The shipbuilding company Rijn-Schelde-Verolme Machinefabrieken en Scheepswerven NV (RSV) was a combination of shipbuilding companies and machine factories founded in 1971. In 1983, the company went broke with a staggering loss of public money. It led to the Parliamentary inquiry about RSV.
Foundation
Context After World War II, the Dutch shipbuilding industry quickly recovered. Until the mid 1950s, there was a lot of work, and the industry made good profits. In 1958, it was the fifth of the world in tonnage and employed 56,000 people. Nevertheless, the Dutch shipbuilders had a structural problem. In general, they had missed out on the revolution in shipbuilding which had taken place in the United States during World War II and resulted in the Liberty ship. It involved building ships in sections and series and replacing most riveting with electric welding.
Building in sections was first done in the Netherlands by Cornelis Verolme. In about 1960, the other shipyards followed. Building in sections becomes more effective when it is done by building a series of ships according to the same design, i.e. building in series. This was done by De Schelde, and by Verolme. When this is done on a larger scale, it becomes even more effective, because of the economies of scale.
Profiting from economies of scale can also be done by creating larger companies. In 1929 Wilton's Dok- en Werf Maatschappij and Fijenoord had merged to become Wilton-Fijenoord. In 1946, Nederlandsche Scheepsbouw Maatschappij (NSM) and Nederlandsche Dok Maatschappij (NDM) merged to become Nederlandsche Dok en Scheepsbouw Maatschappij (NDSM). The alternative way to profit from economies of scale is to increase cooperation. Before 1965, IHC Holland was a partnership of 6 medium sized shipyards. This partnership would sell e.g. dredging vessels, and then, the partners would each build the part in which they excelled, reducing the price of the individual parts. Outsourcing part of the construction to suppliers is another alternative. The lack of scale, and the lack of cooperation was a serious problem in the Dutch shipbuilding industry. Unlike the situation in Japan, where all parties concerned (shipping lines, government, classification agencies, suppliers, education) cooperated, Dutch shipbuilding and its modernization remained a fragmented operation.
Predecessor Rijn-Schelde Machine Factories and Shipyards
In 1966 Rijn-Schelde Machinefabrieken en Scheepswerven NV was formed by Rotterdamsche Droogdok Maatschappij and daughter P. Smit Jr. (4,148 employees), De Schelde (3,487 employees), and Motorenfabriek Thomassen in De Steeg (848 employees). The reasons were the need for bigger production units to take on bigger shipping projects, diversification to sectors like oil and nuclear energy, and the need to increase efficiency. At the time of the merger, the companies still had enough work for the next year.
Predecessor Verolme Verenigde Scheepswerven Verolme Verenigde Scheepswerven had been formed in 1955. It consisted of a machine factory in IJsselmonde, two shipyards in Heusden and Alblasserdam, and Verolme Dok en Scheepsbouw Maatschappij (VDSM) founded by Cornelis Verolme in 1957. The latter was a very modern shipyard. It used the idea of boosting productivity by building in sections and series, and focused on supertankers, which became a new market after the 1956 closure of the Suez Canal.
History before foundation
Increasing wages In the 1960s, wages all over the Western world started to increase sharply. In 1966 Amsterdamsche Droogdok Maatschappij (ADM) claimed that the labor cost, including all taxes and social security costs, had doubled from 1960 to 1965. Reason enough for ADM to halt shipbuilding and to focus on ship repair. On a national economic level, numbers for 1960-1965 indicate that the real cost of labor increased by 40% in this period. In the shipbuilding industry, with its strong unions, and in Amsterdam, this might very well have been much higher than 40%. Still, increases in wages or labor costs do not pose a problem, as long at they are matched by increases in productivity. In general, the Dutch shipyards remarked that this was by far not the case in the 1960s.
Commission Keyzer By the mid-1960s, it was clear that the Dutch shipbuilding industry was in serious trouble. While most shipyards still existed, they had not been able to profit from the industry international growth since it hit its lowest mark in 1962. Right-wing politicians noted the high labor cost in the Netherlands, and the low wages in Japan, which built about 25% of the new ships worldwide. The leftist side noted that the productivity per hour was 0.0136 brt in Sweden, as opposed to 0.0049 brt in the Netherlands, and even worse in the United Kingdom, but did not mention the number for Japan. By December 1965, the Netherlands had dropped to the 11th place in the list of shipbuilding nations. Even Poland was building more ships than the Dutch.
Worldwide many countries were supporting their shipbuilding industry in some way. Japan had a great research program and invested heavily. It also had the advantage of its shipyards being part of great conglomerates. Total Japanese support was estimated to amount to 10%. In West Germany, there was a tax return, and in Italy a subsidy of 15%. In Sweden, there were very favorable tax conditions for depreciating fixed assets, which had been of great help while modernizing its shipyards. In the United Kingdom, the government had helped with loans, and long-term export credits. The Dutch government thought such measures would not help in the long run without increased cooperation between the Dutch shipyards and speedy rationalization of their production methods through an extensive research program. To achieve this, the (shipbuilding Commission 1965) was appointed, later known as Commission Keyzer.
In its 1966 report, the Commission Keyzer noted three major causes of the crisis in the Dutch shipbuilding industry. Keyzer personally noted these as: 1) The almost universal support for foreign shipyards by their governments with financing work; 2) The labor shortage in the Netherlands combined with low productivity; 3) The retardation of the Dutch shipbuilders in switching to an industrial approach of their trade. In detail, the commission proposed to start with three groups of companies. One group would build a series of ships of 50,000 to 200,000 tons. The second group would build a series of tankers, bulk carriers, and freighters smaller than 50,000 tons. The third group would build custom-designed ships. Each group would have 5,000-6,000 employees, and there would be a repair and diversification group. Whatever the exact organization, the commission stressed the need to build in series.
Five years till the merger The government message was clear. Before the report was published, Rijn-Schelde Machine Factories and Shipyards had been formed. In November 1967, NV Machinefabriek Breda voorheen Backer & Rueb agreed to join the conglomerate. Later in November 1967, it bought Machine Factory Braat in Amsterdam.
The next two groups made plans to build a (mammoth dry dock) for supertankers near Rotterdam. One group consisted of Verolme Verenigde Scheepswerven and wanted a combined building and repair dry dock. The other group consisted of Rijn-Schelde, Wilton-Fijenoord, and NDSM. It wanted a dock for repairs only because it did not build supertankers. In line with the Keyzer Commission, the government was prepared to favorably finance the construction of the mammoth dock, but it did not want to end up with two dry docks. In late June 1968, it became known that Verolme would take over the troubled NDSM. Indeed, the government had pressured to Verolme to do this, and the reward was the support for Verolme's construction dock for supertankers. Rijn-Schelde and Wilton-Fijenoord then announced that they would also merge. Soon after, the deal between Verolme and the government became public: a guarantee of 75 million guilders for the takeover, and preservation of employment at, NDSM by Verolme.
NDSM would soon prove to be in a far worse condition than was first thought. In September 1969 the construction of the supertankers Melania and Dagmaer Maersk alone was estimated to have led to a loss of 20 million guilders. More supertankers were planned and were expected to lead to further losses. In late January 1970, the state guaranteed 50 million in loans to Verolme, both Mr. Verolme and Rijn-Schelde then agreed to follow the advice of the Commission Winsemius, which planned the future of the major Dutch shipyards. In October 1970, the loss of Verolme (incl. NDSM) was estimated as: 70 million in 1968 and 31 million in 1969. By then a merger between RSV-Schelde and Verolme was thought to be imminent.
History of RSV
The merger becomes final In early 1971, Cornelis Verolme tried to stop the merger with Rijn-Schelde, but because he had agreed to follow the advice of the Winsemius Commission and had given his shares as a guarantee for the government guarantees, he had no real power to stop the process. In mid-April 1971, the commission then advised/decided on a merger between Verolme and Rijn-Schelde on 1 January 1971. In 1971, the conglomerate had 30,000 employees, orders for 17 supertankers, 2 passenger ships, and almost 30 containerships. The only RSV shipyards that built supertankers, were Verolme's in Rozenburg, and NDSM in Amsterdam. These were the parts/shipyards which would form RSV:
Nederlandsche Dok en Scheepsbouw Maatschappij (NDSM) in Amsterdam Wilton-Fijenoord in Rotterdam Rotterdamsche Droogdok Maatschappij (RDM) in Rotterdam P. Smit Jr. shipyard in Rotterdam (part of RDM) Nieuwe Waterweg shipyard (part of RDM) Verolme Dok en Scheepsbouw Maatschappij NV (VDSM) in Rozenburg, Rotterdam Verolme Scheepswerf Alblasserdam in Alblasserdam Verolme Scheepswerf Heusden in Heusden De Schelde in Vlissingen Verolme Cork Dockyard Co. Ltd. in Cobh, Ireland Verolme Estaleiros Reunidos do Brasil in Jacuecanga, Brazil Motorenfabriek Thomassen NV in De Steeg Machinefabriek Breda voorheen Backer & Rueb NV in Breda Verolme Elektra NV in Maassluis
The first years
Over 1970, the Rijn-Schelde part of RSV made a profit of 13.1 million guilders. The shipbuilding business had a solid demand for supertankers. However, when the supertanker Rudolph Paterson was launched for Chevron Shipping on 5 October 1971, the president of Chevron Shipping spoke some ominous words. He said that as long as prices did not go down, it would be the last Chevron ship built in the Netherlands because the Mitsubishi shipyard was much cheaper. On 30 October 1971, the stern section of the 225,000 ton Texaco Amsterdam was launched at NDSM. It would be followed by the bow section on 31 December 1971.
Over 1971, the profit of RSV was 25.6 million, almost double that of Rijn-Schelde alone in 1970. Contrary to this positive news, the supply of orders diminished. Over 1972, the number of orders received diminished from 4 billion to 3.3 billion guilders. The amount of dock days diminished from 8,552 to 5,145. Wages paid increased from 596 to 695 million (16.6%), while the number of employees increased from 27,754 to 28,839, mainly due to an acquisition. Investments decreased from 63.3 to 57.7 million. Profit increased to 31 million.
1973 seemed to become a turning point for the better. Up till 15 May 1973, orders of 1 billion guilders came in. In the end, open orders rose from 3.4 to 3.65 billion, the number of employees diminished from 28,850 to 28,300, and profit rose to 42.4 million. The big problems during 1973 were in the division of the machine factories.
First reorganization plans