THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, March 14, 1995 TAG: 9503140282
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 81 lines
Newport News Shipbuilding took a second step Monday toward becoming a player again in the international commercial ship construction market.
The giant Peninsula shipyard, Virginia's largest private employer, announced Monday that it signed a letter of intent to build up to six tankers for American Marine Tankships, a domestic shipping company.
The deal appears to be worth more than $200 million for the shipyard, which declined to disclose the value.
Any order for new ships helps preserve jobs at the shipyard, where employment has fallen from 30,000 to little more than 19,000 today. Each ship would keep 200 to 300 workers busy at any given time, a spokesman said.
The deal is contingent on American Marine Tankships receiving federal loan guarantees to help pay for the ships. The review process could take several months.
This order would be the shipyard's second for its Double Eagle double-hull tanker design.
Newport News Shipbuilding won a contract to build up to four of the 600-foot long tankers in October from Eletson Corp., a Greek shipping company.
That deal, worth $152 million, was the first ship order received by a U.S. shipyard from a foreign buyer since 1957.
``This agreement. . . , combined with the first contract from Eletson, demonstrates our company's resolve and our ability to compete in the world market for commercial ship construction,'' said Ed Waryas, the shipyard's director of commercial marketing.
The Eletson deal was Newport News Shipbuilding's first commercial ship construction order since the late 1970s. The shipyard had relied on orders for aircraft carriers and submarines from the Navy through the 1980s.
Newport News took aim at the commercial shipbuilding market again when Navy orders started falling off after the demise of the Cold War.
The shipyard has said it plans to pare the labor force to between 14,000 and 15,000 by the end of 1996. Shipyard spokesman T. Michael Hatfield said this deal doesn't change those plans.
Shipyard executives have been saying for months that they were working on several potential orders for Double Eagle tankers.
American Marine Tankships would order two Double Eagles with an option to order four more. The entire deal is contingent on the company getting approval for loan guarantees from the U.S. Maritime Administration.
The Title XI loan guarantee program, administered by MARAD, was set up to support U.S. shipyards by helping vessel buyers get long-term, low-interest financing with the backing of the federal government. Originally only U.S. shipping companies could get the guarantees, but it was recently expanded by Congress include foreign buyers.
American Marine Tankships is jointly owned by American Automar of Bethesda, Md., and Marine Transport Lines of Weehawken, N.J. The two shipping companies own and manage more than 30 vessels.
``These new Double Eagles will be the first product tankers built for the domestic market in over a decade and the first U.S.-flagged new construction ships to meet the double-hull requirements of the Oil Pollution Act of 1990,'' said J. William Charrier, American Automar's chief executive.
``They will be targeted at the domestic trades but can operate internationally as well,'' Charrier said.
The more orders for these vessels Newport News Shipbuilding gets the better off it will be. ``The ships are essentially the same as the Eletson ships, so we can get the benefits of serial production,'' said Hatfield, the spokesman.
Serial production involves standardized, assembly-line like construction that allows the shipyard to absorb design and engineering costs up front. Typically, a shipyard using serial production doesn't make money on the first several vessels in a series as it learns the best way to put them together. It makes its money building tankers later in the series as it gets better and more efficient.
Actual production on the Eletson tankers begin next fall. The shipyard is currently finishing the design and engineering, establishing supply relationships and acquiring materials, Hatfield said. ILLUSTRATION: Color photo
KEYWORDS: NEWPORT NEWS SHIPBUILDING by CNB