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Thursday, 21 September, 2000, 12:04 GMT 13:04 UK
Last chance for shipyard
Global Marine drill-ship
The Global Marine contracts led to problems
by BBC Northern Ireland business editor James Kerr

The problems at Harland and Wolff have not come about overnight.

In the ten years since privatisation, the yard has faced the same difficulties as many other UK shipbuilders - difficult market conditions and fierce competition.

Initially following privatisation, Harlands focussed on "series building" - the construction of a series of bulk carriers and oil tankers to fixed designs.

Harland and Wolff shipyard
British yards said Korea got unfair aid
However, this market became impossible with Korean yards able to undercut massively the prices of European shipbuilders.

Harland and Wolff would complain that Korean companies could offer to build tankers for the price they would have to pay for the raw materials alone.

These difficulties prompted the yard to look towards more sophisticated vessels in the offshore oil and gas industry.

Demand to explore deeper waters necessitated the construction of a new generation of vessels.

Harlands put time and money into researching and designing such ships, and was successful in winning a number of orders.

However, here too there were problems.

Drillships brought trouble

Fluctuations in oil prices meant similar fluctuations in the willingness of oil companies to order new vessels, while constructing what is essentially a one-off vessel to a customer's specification is beset with its own range of problems.

It was here that Harland and Wolff ran into trouble with the two drillships it built for the US oil company Global Marine.

Although there was a fixed price contract, significant changes were made as the vessels were built.

When it came to adding up the costs, Harland and Wolff claimed that it was owed almost 100m extra for work carried out.

Global Marine argued it expected to pay the agreed price, and that, apart from modest changes, any additional cost was Harland's responsibility.

Payment row settled

There is still a standoff over this claim. It will in due course be settled by arbitration, although about half of the disputed money was paid by Global Marine to ensure completion of the two vessels.

A separate row over the final payment of 23m due on the second vessel was settled by arbitration last week.

Harlands now finds itself with two crises - not just a virtually empty order book, but also in deep financial trouble as a result of the row with Global Marine.

Harland's blames its customer for trying to bankrupt it but sources at Global Marine point to more fundamental competitiveness and management problems at the yard.

Whoever is right, this restructuring is a famous company's last chance to rebuild its reputation.

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