Thursday, September 17, 2015

Crystal Cruises - They Liked it So Much They Bought the Shipbuilding Company! (Sort of)

Crystal Cruises' parent, Genting Hong Kong has announced what it has been working on for months: The purchase of the controlling interest in Lloyd Werft, the shipyard in Bremerhaven, Germany which will be building Crystal Cruises' new ships.  Essentially Genting Hong Kong will own 70% of the operations and 50% of the land; effectively given it control of the yard and protection from the landowner forcing the shipbuilding company off of the real estate (or charging it excessive rent).


Why would Genting do such a thing?  The reasons are many...and it starts with the purchase price:  A mere 17,500,000 Euros and continues with Genting's preexisting involvement in the struggling yacht construction industry (from where Crystal Cruises acquired the Crystal Esprit) followed by the ship/yachtbuilding industry being one that requires huge sums of cash to operate, but operates on extremely thin margins...and this Chinese company has lots of cash.

The result is Crystal will theoretically significantly cut the cost of its new ships (ocean and river) since it has little motivation for its bargain-basement priced shipyard to turn a profit while theoretically eliminating much of the gamesmanship of charging for changes, extras and overages.


HOWEVER...and it is a BIG HOWEVER, having been the managing director of a superyacht shipyard in Brisbane, Australia (Australian Yacht Builders, Pty. Ltd.) and having been in the industry for decades I can tell you that there have been many who have purchased shipyards with the same theory and then sorely regretted it.

It also is not so long ago that shipyards were begging for work and were teetering on closing their doors.  Naming names is not necessary, but let's just say if you know anything of cruise ship industry you know who they are...or were.

To me there are many warning signs where, as here, the purchase price is so low and virtually all of the control regarding ship construction is now in the hands of the Owner.  It also concerns me that Genting Hong Kong has another, much smaller, yachtbuilding facility and I cannot help but anticipate the melding of these two yards...potentially creating even more areas for conflict.

A quality shipyard requires truly talented workers that are fiercely loyal.  They not only assure a high level of quality control, but efficiencies both as to time and materials.  If those loyalties are split between the Owner and the Shipyard, those workers can find themselves frustrated and feeling like that are forced to be loyal to two masters.  And that is where the breakdown occurs.

Hopefully this will be a success story with the European craftsmen and technicians having secured years of high quality work, a shipyard that is assured of existing into the next decade and Crystal Cruises having its ships delivered on time, under budget and with the highest of quality.