Poland's shipyards look to ride EU wave

By Ben Richardson
BBC News Online business reporter in Gdansk, Poland

Poland's shipyards have played a prominent role in the country's recent history and economy. In the second in a series of reports from Poland and Lithuania, BBC News Online looks at how they survived the collapse of the communist economy and what the future holds.

Shipbuilding and repairs rely on precise engineering and brute force

Piotr Soyka was a youthful member of Solidarity when the Polish trade union called the strikes that put the first cracks in the Eastern Bloc.

In 1980, government plans to raise food prices led to a wave of strikes and the emergence of Solidarity under its leader, Lech Walesa.

Today Mr Soyka is chairman of Gdansk's Remontowa ship repair yard, with a plush office down the road from the birthplace of the workers' movement and a clear recollection of why the Baltic port was so ripe for rebellion.

"There was more knowledge about the outside world. It was a window to the outside world," he told BBC News Online as cranes picked their way over tankers and rusted oil rigs.

Quick change

It is this history of independence and international links that Mr Soyka believes will help both his company and the country's shipbuilding industry thrive after European Union membership on 1 May.

After all, he says, they have faced much more difficult situations.

When the Soviet Union collapsed in 1989, many of Poland's state-run enterprises were suddenly shorn of their best clients. Remontowa lost 75% of its sales almost overnight.

"The problem was how to find new clients because we knew nothing about marketing," Mr Soyka explains with a wry smile that acknowledges the benevolence of a centrally-planned economy.

Job cuts

The company first looked to Scandinavia and then western Europe, using contacts made in the Cold War and calling in favours.

It then broadened the services it offered, converting and fixing ships, as well as working on structures such as oil rigs.

Offering different services can keep work coming in all year round

The next challenge was slashing the workforce from more than 7,000 to about 2,500.

Having started his career on the workshop floor, Mr Soyka liaised with trade unions to soften the blow and explained the need to pare down the organization and have it serviced by sub-contractors.

But the main thing that helped Remontowa, according to Mr Soyka, was that it brought in a new group of directors almost immediately after 1989.

"It was the beginning of a new era," he said, suddenly looking up from the conference table. "Other companies spent years pushing out the old management. We didn't waste any time."

Sinking feeling

Head a few miles up the coast to the town of Gdynia and the transition has been far more choppy for Stocznia Gdynia, once Europe's biggest shipbuilder.

High raw material costs, an economic slowdown and cut-price production in the Far East took their toll on profits across the industry.

Poland's shipyards were like small towns, with thousands of workers

Poland, newly emerged from Soviet rule and struggling to modernise inefficient state-run enterprises, was hit particularly hard.

A couple of years ago, Stocznia Gdynia was on the verge of bankruptcy and had to be bailed out by the government, which now owns a stake of more than 45%.

Question marks over the financial future of the company have been difficult to dispel, however, and recently newspaper headlines have again been dominated by the threat of bankruptcy.

Clear vision

From behind a cloud of cigarette smoke, marketing director Andrzej Sowa is dismissive of any suggestion that Stocznia Gdynia may be heading for trouble.

Workers are proud of Poland's shipbuilding tradition

He points to an order book that is worth $1.7bn (£925m) and will keep the company busy for the next two years.

After slashing its workforce and getting government help, the future is looking far brighter than it did, he says.

Certainly the shipyard is a hive of activity.

Workers clamber inside a half-built hull, then spill out at the end of their shift, queuing to pick up pay packets.

The air rings with shouts and the sound of rivets being banged home. Sparks fly as the decks of a cargo carrier are welded together in the dry dock.

Foundations

According to Alan Shipman, an independent analyst who specialises in Poland and Eastern Europe, the next 12 months and EU membership will prove crucial for the industry.

Any increase in wages after 1 May, for example, will need to be offset by either further job cuts, improved efficiency or the implementation of new technology and working practices.

A pick up in economic growth should boost demand for ships

Even so, Poland should be able to secure a large slice of any new business because of its high quality, cheap labour and accessible ports. It currently has about 17% of the total European shipbuilding market.

EU membership is also set to boost travel and trade, driving demand for services as traffic to the region increases.

"The changes in the 90s have been enormously painful for companies and Poland as a whole," Mr Shipman said.

"But there is a real feeling that they have already turned the corner. They have a good basis."

The big question now is whether Poland's shipyards can build on that foundation and claw their way back to the top of the pile.