Major bailout finalized for struggling German shipyard

A major bailout plan for the struggling Meyer Werft shipyard was finalized on Monday with stakeholders signing contracts that clear the way for a temporary state takeover of the shipbuilder.

Last week, the budgetary committees of both the federal parliament in Berlin and the north-western state of Lower Saxony parliament in Hanover approved state aid to the company.

"The shipyard's future has thus been stabilized, and we are now firmly predicting that we will see positive development at the production sites," Olaf Lies, economy minister for Lower Saxony, said on Monday after a meeting at company headquarters in Papenburg.

He said that some 340 jobs would be cut during restructuring.

Together, the state and federal governments will take over 80% of the shares in the struggling shipyard. Both agreed to split the cost of a €400 million ($445 million) investment.

Both governments also plan to offer loan guarantees of around €1 billion each to allow Meyer Werft to secure funding to complete orders.

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

Contractual details were settled on Friday, with a large number of banks involved, Lies said.

The 200-year-old company is best known for building large cruise ships. The Meyer Group employs a total of some 7,000 workers.

In addition to the Papenburg site on the Ems River near Germany's North Sea coast, it operates shipyards at the port of Rostock on the Baltic Sea and in Turku, Finland, also on the Baltic.

While the Meyer's order books are full, contracts concluded before the pandemic did not foresee subsequent sharp rises in energy and raw materials costs.

An additional factor in shipbuilding is that 80% of payment is made only on delivery, and Meyer needed to put up almost €2.8 billion up to the end of 2027.

The shipyard would have run out of money without agreement by Sunday.