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Bid to rescue Holzmann

News: German Chancellor meets bankers in an effort to keep the country's second biggest contractor afloat

THE GERMAN government was formulating a rescue package for Holzmann this week after the country's second largest contractor filed for insolvency on Tuesday.

Pressure was mounting on the government from unions and opposition parties to protect the estimated 70,000 jobs which depend on the 150-year-old contractor.

German Chancellor Gerhard Schroeder was due to meet the company's bankers in Frankfurt yesterday (Wednesday) to thrash out a rescue package.

Perry Winfield, a construction analyst with Robert Fleming Securities, said there would be strong political pressure in Germany to ensure that the contractor survived.

He said: 'The key thing here, and Holzmann's strongest card, is the impact the failure of the business would have on employment.'

The discovery of an £800 million black hole in Holzmann's accounts last week sent shock waves through the German construction industry. The contractor put the blame on the 'criminal negligence' of former management.

Most of Holzmann's losses are understood to be derived from its property activities, although it also chalked up signif icant losses on several major contracts including the Cologne Arena project.

It has emerged that Holzmann's labyrinthine structure includes 400 operating subsidiaries.

Analysts say potential buyers might be more interested in these individual parts of the group rather than the whole company.

Meanwhile in the UK, Holzmann's partners in the Connect consortium were watching developments in Germany. Holzmann has a 30 per cent stake in the consortium, which also includes WS Atkins and Balfour Beatty.

The consortium is bidding for the £73 million Newport Southern Distribution Scheme in Gwent.

A Balfour Beatty spokeswoman tried to remain upbeat. She said: 'We are well aware of Holzmann's position, but we have contingency plans in place.'

WS Atkins was unavailable for comment.

Shares in Holzmann plunged more than 90 per cent at the start of Tuesday's trade after being suspended for six days.

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