AN UNLIKELY 'FINNISH CONNECTION'

For many years Finland was able to dodge the bullet by aiming our less than 1 percent of the world's new building capacity at highly specialized markets.

The speaker was tall, rugged, affable, energetic Tankmar Horn, chairman of Wartsila, one of the world's major shipbuilding companies, as he described events leading up to the recent thunderbolt decision of two Finnish shipbuilding giants - Wartsila and Valmet - to merge into a new company by the beginning of 1987. In this unprecedented move, the privately owned Wartsila is scheduled to merge with the state-owned Valmet.I visited the Helsinki yards of Wartsila to see first-hand the famous specialization Tankmar Horn was talking about. I saw finishing touches put to some of the world's most advanced ice-breakers (Wartsila is at this moment building two shallow-draught atomic ice-breakers for the Soviet Union). I also could not help being impressed with technology that permitted Wartsila to cut two big passenger ships in half (the Song of Norway and the Nordic Prince) and lengthen them.

On a previous visit to Wartsila, I viewed the Song of Norway in dry-dock

cut in two prior to lengthening. Two decades ago, I worked as a merchant sailor - including duty on a Norwegian tanker - and I could only marvel at this shipbuilding feat.

Mr. Horn, in an interview for the Wartsila newsletter, spoke of the impact of the global shipbuilding crisis on Wartsila and other Finnish shipbuilders.

He was candid about the survivability of Finnish yards:

We have no chance whatsoever if we try to function like Japanese or Korean shipyards. To be competitive, we have to stick with our strategy of specialization, and that requires much more R&D than the Far Eastern shipyards need. This, in turn, requires a certain volume of orders and a certain income to support hundreds of engineers who spend their time thinking primarily about what the next generation of ships should be like.

Speaking of the long-standing crisis, Mr. Horn said the impact was softened thanks to the unique situation in which half of our output is directed toward the Soviet Union. However, Finnish say that orders from the U.S.S.R. have been coming in more slowly than in previous years.

Mr. Horn explained that in the past this combination of Soviet trade and highly developed specialization actually helped Finland experience a small shipbuilding boom when many other countries were already suffering the full impact of the worldwide downturn. Now, he said, the crisis has caught up with us here in Finland. We are having difficulties getting orders in the fields in which we have specialized, and our trade with the Soviet Union has been adversely affected by falling oil prices.

Finnish sources, including Mr. Horn, say the general outlook for the Finnish shipbuilding industry in the next few years is rather bleak, partly owing to the continuing government subsidies provided in several competitor countries. They predict the market situation will improve toward the end of this decade.

Finnish sources have told me that the order books for Wartsila and Valmet as of September this year included 21 vessels with a value of more than $1.5 billion.

Specifically, what occurred at Wartsila and Valmet? Why was such an unorthodox merger felt necessary? One factor apparently was the underutilization of shipyard capacity and consequent lay-offs and redundancies. In the new company, as yet unnamed, Wartsila will have a 70 percent share ownership and Valmet the remaining 30 percent.

As a result of the shipbuilding crisis, say Finnish sources, there simply wasn't enough work to keep the four Finnish shipbuilders (Wartsila, Valmet, Rauma-Repola, and Hollming) busy.

Observers here point out that the top leaders of Wartsila and Valmet are realists, and so when talks at reaching a solution involving all four Finnish shipbuilders broke down, Wartsila and Valmet kept pushing ahead for a solution between them. The observers say that Wartsila and Valmet officials displayed both imagination and flexibility.

But Mr. Horn is cautious: It is much too early to pat ourselves on the back.

The merger means thousands of lost jobs. It is now estimated that 4,000 jobs may go. The new company may have to cut the work force down from 10,000 to about 6,000.

What will happen to the laid-off workers? Mr. Horn: We suggested that the minister of Trade and Industry set up a commission composed of the two companies, the cities (where the yards are located) involved, the trade unions, the personnel, the Ministry of Labor, and some outside experts to consider what measures ought to be taken.

There is one final note of optimism regarding the merger. By joing forces, Wartsila and Valmet will have one less fierce competitor.

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