1 Finnish government officials are negotiating with creditors of Waertsilae Marine Oy, a major shipyard that filed for bankruptcy protection this week, amid confusion and mounting doubts that collapse of the nation's entire shipbuilding industry can be averted.
2 At stake are almost 10,000 jobs in an industry that has been the mainstay of Finland's post-war economic revival.
3 Shipbuilding became a point of pride as Finnish shipyards remained profitable long after rivals collapsed all over Europe.
4 But if, as many now fear, Waertsilae Marine joins the ranks of failed shipyards it might turn out to be remembered most as a blemish on Finland's international reputation.
5 The shipyard's 6.5 billion Finnish markka ($1.54 billion) backlog includes about 20 ships ordered by big international shippers, including three for Carnival Cruise Lines Inc.
6 Miami-based Carnival said the first of the three ships is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.
7 The second ship is scheduled to be delivered in fall 1990 and the third in fall 1991.
8 One analyst said the first ship probably will be delivered close to schedule, but that Carnival may have to pay up to 25% more to get the second and third ships.
9 All the ships are covered by loan guarantees from a state export financing agency, even though it's not clear whether they will actually be built.
10 Bankers worry that if the government makes good a threat to withdraw its guarantee commitments, shippers will counter with a hail of lawsuits.
11 State loan guarantees are rarely a source of controversy.
12 However, some bankers cited possible parallels between the Waertsilae Marine case and the collapse of Norway's state-owned Kongsberg Vappenfabrikk AS two years ago.
13 In that case, international banks and investors incurred big losses because they incorrectly believed the company's debt carried implicit state guarantees.
14 Doubts about the quality of state credit guarantees could reduce the competitive strength of Finnish companies in world markets where financing often is the key to winning orders, analysts warn.
15 Moreover, state-owned Finnish companies lacking formal state guarantees could face greater difficulty raising funds in international financial markets, bankers say.
16 The decision by a majority of state-appointed Waertsilae Marine directors Monday to file for bankruptcy was an abrupt about-face from previous government policy.
17 In August, the government played a major part in a sweeping restructuring of the troubled shipyard.
18 At the time 71%-controlled by Oy Waertsilae, a conglomerate, the shipbuilding unit faced potential losses estimated at one billion markka and was on the brink of liquidation.
19 Under the rescue plan, Waertsilae sold 51% of its stake to a group of banks and pension funds.
20 The government, in turn, guaranteed financing to complete the order backlog and took control of the board.
21 Government officials were expected to combine Waertsilae Marine with two other struggling firms, and thus ensure Finland's survival as a shipbuilding nation.
22 The government spent most of last year attempting to carry out such a plan but was thwarted when the parent Waertsilae concern pulled out at the last minute.
23 After the restructuring of Waertsilae Marine and bolstered by state loan guarantees, two big bank creditors, Union Bank of Finland and state-controlled Postipankki, resumed lending the shipyard working capital.
24 But the bankers got cold feet recently as government officials complained they had been misled about the shipyard's actual financial condition, and hinted the credit guarantees might be withdrawn.
25 People familiar with Monday's board meeting said it was the state's refusal to explicitly reaffirm the credit guarantees that led Union Bank and Postipankki to halt lending to Waertsilae Marine.
26 Then, in a boardroom showdown, state-appointed directors voted to file for bankruptcy, apparently under instructions from Finland's Industry Minister Ilkka Suominen.
27 Analysts say Mr. Suominen had grown increasingly worried about the state's potential financial exposure as Waertsilae Marine's losses ballooned to more than double the figure estimated in August.
28 Noting that Sweden wound up wasting state subsidies of about 35 billion Swedish kronor ($5.47 billion) during the 1970s in a vain attempt to salvage its shipbuilding industry, one analyst suggested that Mr. Suominen may have decided to cut Finland's losses once and for all.
29 Senior ministry officials huddled with creditors during the week in an attempt to agree on some form of restructuring that would keep Waertsilae Marine operating.
30 The talks may drag on for weeks before any concrete result is announced, people familiar with them said.
31 One solution would be to sell the shipyard to an outsider.
32 But there appear to be few, if any, suitors.
33 Indeed, the potential losses make any rescue scheme unlikely unless the politicians once again change tack and agree to pick up the bill, analysts said.
34 Meantime, shippers with vessels on order from Waertsilae Marine will remain in limbo.

Shipbuilding became a point of pride as Finnish shipyards remained profitable long after rivals collapsed all over Europe .
rivals collapsed
What caused the collapse of the rivals