Germany: Transfer Company Solution for P+S WERFTEN Employees

Together with the State of Mecklenburg-Western Pomerania and the representatives of the works council and the IG Metall union, a transfer company must be set up for all 1,750 employees of P+S WERFTEN. The transfer company should take up its work on 1 November 2012 and would then operate for a year, i.e. until 31 October 2013. The aim is to prepare the employees for new duties so that they ultimately switch to interested companies. During this time the employees would receive a short-term allowance of up to 67% plus a top-up of 9% of their former gross monthly wage. The creditor’s committee has given its approval to the plan.

The basis for the establishment of the transfer company are the state government’s approval, a loan of €25.2 million, a closed settlement of interests between P+S WERFTEN and the complete works council on a reduction in the workforce at both locations and a labour management deal to carry out the transfer project. The expected costs of €25.2m are made up of €17m in retention costs (contractual top-up of the short-term working allowance, social security contributions, further remunerative components to be retained in full, e.g. Christmas and holiday pay), €7.2m in active and structural costs, and €1m to secure the retention of trainees at the shipyards for six months.

Professional profiles are currently being drawn up in consultation with all employees at the shipyard in Stralsund und Wolgast. Over the next week all employees will receive an offer to switch from P+S WERFTEN GmbH to the transfer company.

An individual term of at least six months is planned. The switch will occur at various points in time:

•  All 1,260 employees at Volkswerft Stralsund will receive an offer to switch to the transfer company on 1 November 2012. A core team of 100 employees in central positions and about the same number of design engineers will continue work at the shipyard and receive an offer to switch to the transfer company effective 1 May 2013.
•  All 490 employees of the Peene shipyard in Wolgast will also receive an offer. However, since there are still orders on the books until April 2013, the employees will make the switch in sections: 110 employees will receive an offer of transferring to the new company on 1 November 2012, a further 89 will move in stages between 1 December 2012 and 1 April 2013, and 291 employees will switch on 1 May 2013.
•  An arrangement for all 156 trainees could also be found: they should continue their training for six months initially. At the same time, a longterm solution will be drawn up.
•  Around 100 employees at both shipyards now in partial employment will sadly lose their jobs altogether absent any other solution. A further 40 employees who have yet to enter the release phase will be made an offer to switch to the transfer company.

Current status of orders

The creditor’s committee approved provisional insolvency administrator Berthold Brinkmann’s proposed commercial agreement with the Swedish Coast Guard. He was tasked with leading the final negotiations and drawing up agreements. The two coast guard ships ordered and being built at the Peene shipyard can be completed as it is now certain that the necessary work will actually be paid for. Delivery is planned for February and March 2013.

There have been no new agreements on the other new ships to be built as the previous orders have risks attached and cannot therefore be met by the insolvency administration.

The reason for this is that the customers could refuse the ships because of late delivery.

Conversely, in the view of the provisional insolvency administration, the cancellation of the two RORO special transporters by shipping line DFDS was unjustified. Talks with the shipping line have been set despite the wide difference in positions.

The administrator has requested a mass credit line for the continuing construction of an offshore construction vessel that has been received by the State of Mecklenburg-Western Pomerania. However, initial indications from the EU Commission point to Brussels being unable to approve any such subsidy.

The two Ro-Pax ferries ordered by the Scandlines shipping line are owned by P+S Werften GmbH and covered by ship mortgages. The shipyard is awaiting proposals from Scandlines once it has all the documents and the ships have been inspected by the specialists commissioned by the line. According to Scandlines, the result of the inspection means that both ferries will have to be refitted to a large degree. The customer is now examining its further course of action, if any. The administrator is continuing negotiations with the goal of delivering the ships.

The orders taken by the Peene shipyard to convert and maintain naval ships will go ahead as planned. To clarify, the repair contracts were gained in tough competition unconnected to the insolvency. It was achieved solely through the shipyard workers’ performance.

Calls for a “strong” provisional insolvency administrator

To ensure that the provisional insolvency administrator can make the necessary binding agreements with customers and suppliers, the creditor’s committee has empowered him to submit a request to the Stralsund local court for a “strong” administrator with powers extending beyond the opening of insolvency proceedings. This was agreed by the management of P+S WERFTEN. Insolvency proceedings are expected to begin on 1 November 2012.

Indicative offers for the Peene shipyard in Wolgast on hand

Since the administrator reported in September on the first 30 expressions of interest, contacts have been furthered with them. Indicative offers have been requested by the end of October 2012.

Berthold Brinkmann: “I am very satisfied with the interest expressed for the Peene shipyard in Wolgast. I have already received indicative offers. But for Stralsund the situation is not as clear-cut and we are involved in many talks in this respect.” This is understandable in light of the uncertain order situation and financing at the shipyard.

Following an in-depth due diligence review the next phase will be to flesh out and confirm the offers. To safeguard the bidding process, details will not be released.

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Press Release, October 22, 2012; Image: P+S WERFTEN GmbH