Decision on Govan imminent

The fate of threatened Clydeside yard Kvaerner Govan could be decided next week. The Government is expected to choose then whether to place the order for two oil replenishment ships with Govan or VSEL, the yard originally chosen for the £200m contract. Govan said 500 jobs would be lost immediately if it did not win […]

The fate of threatened Clydeside yard Kvaerner Govan could be decided next week. The Government is expected to choose then whether to place the order for two oil replenishment ships with Govan or VSEL, the yard originally chosen for the £200m contract.

Govan said 500 jobs would be lost immediately if it did not win the oilers and `we don’t rule out the possibility of closure and the loss of another 900 jobs if we don’t get the contract’.

The Ministry of Defence chose VSEL for the contract and planned an announcement last week, but Scottish secretary Michael Forsyth intervened at the last minute to press Govan’s case. He visited the yard to reinforce his support on Monday.

Deputy prime minister Michael Heseltine’s effort last week to broker a deal between Forsyth and defence secretary Michael Portillo failed.

UBS Phillips & Drew analyst Sash Tusa said that, `VSEL and the Royal Navy are clearly very upset and are telling the Government that if you’re going to start playing politics then you have to pay for it’.

It is understood that the VSEL bid may be 10-15% cheaper than Govan’s.

Tusa said the MoD believed that awarding the contract to VSEL was necessary to ensure that costs were kept down on another VSEL project, the construction of three Batch 2 Trafalgar class submarines. An order with submarine prime contractor GEC-Marconi could be placed by Easter.

Govan said it put in a `very competitive bid’ for the oilers, to be operated by the Royal Fleet Auxiliary.

The company’s preliminary 1996 results, announced this week, said Govan’s losses `were not satisfactory’.

The oilers contract has been delayed since December.