German lawmakers approve bailout plan for Meyer Werft shipyard

German lawmakers approved a major bailout for the struggling Meyer Werft shipyard on Wednesday, clearing the way for a temporary state takeover of the shipbuilder.

Lawmakers in Berlin and the German state of Lower Saxony both approved a €400 million ($440 million) government investment to stabilize Meyer Werft, with the German government and Lower Saxony splitting the cost.

Together, the governments will take over 80% of the shares in the struggling shipyard, which is best known for building large cruise ships.

Political leaders have said the takeover will be temporary, but there is not a fixed exit date for government ownership of the company.

Meyer Werft's shipyard is located in Lower Saxony and is a major regional employer, raising concerns that the company's financial trouble could have major implications for the broader regional economy.

In addition, both the state and federal governments plan to offer loan guarantees of around €1 billion each to allow Meyer Werft to secure funding to complete orders.

Meyer Werft, which was founded more than two centuries ago, fell into serious financial trouble after business was upended during the coronavirus pandemic.

The shipyard had signed contracts to build a number of ships, but then found itself swamped by rising costs that were not accounted for in the deals.

The European Commission generally also needs to approve state aid for companies, because subsidies could upend competition with other rivals elsewhere in the European Union.

But sources in Lower Saxony indicated that the state aid is being structured in such a way that EU approval is not legally required, and the European Commission has been informed of the effort voluntarily.

The commission stated that constructive discussions were being held with German authorities.

Dennis Rohde, a lawmaker in the German parliament from the centre-left Social Democrats (SPD), said that Meyer Werft was an important engine for the maritime industry with around 3,500 employees as well as more than 10,000 jobs at suppliers.

Parliamentary sources told dpa that keeping the Meyer Werft shipyard open is also seen as a strategic imperative for Germany, since it could provide naval shipbuilding capacity in the event of a conflict.

The sources said that the German government expects the shipyard to continue recording losses in 2025 and 2026, even if the restructuring plan is implemented.

Meyer Werft said it has to raise almost €2.8 billion by the end of 2027 to finance new ships, and that agreements must be reached by September 15 or else the shipyard will run out of money.

The company has a full order book, and in August announced a record order from the Disney Cruise Line for four new ships.

But the shipyard's shaky finances have left it unable to raise enough financing from banks to fund further construction of the ships.