Big Bucks From Italy's Bigger Boats

So far, Fincantieri's survival-of-the-glitziest strategy pays off

The bigger and glitzier cruise ships get, the better Corrado Antonini likes them. As chief executive of Italian state-owned shipbuilder Fincantieri, Antonini has turned the company from a subsidy-swilling white elephant into the world's No.1 builder of cruise liners. Its latest creation, the Carnival Destiny, commissioned by the Miami-based cruise king Carnival Corp., is loaded with 280 tons of Italian marble and a two-ton Venetian chandelier in its three-level indoor theater. Carrying 4,400 people, it will be the largest cruise ship ever built when it is completed this fall.

The 62-year-old Antonini took a gamble when he pinned Fincantieri's fortunes to the cruise craze that began 10 years ago. So far, the bet has paid off. But to remain successful, Fincantieri must keep a step ahead in an industry that some observers think is already facing oversupply. Antonini's answer: build ever-bigger, ever-gaudier ships.

MICKEY'S STATUE. That's what Fincantieri's customers seem to want--even more than a low bill. Says Carnival Chairman Micky Arison, who handed Fincantieri a contract for two more vessels last month: "Because they understand what we need, they don't have to be the lowest bid." Pleasing its clients helped Fincantieri turn a profit of $16.8 million in 1995, compared with a loss of $79 million in 1992. Antonini's latest coup: a reported $1 billion contract signed last year with Walt Disney Co. to build the first two vessels for its new cruise unit. The Disney Magic and Disney Wonder, two mock-1940s steamliners, will be adorned with images of Mickey Mouse and other Disney characters, and a bronze statue of Mickey will stand in the ships' main atrium. The ships will take passengers on weeklong cruises to the Bahamas, with stops at Disney's private desert island, Castaway Cay, and Disney World in Orlando.

This is heady work for a company that used to build mostly warships and tankers. Shipbuilders throughout Europe are closing shop, victims of reduced government subsidies, hefty cuts in defense spending, and pressure from East Asian competitors. Meanwhile, Fincantieri boasts an order book worth $6.2 billion that is so dense it can't accept any new cruise shipbuilding contracts until 1999. Such ships take around two years to build.

CEO and President Antonini was largely responsible for steering Fincantieri into profitability. In the mid-1980s he initiated a huge turnaround effort, dropping duplicate or unproductive shipyards, streamlining production, and slashing the workforce from 30,000 to 11,600. His biggest gamble, entering the cruise boat business, fortunately coincided with the start of America's Love Boat fever and the scramble among cruise companies for huge, snazzy ships. Throw in the 1992 lira devaluation, and Fincantieri was able to roar ahead.

Part of its success is that Fincantieri can offer high-quality design and high-tech features at competitive prices. By linking up with the network of small businesses in Italy's booming northeast, Fincantieri can keep down the costs of outfitting a ship with the glass, marble, leather, and electronics that together account for the bulk of total construction costs. This network of small, flexible subcontractors also provides cutting-edge technology. So Fincantieri can offer its clients attractive features such as a funnel that blows smoke away from passengers and a noise-reduction system that diverts the engine's vibrations away from the ship.

The honeymoon may not last much longer. Analysts believe the cruise ship industry may be heading for a slowdown as passenger volumes level off and ship capacity keeps skyrocketing. "The ships currently on order may be far in excess of what the industry can digest," warns James R. McCaul, a shipbuilding analyst with IMA Associates in Washington.

For now, Fincantieri is following the cruise industry's strategy of making each ship more gigantic than the last. Its latest undertaking, the Grand Princess, commissioned by London-based P&O Group, will be even bigger than the Destiny when it hits the seas in the spring of 1998. But for Fincantieri to keep steaming ahead, Antonini will need to spot the next hot shipbuilding niche before competitors get there first.

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