it cannot at present meet its financial liabilities. At stake in the ongoing effort to rescue Kværner are approximately 35,000 jobs worldwide, of which 5,000 are located in Norway.

The Kværner Group is one of the oldest and most traditional industrial enterprises in Norway, dating back to the late 19th century. It employs around 35,000 people in 35 countries in Europe, Africa, Asia and the Americas. The enterprise was an important and influential actor during the expansion and restructuring of the Norwegian offshore and shipbuilding industry in the 1970s and 1980s. During the 1990s, the group significantly expanded its activities and, through its purchase of the BritishTrafalgar House in 1996, it doubled in size, from 40,000 to almost 80,000 employees. However, in the late 1990s its financial problems became evident, and since then it has gone through a process of restructuring and a period of 'downsizing', selling off many of its business activities.

The present crisis in Kværner is very much the result of the expansion witnessed during the 1990s. In this period, the group became heavily indebted and the situation is now so serious that trading in Kværner shares on the Oslo Stock Exchange was suspended twice in September-October 2001.

The president of Kværner, Kjell Almskog, was forced to resign earlier in September, although he will function as president until a successor has been found. The chair of the company board, Harald Arnkværn, has pursued intensive meetings with investors, trade unions and the minister for trade and industry, Grete Knutsen, in a bid to secure financial support in order to save the company and jobs. The minister did not make any commitments on behalf of the state in the belief that 'there is both the ability and private capital to save Kværner.'

Den Norske Bank came to Kværner's aid in late September by extending repayments on an NOK 800 million loan until 31 December 2001 and with a commitment to restructure the enterprise's short-term debt. Further commitments by the bank are conditional on Kværner managing to raise fresh capital from its own shareholders and potential investors. However, investors and existing shareholders are wary about providing fresh capital, and the group's largest shareholder, the offshore company Aker Maritime, has so far not been willing to provide such capital.

There has been a longstanding dispute between management and trade union representatives at Kværner and the owner of Aker Maritime, Kjell Inge Røkke. Earlier in 2001, Mr. Røkke proposed merging Kværner and Aker Maritime, which would have given him a majority share of the company, but the proposal was rejected by the board of Kværner and a majority of its shareholders.

A number of Kværner's offshore shipbuilding yards along the coast of Norway are under threat, including the largest yard in the group, Kværner Rosenberg, which has 1,720 employees. Employees at Rosenberg thus took the initiative to persuade all Kværner workers to rally behind the board's capital-raising efforts, and so far more than 1,500 employees have purchased shares in Kværner. The Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the largest union in Kværner's Norwegian operations, the United Federation of Trade Unions (Fellesforbundet), have issued a joint statement in which they state that although a short-term solution may have been found in the form of bank favours, it is important to find more sustainable long-term solutions in order to safeguard jobs.