Maersk to Stop Making Ships, Sell Shipyards

A.P. Moller-Maersk said Monday it will stop making ships in its money-losing Odense Steel Shipyard in Denmark, which it said has played a “special role” in the company’s history.

The company, which owns Maersk Line and extensive oil and gas production facilities in the North Sea and elsewhere, said it will also put up for sale the Lithuanian Baltija Shipyard, which it will no longer need after the closure of the Odense yard.

The closing of the Odense Shipyard is the first tangible sign that the Danish shipping giant is taking steps to follow through with the new strategy articulated by Moller-Maersk’s chief executive, Nils Andersen, that the company will henceforth invest only in profitable enterprises.

The Danish group plans to sell the industrial, design and engineering facilities associated with both shipyards.

Moller-Maersk said it would close the Odense Steel Shipyard, which it calls Lindø, because “the competitive situation for the shipbuilding industry has become increasingly difficult in recent years.”

It said the increased competition has come from “the expansion of shipyard capacity in low cost countries in the Far East and most recently with China’s determined endeavors of becoming the world’s largest shipbuilding nation.”

The yard has run up “very considerable annual deficits” despite the huge effort to improve the yard’s competitiveness with investments in new technology and streamlining of production, the company said.

The company said it “must today realize that it is impossible to attract orders, which are commercially sound.”

The company will stop making ships when the currently contracted orders have been fulfilled and it will continuously downsize the present workforce to accommodate production.

The contracted orders, which include five bulk carriers, seven roll-on, roll-off ships and three frigates, extend to August 2010, November 2011, and February 2012, respectively.

The first layoffs of about 175 employees are expected to take place from the end of August.

The last new ship under construction in the Odense yard is expected to be delivered in February 2012.

“We have to realize that it is impossible for Lindø to attract new orders. The board has therefore decided to make it absolutely clear that Lindø will not be building more vessels, once the contracted orders have been delivered,” said Lars-Erik Brenoe, chairman of the shipyard’s board.