Engineering at Sea: To start us off, let’s take a look back. Historically, which country has been at the forefront of the shipbuilding industry?
Martin Johannsmann: Over the centuries, the epicenter of the shipbuilding industry has shifted from country to country. In the early 20th century, it moved from England to Germany, then to Sweden and Finland in the ‘50s. Two decades later it was in Japan and then Korea. After that, China was the leading nation until 2010. Now, almost 90% of shipbuilding operations take place in Japan, Korea, and China.
German shipyards are focusing on constructing cruise liners, which are currently in high demand. Is this a reason why German shipyards aren’t feeling the effects of the crisis so strongly?
Yes. We lost a lot of orders to Asia in the 1990s and 2000s. A great number of shipyards closed or experienced cutbacks as a result. The survivors were those providing more niche products unaffected by the crisis—cruise liners, ferries, yachts, and submarines. Because of that, German shipyards are very well positioned.
And what’s the current situation for the Asian shipyards?
The market slump is affecting general shipbuilding—so tankers, bulkers, and container ships. This means losses for Korea and China. Japan is more stable because many of its shipowners buy their ships locally—even if they’re more expensive than elsewhere.
Now let’s take a look at the suppliers. The Germans are better positioned in this regard, too, as they are able to develop and supply to industry standards. Asian suppliers don’t manufacture their own parts. What consequences does this have?
The Chinese and Korean governments have intervened and saved jobs. As a result, European suppliers have been operating in China. But for the most part, manufacturing is still carried out in Europe. This is what’s known as “contract manufacturing”. The advantage of this is that engineering is in high demand even in times of crisis, as there are constantly orders for a fleet to fulfill.
Is it true that the German ship supplying industry is mainly centered on small and medium-sized enterprises?
Yes, and that’s another advantage. Smaller companies are careful when it comes to cost control and employment. They don’t expand their operations as soon as things start going well. This is because they know the next crisis is on its way. Through experience, they are often stable and well positioned to survive crises.
How will German manufacturers remain competitive?
To continue to overcome competition from China, Korea, or the US, German organizations will have to keep investing in manufacturing. From my view, their chances look good.
Let’s talk about the other market players: where are the most competitive shipowners?
Many of the big shipowners are European. There are some in Asia and the US, too, but they are mainly based in Europe. The way I see it, shipping companies that own a large fleet and offer “door to door” transport services will remain financially strong. Whether they serve in Europe, the US, or China isn’t important. The small companies will gradually disappear.
Is the focus in Asia likely to remain on standard ship and component construction, and on shipping companies and engineering in Europe?
It depends who you ask (laughs). Different countries have different interests. A Chinese shipowner would almost certainly tell you that his or her country will be the industry leaders across all areas within 20 years. A Korean would probably say that manufacturing locally is the key to reducing dependency on Europe. My opinion is that the division of labor will change and the value chain will become even more strongly established in Europe. The reason is that China and Korea’s competitiveness is politically motivated and not as strong as they would have us believe.
Chinese investors could also buy German suppliers. Is this a risk?
Yes, it is a risk for most parties. They fear the loss of employment and orders. But some also see investment as a positive thing. I’m somewhere in between the two. As a company affected by it, you have to ask yourself the question: “What reasons are there not to outsource to Asia?” For example, shipyards can’t simply move elsewhere. It’s also difficult for them to transfer knowledge.
Shipbuilders and shipowners are increasingly outsourcing, which could mean a new kind of relationship between market players. What opportunities would that bring?
It will mean clustering—several companies coming together and collaborating. The chances of this happening in times of crisis are higher, as everyone wants to cut costs. It’s the same for technological innovations. For example, in the cruise industry, fleet operation centers require many partnerships.
Looking to the future, who, in your opinion, is best equipped to survive the crisis?
I’d say that depends on three factors: size, productivity, and manufacturing. If a company is well equipped in all of these areas, it survives.