New day at shipyard Sold: Veritas Capital's purchase of the Sparrows Point shipyard from Bethlehem Steel has brought optimism and a new name: Baltimore Marine Industries.

November 02, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

As president of BethShip Inc., Dave Watson saw two deals to sell the Bethlehem Steel Corp. Sparrows Point shipyard fall apart. Twice, when those deals died, his bosses said they would close the 107-year-old yard.

Still, Watson, a Scottish-born engineer who has worked 32 years at the yard, never doubted its survival. "You just had to look at the numbers and see that this business was too strong," he said.

For more than a year, Watson, 60, was the guy looking under the hood, telling prospective buyers what he thought of the yard's capabilities. Bethlehem barred him from talking publicly until the shipyard's sale to Veritas Capital Inc., a New York-based merchant banking fund, became final last month.

Now president and chief executive of Veritas' newly named Baltimore Marine Industries, Watson believes the yard is better positioned to make good on its potential.

Armed with lower costs and free to pursue long-term jobs that had been passed up by Bethlehem, the yard will meet Veritas' goal of boosting sales by 10 percent a year, he said. "We now find that we're going to be able to compete with people on a more level playing field," Watson said.

After an initial six-month period of losses, the yard will get back on track, with sales topping $70 million in 1998 -- shy of last year's $76 million but much higher than 1995's $59 million, Watson predicted.

He sees employment topping 400 by the end of the first quarter of 1998 and 650 by the end of 1998. That's close to the 700 Bethlehem employed when it put the yard up for sale more than a year ago.

Competitors such as Norfolk Shipbuilding and Drydock Co., or Norshipco, and Atlantic Marine Holding Co. expressed mixed feelings about the return of the dormant yard to worldwide repair industry, worth about $15 billion annually.

"It's good to have a grand old shipyard like Bethlehem's back in the business," said Tom Jones, a vice president of Atlantic Marine Holding Co., which has a huge repair yard in Mobile, Ala. "On the other hand, it's another competitor and that much tougher."

An official at Carnival Cruise Line, who would speak only on the condition of anonymity, said he was glad to see the yard's return. "It's a good yard with a huge drydock and some of the best prices in the United States," the official said.

He added that the company has given most of its recent repair work to Norshipco, but that it has had a lot of work done at the Sparrows Point yard.

Veritas bought the yard after negotiations with WHX Corp. and Baltimore Orioles Chief Executive Peter G. Angelos fell through. Veritas paid $16 million, little more than half the original asking price of $30 million "They got a good deal," Watson said.

Watson laughed off a question about which of the three buyers he preferred. "Each one had a different agenda," he said.

But he said he felt comfortable with Veritas because the investors leaned heavily on him for advice. "Just human nature makes you migrate to the people who count on your professional experience," Watson said.

Wage cuts

Veritas will benefit from a $7 million state economic incentive package and 75-cent cut in the average hourly wage for workers, who will now make about $12.75 an hour.

"The new owner can always get a better deal than the old owner," Watson said. "We tried in earlier labor agreements to get the same package. And the union wouldn't give it to us. And understandably so. The union only gave this package to the new owner out of desperation: Do I want a job or no job?"

Jim Lautar, the grand lodge representative for the Industrial Union of Marine and Shipbuilding Workers, said the union agreed to the wage cut only in return for profit-sharing and ownership of 10 percent of the company's stock.

"For us, it was a long-term trade-off," he said.

He said the deal might be lucrative not only for the workers, but for the yard. "That lower wage rate should make them more competitive," Lautar said.

Watson wouldn't talk specifically about profit expectations. Ultimately, he said, sales will easily top last year's $76 million. "We were able to compete with Norshipco and Atlantic Marine under the old rules of the game," he said. "With lower labor costs and better work practices, we're going to do that and better."

Perhaps the biggest difference will be the yard's pursuit of big jobs that can take as long as two years and provide steady employment. Bethlehem passed up those jobs for more than two years, so it would be easier to close or sell the yard.

"There were vessel conversions which we could not pursue under Bethlehem," said Robert A. Fiorelli, an assistant vice president of Baltimore Marine Industries.

Among the jobs were double hull conversions, the equipping of oil tankers with an additional shell that is required by 1990 federal legislation; and sealift conversions, turning commercial ships into military cargo ships. "A double-hull conversion could be three months and a sealift conversion could be two years," Fiorelli said.

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