Re: [OPE-L] shipbuilding

From: Dogan Goecmen (dogangoecmen@AOL.COM)
Date: Thu Jan 10 2008 - 09:53:30 EST

Jerry, I know from German firm MAN I worked with for many years that every lorry that was built was acutally already sold. It means that they were ordered and paid in part or as whole in advance.
Cheers, Dogan

-----Ursprüngliche Mitteilung----- 
Von: GERALD LEVY <gerald_a_levy@MSN.COM>
Verschickt: Do., 10. Jan. 2008, 15:20
Thema: Re: [OPE-L] shipbuilding

> I understand your general point about wages being paid after the work is done but before
> sale of the product. The example that occurs to me, working in glasgow, is a shipyard.
> You see the part completed ship on the stocks for ages before it is launched. Obviously
> Govan Shipbuilders pay their workers before the ship is actually sold, but they
> already have a (half complete) product by then. Suppose they want to sell the shipyard,
> then the half complete ship for a customer will be valued at millions of pounds. <snip>
> In the shipyard there has already been a flow of value from the workers to the employers
> well before the ship is finally sold, it is just that this value is not normally expressed
> in an actual transaction, it is there nonetheless, as any accountant doing the shipyard
> accounts would make evident.

Hi Paul C: 
It's customary in the shipbuilding industry - where the ships are built to order - to specify in 
the contract with the customer that upon signing of the contract and at specified intervals
thereafter, the customer is to pay different amounts to the shipbuilder until, before the
owner can take possession of the completed vessel, the outstanding balance must be 
paid.  So, in actual fact, the shipbuilder receives periodic flows of money to cover the 
costs associated with building while the ship is under construction. This is unlike most
commodity production where the manufacturer only receives payment after the product is 
produced and then sold.  In this case, it is the _buyer_  who _advances_ funds to the
manufacturer. The reason for this custom, of course, is that shipbuilders don't want to 
take the risk and incur the borrowing costs for purchasing constant capital and hiring
workers and periodically paying out  the wages of workers associated with producing a 
product which is constructed over such an extended period of time.  This can expose the 
_buyer_ to significant risk since the shipbuilding firm might declare bankruptcy while the
ship is under construction and the value of the unfinished ship might be much less
than the monies already paid out to the company and just taking possession of the
uncompleted craft can be a big legal headache the way bankruptcy laws work (I knew a 
former New School economics student who suffered a large financial loss when the 
company _Westsail - which was building a yacht for her and her new husband went 
out of business while the boat was still under construction).  The shipbuilders (and any 
firms - or even craftspeople sub-contracted to work on ships or boats) have an additional
legal means for securing payment which is not available to most other producers
- they can put a _lien_ on the vessel which prevents the owner from moving or using the 
vessel until all outstanding financial obligations are met.
In solidarity, Jerry

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