A viable industry structure has to be at the core of any effort to improve the competitiveness of the EU shipbuilding and ship repair industry. In the area of newbuilding, competitors in the Far East are much more concentrated, with only a handful of large companies dominating the scene in Korea and Japan. In Europe, shipyards have also been reorganised into larger groups, comprising of a number of production facilities, but there are more than 30 major yards remaining as independent companies and there are numerous smaller yards engaging in the production of fishing vessels and the like. In the repair sector the fragmentation is even more pronounced. Also with regard to naval shipbuilding more concentration seems desirable in order to achieve synergies and limit problems with regard to R&D spending, market standing or access to finance.

　

 Considerations on the future structure of the European shipbuilding industry therefore need to cover all areas of activities, from the construction of all types of merchant and naval vessels, to repair and conversion projects, to the manufacturing of key components and systems, as all these activities are closely linked. Security considerations establish clear needs for certain shipbuilding capabilities, with regard to both commercial shipping and defence related tasks. Maintenance and repair capabilities are certainly to be regarded as indispensable due to safety requirements and the topographic nature of Europe.

　

 The cornerstones for a healthy and sustainable development of the industry world-wide are reasonable investments meeting the actual market demands. Economically less efficient facilities should exit from the market and investments should concentrate on segments where sufficient returns can be achieved.

　

 Great market volatility and the cyclical nature of the industry force shipyards to meet contradicting objectives: In order to optimise productivity, yards have to specialise; in order to be able to weather market volatility and business cycles, yards should diversify. The comparatively smaller size of European yards can be a competitive advantage when specialising in certain products. At the same time, market volatility constitutes a serious threat to highly specialised yards: Declining demand in specific market segments may force a specialised yard to engage in alternative products for which it is less well suited, and to team up with other yards.

　

 On company level, structural changes are on-going. They relate particularly to the relationship between yard and suppliers, but consolidation through mergers and acquisitions is also on the horizon. In the future, the relationship between yards and suppliers will evolve towards project partnerships, moving away from the traditional customer-supplier relation. Recent developments in the market indicate that this evolution may dramatically accelerate if efforts to merge a number of naval yards, eventually under the lead of a key marine equipment producer, are successful. As some of the yards involved are also engaged in commercial shipbuilding, a powerful entity, comprising all major shipbuilding activities, could emerge.

　

 Great diversity of yards and products exists in Europe, particularly when the situation in the future EU member states is taken into account as well. The total employment in merchant shipbuilding in the accession countries is about 20% higher than in the combined EU 15, while production output is only slightly above a quarter of the EU 15 reference figure. With still much lower labour costs, shipyards in accession countries focus on a different product portfolio. The different sets of competitive advantages already foster extensive co-operation between yards in current and future EU member states. However, this cannot conceal the fact that the EU enlargement process will increase the necessity for an overall industrial consolidation in Europe. Past experience of fundamental restructuring processes, such as in East Germany, indicates that policies are not yet optimised in this respect. Industrial restructuring needs to put stronger emphasis on commercial investors who provide additional know how and better market access. Where yard closures have become unavoidable, these should be undertaken and supported with the view to create new investments.

　

 The future policy for the sector should be reviewed without bias and with a clear understanding of consequences. Two extreme paths, both undesirable, illustrate the possible pitfalls. The absence of specific measures and policies for shipbuilding could result in the disappearance of merchant shipbuilding in Europe within less than a decade and a serious impediment to the construction of a European defence identity. On the other hand, protectionism, as experience shows elsewhere, for example in the USA, will inevitably result in an irreversible loss of competitiveness in commercial shipbuilding and extremely high procurement costs for naval ships.

　

　

　

　

 The Commission believes that further consolidation, respecting competition rules, can generate benefits at all levels of activity, commercial and naval shipbuilding, and ship repair. However, this is primarily the responsibility of industry and in matters of defence Member States have a key role also. The Commission is ready to offer its knowledge and experience to facilitate the process.

　

　

 The Commission acknowledges the substantial work undertaken in the framework of the LeaderSHIP 2015 initiative and endorses the approach to improve sectoral competitiveness through an intensive dialogue between stakeholders. It invites the other European institutions to closely examine the issues raised and, in line with their commitment to support the manufacturing industries in Europe, to co-operate with the Commission in developing specific sectoral responses that are suited to boost industrial competitiveness and to take action on aspects that fall within their competences. More specifically, the Commission wishes to stress the following aspects: