Germany is home to Europe’s largest shipbuilding community, with 60 yards and 23,600 employees. Werner Lundt has been general managing director of VSM for four years. He has been involved in the shipbuilding industry since 1972, and has held several management positions in German shipyards. VSM has 120 members and supports yards on technical, economic and political issues.

World Cruise Industry Review: What is your opinion of the cruise shipbuilding industry over the last year?

Werner Lundt: Compared with the rest of the shipbuilding sector, the cruise industry is doing well. There were still orders during most of 2008, but by the end of the year the entire shipbuilding industry experienced a deep fall as the downturn took hold. I’ve never seen anything like that before. In the past, we sometimes experienced a drop in orders in some segments, but now it is being observed in all sectors of the industry, with gloomy prospects for the immediate future.

This has been strongly felt in German yards, whereas other European countries have had only a few cancellations. However, the cruise sector still has a few orders on its books, so it is in a relatively normal state.

There has been talk about governments helping out shipyards. Has there been any financial help available?

Because of the banking crisis, there has been no financial help for yards. The banks are in trouble and are finding it hard to keep their own business going. They are not willing to risk their money on projects they believe are not 100% safe. Rescue packages are different for each country. The German Government has come up with a new financing package for all its industries, not just for shipbuilding, but this programme is not flexible enough for shipyards to rely on.

With few cruise orders on the horizon, how will yards cope?

Yards are trying to keep their order books safe. They do not want to lose their orders or risk cancellations, so they have to negotiate with owners who are thinking about cancelling or postponing projects, while trying to revive financing and find new work. This is difficult to do as there are only a few projects tendered and too many yards chasing them.

“If yards want to be successful, they have to look outside their specialist areas.”

Italian shipyard Fincantieri recently announced that it was taking on more military work. Will more yards turn to other sectors for contracts?

In Europe, yards that have focused on, for example, containers or tankers have recognised early on that they cannot continue in just these sectors, so they are looking for more specialised areas such as cruise, ferries, yachts and offshore. But there are only a few orders available in these segments. If yards want to be successful, they have to look outside their specialist areas. We may also see more deals and discounts being offered, and possibly the beginnings of a price war, but these will be limited because shipyards need to make some profit to stay in business.

There was talk about Lloyd Werft selling a major share of its company to Fincantieri. Will there be any mergers or takeovers as a result of the tight market?

There might be a few mergers, but it is unlikely. What is more probable is an increase in insolvencies. There have already been five insolvencies in Germany, which, compared to China and Korea, is a big issue.

What is your outlook should the downturn end within the short term; and if it continues into the long term?

I have to believe what the experts are telling me: that they expect to see a slight upturn in 2010. It is important that the industry remains positive. In the long term, if the recession continues and trade slows further, it will have an even deeper impact. It is important that world trade performs well, but even if the general economic situation improves, the effects won’t be felt in the shipbuilding industry for another two or three years, depending on the sector.

What can the cruise industry do to help buck the downturn?

If more ships were ordered, it would be a great help. In Northern Europe the summer cruise industry is in a good position and seems to be growing in popularity.

In Kiel, where I live, I see more cruise ships docking at the port every year. Also, refits and refurbishments would certainly help the yards.