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Wednesday, 11 April, 2001, 20:30 GMT 21:30 UK
Cammell Laird: what went wrong
Cammell Laird's Merseyside shipyard
Cammell Laird has called in the receivers
UK shipyard Cammell Laird has given its version of the events that led to Wednesday's decision to call in the receivers.

In a statement, the Mersyside shipbuilder said its decision followed a series of problems that caused significant damage to its trading and financial position.

In Autumn 2000, the ship builder and repair yard had a record level of enquiries totalling approximately 750m which gave the directors high confidence in the future prospects of the group.

The business had grown substantially reporting pre-tax profits to April 2000 of 15.9m.

Investment was made in employees and infrastructure in anticipation of further growth. But the enquiries did not translate into firm orders, the company said.

Government contracts

In late October, a six ship contract for the Ministry of Defence was awarded to the German shipyard, Flensburger, and Harland and Wolff.

The company claims a further naval order for four large landing craft could not be pursued with any prospect of success due to the Government's bidding process.

The work was awarded to BAE Systems and Swan Hunter, with the result, Cammell Laird claims, that its shipyards were the only major facilities in the country not to benefit from Government orders.

Italian cruise ship

But the biggest impact on the deterioration in Cammell Laird's position was the dispute over the Italian cruise-liner Costa Classica.

The contract involved a 50m lengthening of a cruise ship.

Signed in late summer of 1999, the work involved building a mid-body section for insertion into the vessel between November 2000 and March 2001.

Given the credit worthiness of Costa Crociere, Cammell Laird's confidence in its own technical ability, and the desire to further establish itself in the important cruise ship market, the British company says it agreed to accept a contract with back end payments.

However, the ship's operator, Costa Coriciere, pulled the plug on the order as the ship was sailing to Cammell Laird's yard.

Cammell said it had considered legal action against Costa Coriciere, but has been advised it would take two years for a case to be resolved.

Damaging

Cammell says the Costa dispute has been very damaging to its business.

Apart from the loss of profit on the contract and significant cash outflow, the company says it has suffered the additional costs of downsizing the workforce, carrying excess overhead costs and the significant negative impact on employee morale.

Furthermore, the trade and financial markets have begun to doubt Cammell Laird's financial viability, which, combined with media speculation, has damaged the company's trading and financial position.

Luxury cruise ships

During the period since November, Cammell Laird has also been working hard to secure a $500m contract to build two luxury cruise ships for Luxus (UK) Limited.

It has made strenuous efforts to improve the government's offer of support to Luxus, it says.

Various assessments were made of Cammell Laird's capability and project plan which all stood up to scrutiny.

However, to date, the company claims the support package has not been sufficiently improved to enable the project to proceed.

The impact of all of the above, the company claims, has created an environment of lower customer confidence and employee morale leading to less work at tighter margins.

The directors had embarked upon a strategy of re-organisation and re-focussing of the business which included a possible restructuring of the balance sheet and possible sale of the business as a going concern.

However, the company now has insufficient working capital to complete this strategy and accordingly has taken the action announced on Tuesday.

The company's directors say they will continue to provide whatever assistance they can to the receivers to protect the future prospects of the business and safeguard jobs.

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