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Swan Hunter on watch for a rescue bid: A year after calling in receivers, the North East's last shipbuilder looks to a French buyer to secure its future

ON FRIDAY, HMS Westminster, the first frigate to be built by accountants Price Waterhouse, was commissioned into the Royal Navy. And on Thursday PW's second ship, HMS Northumberland, will be launched on the Tyne.

The Type-23 Duke class frigates have been built at Wallsend by Swan Hunter, one of the great names in shipbuilding but, since last May, in the care of Price Waterhouse's receivers Gordon Horsfield and Ed James. They held a press conference on Thursday to mark the anniversary, and were confident that the yard is on the point of finally being sold, to Constructions Mecaniques de Normandie. The mood at the meeting was not quite festive, but was much more cheerful than the average receiver's get-together. Even more surprising, much of the bonhomie came from Roger Vaughan and Alex Marsh, members of the ousted management team.

The sale could still collapse. Even if CMN does sign at the end of the month, as the receivers expect, it will pull out if Swan Hunter fails to win a pounds 30m order to refit a naval landing ship, the Sir Bedivere. Without the order, Swan Hunter's work will run out when a third frigate, HMS Richmond, is handed over in November.

With Sir Bedivere, however, the French company - which has become highly successful at exporting specialist naval craft - will have time to drum up new business. It should also be able to trigger some of the orders that have been provisionally booked by Messrs Horsfield and James in the past year. The last shipyard in north-east England, once the world's biggest shipbuilding centre, could yet have a prosperous future.

The mood a year ago could hardly have been more different. On an unseasonably wintry Thursday, Swan Hunter's directors, who had bought the yard from the Government in 1986, asked Lloyds Bank to call in the receivers.

They had tendered a bid of pounds 211m to build a helicopter carrier, and had lost out to a pounds 140m bid from Cumbrian rival VSEL. GEC, which had said it would buy Swan Hunter if it won the contract, pulled out. The failure to win the contract broke the company's back: it would have accounted for three-quarters of its turnover, and Swan Hunter, which had already lost pounds 20m on a fixed-price contract to build an Antarctic survey ship, did not have the financial clout to survive the loss.

There was a widespread assumption that the yard would quickly close down, throwing 2,200 workers on to the streets of an area already plagued by 28 per cent male unemployment. Tim Sainsbury, the industry minister, announced that the Government would set up an enterprise zone in the yard if it had to shut: it seemed that a repeat of the miserable yard closures at Sunderland was inevitable.

The receivers pulled an early rabbit out of the hat by convincing the Ministry of Defence that the yard should continue towork on the frigates. This gave them time to start looking for new business and a buyer. Neither proved easy. An order for two patrol vessels for Oman was lost to CMN because of Omani worries about Swan Hunter's future. VSEL, which is making the Trident submarines, GEC and the German company Bremer Vulkan all came to look at the yard. VSEL said it was interested in completing the frigates and in certain assets, but made it clear that it would not keep the yard operating.

Meanwhile, the workforce was being cut back, falling by 700 in the first two months. It is now 1,000 and is about to fall by a further 100.

Then the yard received an early Christmas present when the EC said that Swan Hunter was, after all, eligible for a 9 per cent subsidy on commercial shipbuilding. It had been barred from receiving this help on privatisation when it was designated a warship builder. Potential purchasers had made clear their interest was dependent on access to the funds.

In February, CMN and Bremer Vulkan both said they were considering an offer, and in March CMN had pulled ahead as the most likely bidder. It said any offer would be dependent on winning the Sir Bedivere contract. Dark rumours about its financial strength started circulating, but Mr Horsfield said on Thursday that he had no reason to believe there were any problems with the company.

The receivers said at the end of March that they hoped a deal would be struck 'within a week or two', but they were reckoning without the Ministry of Defence bureaucracy. It has to clear CMN as a supplier, and negotiate a price for completing the frigates. Only in the past two weeks has there been a flurry of activity which should, Mr Horsfield says, lead to a signature - conditional on the yard winning the Sir Bedivere bid - by the end of the month.

Mr Vaughan, former joint chief executive and member of the original buyout team, is still involved in the company as a consultant. He believes the yard has performed extraordinarily well under Price Waterhouse.

'The fact that a year into the receivership it is still a business employing 1,000 and is turning out ships that the Navy thinks are the best it has ever had is the reason it is still here,' he said.

All Tyneside is keeping its fingers crossed and hoping that in July - when the Ministry of Defence will announce the result of the Sir Bedivere bidding - Swan Hunter will be given the go-ahead to continue in business.

(Photographs omitted)