Views on business structure:
The example of ship-building/repair activities
www.forumokretowe.org.pl
Jerzy Czuczman
Sławomir Skrzypiński
Set-up:
- business recovery
- opportunities perceived
- challenges faced
- shifting into offshore
POLAND – case study
http://ec.europa.eu/enterprise/sectors/maritime/files/fn97616_ecorys_final_report_on_shipbuilding_competitiveness_en.pdf
Business strategies – by ECORYS
http://ec.europa.eu/enterprise/sectors/maritime/files/fn97616_ecorys_final_report_on_shipbuilding_competitiveness_en.pdf
Business strategies – by ECORYS
Poland
Low cost leader
Specialisation
But the „way” was NOT like a „high way”
… it was more like THAT way……
So, let’s take a view
on business structure
0
100
200
300
400
500
600
700
% p
er y
ear
Interest rate - POLAND
644,5%
1990
Economical changes – hyper inflation
http://www.indexmundi.com/facts/poland/lending-interest-rate
Markets versus politics
HOME 34%
WEST EUROPE 8%
SOVIET UNION 58%
Source: REMONTOWA
1990 – direction for sales
COSEQUENCES
LOST
difficulties
The only hope?
ISSUE SWOT
Government strategy –> ? W O
Privatisation –> sensitive issue T O (?)
Financing -> hiper inflation W T
Market economy –> new environment T O
Social partners –> strong social demands T O
Managers –> learning process W T O (?)
Banking system –> cash flow bottleneck W T
Human factor –> overemployment, ratio, social unrest W T O
Debts –> conversion into equities, no capital injection W T
Market –> lost W T O
Business environment
ISSUE SWOT
Ownership – fully controlled (by State) W T (O?)
Efficiency – not an issue W T (O?)
Yards – 3 big NB yards, 4 repair yards (medium to big) S O
Supply chain – strictly tightened (politically) S (?) T
Financial standing – fully dependent (on State) S (?) W T
Products – labour-intensive W O
Business structure
Description Fast movingNew ideas,
Best technical equipment
„only” repair yard not a NB yard,
left of „public interest”
Products Containers,
introducing new products
Containers, introducing new
productsIntensive search
Ownership structure
Management buy-out
Struggling for management buy-out
Assets being released Involve employees
Managerialstructure
Dramatic shiftEfficiency under
controlNot efficient Strongly centralised
Business cases
SPECTACULARS
A few
- European leader in container ships, 35% of European production
- Over 30 ships per year (3/4 of them are containers)
- SIGNIFICANT SHIPS OF THE YEAR
- Production level - almost 500.000 cGT
==============================================
- HUGE debts problem (transformation and consequences)
- debtors agreement
- Public support
CENSEQUENCES
TURMOIL on suppliers’ market:
- Numerous bankruptcies,
- Lost credibility,
- Damaged supply chain,
Szczecin Shipyard & Gdynia Shipyard – debtors agreements
…… „buts” …..
No capital injection,
Full dependence on bank’s loans
Very high cost of capital
Cash flow problems
PRODUCTS
Containers:
2000TEU – ab.34 mln EUR 3,35 eur/kg
Cars:Fiat 126p - ab. 9400 zł4,61 eur/kg
Ford Mondeo 1,6 ab. 27.000DEM, 10,50 eur/kg
OBSERVATIONS
INTERNAL
- Low hour rate,
- Labour-intensive product
- LOW COST LEADER
EXTERNAL
- Poland negotiate OECD agreement
- cup of 600.000 cGT imposed on Poland
- cGT „cup policy” brought no success
- administrative way of controlling market brought no results
- supply-demand factors runs their own way
COSEQUENCY –> PERSISTANCY -> REMONTOWA
- „too small to bother politicians”
- No public support
- First real privatisation - money paid to (not taken from) the State Treasury,
REMONTOWA
2001 – direction for sales
Former SOVIET UNION 4%
HOME 10%
WEST EUROPE 86%
REMONTOWA sales 1990-2001
[USD thousands]
1990
Big Yards
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
EUR/cGT
EUROPE
POLAND
POLITICAL GAMES
- Again in debts,
- Possibly new debtor agreement
- Re-nationalisation – YES, YES, YES
- Policy over economy
- New products? Innovation? – NO, NEW PRESIDENTS, NEW BOARDS
- Efficiency?
REMONTOWA
PRIVATE - too small to bother politics
- Economy, economy, economy
- Generate positive cash flow
- Paying back loans
- Building up capital
- Buy out strategy (eg.: Northern Yard)
- Re-structuring
- New products, new markets, design office
- Steadily building a group,
- GROWING
- PEOPLE – participants, involved, not just viewers (only)
EU
2004 – joining EU
- No interim period for Polish shipbuilding/repair sector
- Low rank at negotiation table, („forgotten” sector),
- Facing all constrains, eg. free flow of people
- Any benefits for the sector ?
Source: REMONTOWA GALATEA - Buoy-Laying Vessel – 2007
EU decision 6.11.2008
Liquidation of Gdynia & Szczecin NB yards
- Assets divided and sold out
- Employment cut dramatically
Source: Stocznia Gdynia
New business
Gdynia
- New opportunities
- New products
- Employment steadily growing
- Turnover reached „momentum”
Szczecin
- no significant success, yet ….
Source: Stocznia Gdynia/Crist
Source: FORUM OKRĘTOWE
Specialisation and shifting into offshore
Source: REMONTOWA/FORUM OKRĘTOWE
Lloyd's List events & Lloyd's Maritime Academy2010 - Green Ship of the Year
Source: Sunreef Yachts
Next please ….
People
Structure
Product
PrivateParticipationResponsibility
SpecialisationNiche Innovative
DeterminationContinuitySkills Learning process
Processingsteel
Selling Intellectual
skills
COMPLEXITY OVER TONAGE
COMPLEXITY OVER TONAGE
NB efficiency in [EUR/cGT]
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
EUR/cGT
POLAND
EUROPE
source: FORUM OKRETOWE/CESA/SEA Europe
Conclusion
PEOPLEVision
Determination
Dedication
Leadership
ECONOMY versus POLITICS
Short sight (politicians’ sickness)
Goals(political always first)
Consequences(pay: companies, business -> PEOPLE)
INSTITUTIONS
Set field
Monitor field
Level playing field
Public support ? (other side of the coin)
DR
IVER
S