UK: A fitful pride on the Clyde - GOVAN SHIPBUILDERS.

UK: A fitful pride on the Clyde - GOVAN SHIPBUILDERS. - The shipbuilding nightmare looks set to end and Govan is ready. Daniel Butler.

Last Updated: 31 Aug 2010

The shipbuilding nightmare looks set to end and Govan is ready. Daniel Butler.

Looming 250 feet above the Clyde, Govan Shipbuilders' 200-ton capacity Fairfield crane has seen it all. Since 1907, it has helped to build famous warships such as the Renown and Howe as well as the Empress class passenger vessels. Until last year the crane was a listed monument, symbolising the glory days of a past when the river supported 33 shipyards and 70,000 men built ships with that proud brass name plate: Built on the Clyde.

Recently the crane's listed status was withdrawn, allowing it to be scrapped. But this does not herald another depressing tale of British industrial retrenchment. The crane's scrapping is not the death knell for Govan - the signal for it to be levelled and replaced by a huge shopping centre or dinky riverside development for Glasgow's burgeoning Yuppie population. The crane is being demolished because Govan no longer needs it. Revolutionary new working practices - both physical and in terms of new investment and attitudinal by the workers - have made the crane not the 22,000-strong workforce redundant.

The cause of the transformation can be put in one tongue-twisting word: Kvaerner. This Norwegian shipbuilding group took over the yard in 1988 and, like earlier Viking invasions, its influence on the Govan worker has been profound. Fittingly, Kvaerner's man on the spot, managing director Steiner Draegebo, looks every inch the Norse seafarer, standing 6 foot 4 inches tall. And the way he drove a coach and horses through Govan's traditional working practices to transform the yard's fortunes perhaps owes something to a sort of buccaneering Viking tradition. But it works - as a £200-million order from Saudi and Norwegian shipowners for four highly specialised chemical carrying vessels last December confirmed. Though, as the Duke of Wellington remarked after Waterloo, "It was a damned close-run thing." Without the Kvaerner takeover, Govan would in all probability no longer exist.

For the first 100 years after its foundation in 1864, the yard, aside from the Great Depression of the '30s enjoyed relative periods of prosperity. But the inexorable rise of Far Eastern competition slowly but surely squeezed its markets. The warning signs were evident when the Upper Clyde Shipbuilders saga hit the headlines at the start of the Heath government in 1971. Govan - then known as Fairfield Shipbuilding and Engineering - was one of the UCS yards in the forefront of a battle to prevent closure and obtain state aid for modernisation. Later, the yard was incorporated into British Shipbuilders (BS), the Labour government's ill-fated nationalisation of the shipbuilding industry. For much of the '80s, Govan, in common with the other Scottish and North Eastern yards in BS, faced an uphill task to modernise work practices while chasing the all too few orders on offer in a tight world market. Gradually subsidies to help obtain orders were whittled away, while one by one, the BS yards were either closed or sold off. The warship yards were sold with little difficulty, including Yarrow Shipbuilders, which was snapped up by GEC in 1985 - a bargain at £34 million.

Govan's workforce gradually slimmed from 6,000 in 1978 to 2,000 a decade later. Industrial relations gradually improved as Eric Mackie, the hard-nosed Ulsterman who ran Govan for much of the '80s, built up a strong working relationship with the shop stewards, notably Sammy Gilmore, the yard's convenor. Double-figure improvements to productivity were recorded yearly but it was never enough to capture anything but a miniscule share of the tight world order book. Its last three orders as part of British Shipbuilders looked like being the last. In the years prior to privatisation in 1988, annual losses approached £50 million. On the Norsea ferry for P and O in 1987, the last ship delivered before privatisation, the loss was said to have exceeded the price of the ship itself.

Kvaerner's decision to take over Govan in 1988, was not based on sentimentality but on remorseless Norse logic. Subsidies to build ships in Norway were being phased out but the company was reluctant to lose its expertise in a specialist industry. Govan was an attractive option - close to Norway, part of the European Community and with long experience in shipbuilding. Also there was an "atmosphere conducive to financing shipbuilding," as Draegebo refers to continuing government aid. Maximum levels for these are set by the community, and though dwindling (13% last year, 9% this) it was enough, calculated Kvaerner, to allow the yard to break even. Lest the word "subsidies" suggest and element of feather-bedding, Draegebo points out that, uniquely in Europe, the Government claws back any profits.

Once at the helm, Draegebo set about convincing a sceptical workforce that the takeover was not a simple asset-stripping operation. Two orders for specialist container ships were transferred straightaway from Kvaerner's Kleven Floro yard in Norway. With the yard's immediate future secure, Draegebo set about "concentrating on areas where quality not price was the prime factor". But such an approach - getting out of run-of-the-mill shipbuilding into specialist chemical and gas vessels - required two crucial changes in the yard: more investment in plant and even more productivity gains than the impressive achievements under the Mackie regime.

Some £30 million was pumped into the yard, mainly on building a new indoor assembly shed, the size of two football pitches. One of the yard's three slipways was renovated, another filled in to create more storage area, and the third mothballed. The new shed proved its worth almost immediately, cutting the time vessels spend on the slipway to 20 weeks. Beforehand ships had spent up to 18 months in the open. Now most of the detailed assembly work is done indoors and in all weathers (important for the notoriously bad weather on the Clyde).

The huge shed is equipped with vast cranes which slide across the roof, 120 feet above the floor. It is large enough for work to progress on two or three ship sections simultaneously, allowing the yard to stagger work and avoid bottle-necks. Currently occupied by part of a hull and by one of the huge stainless steel storage vessels that the yard now specialises in, men cluster around the vast structures, welding and measuring the seams. In spite of the rain spitting down outside, the shed allow work to continue regardless of the elements, cutting time on the slipway to a minimum. At the last possible moment the doors are slid open and the sections, some the dimensions of a fair sized apartment block, are trundled 100 yards across the tarmac and beneath the shadow of the doomed crane, to the slipway. There they are welded together like some vast Airfix model to produce some of the world's most advanced naval architecture.

Certainly "going dry" has proved to be one of the major factors in the 40% improvement in productivity seen at the yard since the Kvaerner takeover, according to production manager Albert Midwinter, who has worked at the yard since 1963 and retained the loyalties embedded in his days on the shop floor. Not only has it revolutionised work at the yard but it has indirectly helped labour relations - the real problem for Draegebo. "This was probably the most difficult area to tackle," he says. "We went through a very tough time initially and there was a lot of resistance. I felt that the trades unions were working against our common interests."

The shed's construction and the renovation of the slipway reassured a suspicious workforce that Kvaerner was serious. "We had to convince the men that we really wanted to build ships," says Draegebo. "Once we began investing we started to get trust - a renewed launchway can't be taken away," he smiles. "And it isn't very conducive to a shopping centre."

Reassuring it may have been, but it was not enough to prevent industrial action in June last year. Draegebo was expecting trouble but he says he was surprised how long it took to emerge: "I fully expected the strike to come in the first year," he says. "That was when we made most of the big changes." Instead it came three years after the takeover, prompted by a change in working practices, including the abolition of the infamous "off-the-job" tea breaks and cutting the 70 shop stewards on unlimited time for union business to 20 with a maximum of an hour a day. There was a walk-out. Kvaerner replied by sacking the strikers. Bluff called, the men returned to work after two weeks and there has been peace since.

Draegebo says the problem lay not with the unions, who advised acceptance of the proposals, but with the "militants". Now he claims there are good industrial relations. His optimism is less evident on the shopfloor. "The men aren't bitter, but resentful maybe," says convenor Mick Giblin of the aftermath of the strike. Then he relents somewhat: "In the end, if the yard closes, principles don't matter and 99% of those who have left are happy."

Shopfloor anxiety in one respect is understandable. When Kvaerner bought the plant in 1988 from British Shipbuilders, it inherited a legacy of overmanning. The first 500 redundancies were taken into account as part of the deal but more were necessary according to the plant's new owners. While publicly-owned the unions had negotiated a relatively generous redundancy package (roughly equivalent to two year's salary, a long-serving worker recalled). Kvaerner found itself having to pay off the next 200 staff at the same rate - an clearly has not relished the experience. Although he says the company has a "natural size" of 1,650, rather than the current 2,000 (about 300 of whom are contract workers), for the time being, Draegebo maintains that redundancies are over. The old scheme will be wound up this June.

This does not reassure the remaining workers, most of whom feel that further upheavals are inevitable. Production manager Midwinter, for example is convinced the workforce if to be cut by a further 500 to 1,200. To back his case he points out that new remote-control cranes are to be brought in: "We know we've got to be lean, mean fighting machines," he says. "But how far do we have to go before we're stabilised." For older workers the ending of the scheme is disturbing. In Midwinter's case, being laid off in late summer would mean a cut from a £45,000 payoff to a statutory £5,000. But for all the disquiet, Govan's future looks brighter now than it has for a long time. With seven ships on the books it has as much work as it can handle until Christmas 1995. For the time being the yard is not looking for orders - no shipowners would want to buy four years ahead and the dangers of inflation and currency fluctuations are too risky, says Draegebo.

For the foreseeable future he is content to handle 30,000 tonnes of steel a year - equivalent to two, or maybe three, specialist ships. Because of the Government's "clawback" policy on subsidies, Kvaerner is unlikely to make any profit out of the yard for some years but it is committed to the sector. As the world's merchant fleets age and subsidies are phased out, Draegebo says the end of shipbuilding's nightmare is in sight. He smiles: "The subsidies are going down faster than I'd like but then profits are going up quicker than I'd expected too." When recovery arrives, Govan, with a proven record of expertise in specialist ships, should be there to reap the benefits.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

A leadership thought: Treat your colleagues like customers

One minute briefing: Create a platform where others can see their success, says AVEVA CEO...

The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this...

Gender bias is kept alive by those who think it is dead

Research: Greater representation of women does not automatically lead to equal treatment.

What I learned leading a Syrian bank through a civil war

Louai Al Roumani was CFO of Syria's largest private retail bank when the conflict broke...

Martin Sorrell: “There’s something about the unfairness of it that drives me”

EXCLUSIVE: The agency juggernaut on bouncing back, what he would do with WPP and why...

The 10 values that will matter most after COVID-19

According to a survey of Management Today readers.