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Svensk Sjöfarts Tidning
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Martin Saarikangas, the man who saved Finnish shipbuilding, depicted in 1998.
Photo: Pär-Henrik Sjöström

The bankruptcy was unnecessary

Without Martin Saarikangas’ actions almost twenty years ago, there would probably be no cruise vessels under construction in Finland today.
In an interview with SSG, the man who saved the Finnish shipbuilding talks about the past and a little bit about the future, too.

The Finnish shipbuilder Martin Saari­kangas made headlines when he, during a hectic week at the end of October 1989, founded a new shipbuilding company, later to be named Masa-Yards, on the ruins of Wärtsilä Marine. The bankruptcy of Wärtsilä Marine had taken the sector by surprise, and Mr Saarikangas is still convinced today that it would have been avoidable.
”As a matter of fact, Wärtsilä Marine encountered a liquidity crisis. The company was solid, but the cash flow came to an end, and the banks ceased to finance the daily cash flow.”
Mr Saarikangas stresses that within two weeks, the company would have received the payment for the large cruise ferry Cinderella, and a couple of months later 80 per cent of the contract value of Carnival Cruise Line’s Fantasy.
”The Minister of Trade was too hasty in his decision to let Wärtsilä Marine file its petition”, Mr Saarikangas criticizes.

Resisted merger
Mr Saarikangas was from the very beginning against the merger of the shipbuilding activities of Wärtsilä and Valmet. The result of this merger was Wärtsilä Marine, which started its activities by the turn of the year 1986/1987.
According to Mr Saarikangas, the major mistake was to merge the companies immediately prior to the collapse of the Soviet trade.
”Valmet was 100 per cent dependent on Soviet orders, and Wärtsilä only up to 25 per cent. Instead of a merger, I advocated a reorganization of Wärtsilä’s shipyards, so that they would not depend on Soviet orders. I was convinced that the Soviet trade had come to an end, and I knew that Wärtsilä Marine could not survive without a complete reorganization.”
As Manager of Wärtsilä’s Helsinki shipyard, Mr Saarikangas had during the 1980’s been working hard to increase the share of orders from the west. This had also led to results. When the merger became a reality in 1986, he proceeded to negotiated with Carnival Cruise Lines on a new series of vessels. He also managed to bag the order when the new company had become operational.
But the top management of Wärtsilä did not share Mr Saarikangas’ pessimism about the Soviet trade. Despite having been appointed Vice President of Wärtsilä Marine, he was transferred to the US because – in his own words – he was sent ”as far away as possible”. When Wärtsilä Marine’s serious difficulties came into daylight two and a half years later, he was reinstalled as Manager for the Helsinki shipyard. He immediately formed a working group to reorganize the company, and this process was in progress when the company went bankrupt.

Fast action
Wärtsilä Marine Industries Inc filed its petition on Monday October 23, 1989 at 15.30 pm. At that very hour, Mr Saarikangas was addressing the workers at the Helsinki shipyard.
”I ended my speech by assuring them that this will not end here. I also told them that their future was now in their own hands if they were willing to continue shipbuilding on new terms.”
After his speech, Mr Saarikangas called Mr Ted Arison, the owner of Carnival Cruise Lines in Miami, who had three cruise vessels on order at the shipyard. Mr Arison arrived at the Helsinki-Vantaa Airport eleven hours later. What followed was a true marathon of meetings and negotiations with creditors, the bankrupt’s estate and other parties involved.

A new shipyard
Supported by Mr Arison, Mr Saari­kangas decided to continue building ships in Helsinki. As Finland lacked up-to-date bankruptcy legislation, he decided to apply Chapter 11 of the US legislation, in which he was knowledgeable after his years in the US. On Friday October 27 at 14.05 pm, only four days after the collapse of Wärtsilä Marine, Mr Saarikangas had completed the registration procedure for his new company, Helsinki New Shipyard. Ted Arison signed a letter of intent with this company to complete the two first newbuildings.
This procedure was soon repeated with the owners who had orders at the Turku Shipyard. On November 9, 1989, both shipyards were again operational under the new name Masa-Yards, which was coined from its founder’s nickname, ”Masa”.
Mr Saarikangas does not hide the fact that without Mr Arison’s support, it would have been impossible to continue. His personal relationship with him and other shipowners was of utmost importance in the process.
”Business is all about personal contacts and good relationships. You must have a good reputation so that your business partners believe in you, and you always have to live up to your promises”, he states.

Viking Line ferries being fitted out at Wärtsilä Marine Turku Shipyard prior to the bankruptcy. Photo: Pär-Henrik Sjöström

Easier than a restructuring
Almost twenty years later, Mr Saarikangas feels that bankruptcy was perhaps after all a better alternative than a complete reorganization of Wärtsilä Marine.
”It would have demanded endless negotiations to achieve any significant progress. The bankruptcy erased all these obstacles”, he admits.
Mr Saarikangas does not believe that such as the drastic decrease in the number of white-collar employees would have been possible at all. His reorganization focused on peeling off all unnecessary functions and steps within the administration, without affecting the pure production capacity.
”After the bankruptcy, everyone walking out of the gate was unemployed. When they returned, they were new employees of a new company. We decreased the number of white-collar workers by a third, but we kept on almost all the blue-collars. The old organisation had seven levels, which I reduced to five. While Wärtsilä Marine had 119 directors, Masa-Yards could manage with six”, Mr Saarikangas explains.

A new culture
Mr Saarikangas also introduced a totally new way of thinking in the Finnish company culture. Blue-collar workers as well as white-collar ones were represented in all decision-making bodies at all levels of the organisation – starting from the Management Board.
”In the US I learned that the best way to obtain a good result is to offer the employees the possibility of influencing the way things are done. We also introduced a new bonus system, spanning from the gatekeeper to the deputy CEO,” Mr Saarikangas recalls.
All the employees received the same bonus, the directors included.
”I was the only one not included in this system. If our ROI exceeded 20 per cent I received an additional half a year’s salary”, Mr Saarikangas says.
He feels this was a just system compared with the option programmes later introduced in some other companies. It also immediately proved successful.
”From the very first closing of the books, we made good results, and during the whole 1990’s, Masa-Yards was the best earning company in Finland”, Mr Saarikangas says.

Lucky solution
Mr Martin Saarikangas retired as CEO of Kvaerner Masa-Yards in 2001. The shipyard subsequently became part of the Aker shipbuilding group. Before that the company had been extremely successful under the ownership of the Norwegian Kværner group.
”We fought hard to get Kværner as our new owner in the early 1990’s. It was agreed from the beginning that we would start our operations under a temporary ownership structure but that we would later need a strong owner, one willing to invest in shipbuilding in a long-term perspective.
Mr Saarikangas says that the Rauma-Repola Group were interested in buying Masa-Yards as a step towards a merger of all large Finnish shipyards.
”Luckily for us, Kværner bought us. If we had become part of Rauma-Repola, it is most likely that a significant share of our activities would have been closed down.”

Completed on January 26, 1990, Fantasy was the first vessel to bedelivered
by Masa-Yards. Photo: Pär-Henrik Sjöström

Too many orders
Mr Saarikangas believes that today there perhaps are too many orders in relation to the workforce of Finnish shipbuilding.
”I hope this will not lead to an increase in costs as it did in the end of the 1980’s. The chain of suppliers cannot work if only one actor in it makes money and the others do not – the whole chain must be profitable. The subcontractors must look into the future instead of being short-sighted and making large and fast profits now”, he warns.
Now active in local politics in his home town Espoo as a member of the conservative party, Mr Saarikangas was a member of the Parliament in 2003–2007. As a politician he feels one of the most important issues is to ensure the supply of a well-educated workforce.
”We have finally realised that we must focus more on training skilful workers. Until now, we have educated too many academics and engineers. The society should also provide the preconditions for a supply of a sufficient number of cheap apartments, as this is a key issue when recruiting workers.”
He also thinks that the universities must be given the abilities to fully exploit the potential of their top students and scientists. By this he does not mean that he wants to close down the well-working system of education in Finland.

”Even in the future, everyone should have the right to free education, but when we are talking about the best of the best, there must be opportunities for them to advance. Also in Finland there should be some universities that are better than others, aiming at educating top scientists,” he believes.

Latest update 21-02-2008 09:25


No 24/2008
SST Ships of the Year

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