Loan to Bremer Vulkan whips up political storm

Date: 08/02/1996

WHEN the city state of Bremen agreed to underwrite a 116-million-ecu bank loan to local shipbuilder Bremer Vulkan, it probably did not realise it was kicking up a storm.

On 23 January, Bremer Vulkan said it had received the loan to cover the costs of completing a ferry it had begun.

Although the money came from Commerzbank, Dresdner Bank and the Bremer Landesbank, it was underwritten by Bremen, where the company is the biggest single employer.

Last autumn, when the problems first arose, the firm received a loan worth 160 million ecu from the same banks.

The two tranches of money are intended to help the company out of its immediate problems in building the cruise ship Costa II.

However, this is only the latest round of private and public cash to have gone to the company. A 400-million-ecu payment was made to Bremer Vulkan when it took over three loss-making East German yards.

The company first ran into problems last year when it emerged that it faced losses of 106 million ecu at engineering

unit Dörries Scharmann, followed by news of rising costs at its Bremen yard.

While it has orders worth 3.7 billion ecu, there is speculation it may be following the current practice of selling at below production costs.

For the first half of 1995, the company reported losses of 14 million ecu on sales revenue of 1.2 billion ecu. By September, its debts totalled 530 million ecu.

Competition Commissioner Karel Van Miert warned last week that the latest round of aid may be illegal since it was not notified to the Commission.