Shipyard's comeback a miracle Sparrows Point: Six months ago the failing shipyard was down to 25 people. Now it expects to make a profit and has a payroll of 500 and climbing.

March 15, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

The Sparrows Point shipyard, mothballed for closure last year, isn't supposed to be employing almost 600 workers.

The yard, which abandoned shipbuilding to focus on repairs, isn't supposed to have contracts to build four new barges. And the yard, plagued by months-long layoffs, isn't supposed to be talking about new jobs dismantling old Navy ships.

Yet the shipyard is doing all of those things less than six months after Bethlehem Steel Corp. sold it to New York-based Veritas Capital Inc.

"You forget the depths of despair: We were down to 25 people," said David Watson, former BethShip Inc. president and now president and chief executive officer of Baltimore Marine Industries Inc., or BMI, the yard's name under Veritas.

Now, he said, BMI is having trouble getting enough workers trained and on the job. "Part of our problem was our success kind of surprised people," Watson said.

The yard approached the brink of extinction twice last year when sales deals fell through. Today it's exceeding the expectations of Veritas, which bought the yard in October. The yard is on a pace to hit its goal of $70 million in sales this year -- shy of 1996's $76 million but much higher than 1995's $59 million.

BMI said Veritas' goal to increase shipyard sales by 10 percent a year is reasonable. The yard's losses have been dwindling and ** BMI expects to achieve a monthly profit in April, Watson said. Finally, the yard's management expects an annual profit in 1998.

"The marketplace is very receptive to BMI," Watson said. "Our estimating department, which is a barometer for inquiries, has been working six or seven days a week."

BMI scored a coup last month, when it landed a $12 million job to refurbish the LNGC Matthew, a liquefied natural gas carrier. The job will employ an average of 150 workers from now to September.

"That's a big job," said Tim Colton, a Northern Virginia-based industry consultant. "Most people would have bet on Newport News Shipbuilding or the Norfolk shipyard getting that job since they have experience in that kind of work. I guess you can say BMI stole it from them."

Stealing business from anyone would have been inconceivable a year ago, when Bethlehem Steel issued a federally required notice of a permanent shutdown. That came when negotiations with WHX Corp. collapsed. The company proceeded with shutdown plans again in August when a deal with Baltimore attorney Peter G. Angelos fell apart over unresolved environmental questions.

Veritas, which bought the shipyard for $16 million, received a state financing package worth about $7 million. That includes a $4 million loan -- $1 million of which will become a grant if the yard reaches its target employment of 875 within three years -- and up to $3 million to repair the yard's drydock.

Thomas J. Campbell, a co-founder of Veritas, a merchant banking fund that shoots for a 25 percent annual return, is satisfied so far with the yard's progress: "It's early days. But we're cautiously optimistic. Management and the union have really pulled together to make this work."

Two key factors

The yard owes much of its promise to two factors: BMI negotiated a new contract with workers that cut hourly wages by 75 cents to about $12.75 in exchange for profit sharing, stock ownership and board representation.

Also under BMI, the yard was free from multimillion dollar annual burden of making annual payments to Bethlehem Steel's headquarters and paying for retirees' pensions and health insurance.

"All they had to do was get out from that great monster Bethlehem Steel," Colton said. "I would imagine Dave and his guys are having the best time of their lives."

Murphy Thornton, president of Local Lodge S-33 of the Industrial Union of Marine and Shipbuilding Workers of America and a board member, said morale at the yard is high.

After years of being in a business to which Bethlehem Steel wasn't committed, the yard has aggressive leadership interested only in the yard's future, Thornton said. "Now our business has to rise and fall on its own, without anything or anybody else involved."

BMI's plans called for the yard to get 48 percent of its sales from government work; 15 percent from domestic ships, 15 percent from commercial foreign ships, 10 percent from cruise ships and about 12 percent from industrial business, such as tunnel sections. So far, government work is slightly off because of the need to keep military supply ships unencumbered during the Persian Gulf crisis. But foreign repairs are higher than expected, at about 30 percent.

The yard, which expected 400 workers at this point, started March with about 500 and will be up to 600 by the end of the month. Under Bethlehem, the yard technically employed 900. But many of those workers, who endured months of layoffs, found work elsewhere and are reluctant to return.

"They were casualties of the prolonged up-and-down sales policy," Watson said. "A lot of them got other jobs. They're not willing to come back until they see a success story."

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