THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, November 1, 1994 TAG: 9411010284
SECTION: BUSINESS PAGE: D01 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Long : 119 lines
Newport News Shipbuilding got a big treat for Halloween - a $152 million contract to build up to four double-hull petroleum tankers, marking its return to commercial shipbuilding.
The giant Peninsula shipyard inked the contract Monday with Eletson Corp., a Greek shipping company. It is the first commercial ship order from a foreign buyer received by a U.S. shipyard since 1957.
The deal will help assure Newport News Shipbuilding's future and preserve the jobs of thousands of its employees, company officials said. Yard Chairman and Chief Executive Pat Phillips called the event the beginning of ``a renaissance in American shipbuilding.''
``These agreements send a powerful message to the world,'' said Federico Pena, U.S. Secretary of Transportation. ``The United States of America is back in the shipbuilding industry to stay.''
The signing of the contract coincided with U.S. Maritime Administration approval of $133 million of loan guarantees for Eletson. Pena signed the agreement for the government.
The Greek shipping company is ordering two ships, the first to be delivered in 22 months and the second four months later. It has an option to order two more.
The ships will be built in the yard's submarine construction area using modern serial-shipbuilding techniques. That involves manufacturing ships in a series so such costs as design and engineering are paid for quickly and many parts can be standardized.
The tanker design, known as the Double Eagle, is for a 46,500-ton ship about 600 feet long able to carry about 343,000 barrels, or 14.4 million gallons of petroleum products. The Double Eagle is much smaller than the so-called supertankers that tip the scales at several hundred thousand tons.
The $152 million potential value of the order is small compared with Newport News Shipbuilding's backlog of more than $6 billion worth of naval vessels. Even so, the contract is tremendously important for the shipyard, which has been suffering from a decline in defense spending.
``We consider it a very significant contract,'' Phillips said. ``It's major from our point of view because it marks our return to commercial shipbuilding.''
The shipyard hasn't built a commercial ship since it delivered two 456,983-ton supertankers to Shell Oil in 1979.
Commercial shipbuilding virtually ceased in the United States when subsidies ended in 1981. At the same time foreign nations dramatically increased assistance to their own yards.
Throughout the 1980s Newport News' sole customer was the Defense Department, which was just fine as long as the Navy aimed toward having 600 ships. Newport News was the only builder of aircraft carriers and one of two submarine builders for the Navy.
But the Evil Empire of the Soviet Union went away, the Cold War ended and the Navy no longer needed so many ships. That meant less work for the giant shipyard. Earlier this year it announced it was cutting its work force from 21,000 to between 14,000 and 15,000 by the end of 1996. That's less than half the 30,000 it employed in 1986.
While Newport News will continue to rely on Navy shipbuilding - the newly approved carrier CVN-76 makes up half its backlog - it sees a big chunk of its future in commercial shipbuilding.
``This contract is the essence of what defense conversion was designed to be,'' said U.S. Sen. John W. Warner, who was on hand for the signing along with Sen. Charles S. Robb and U.S. Reps. Herbert Bateman and Robert Scott.
The Eletson contract will hopefully be the first of many for the yard's tanker design, Phillips said.
Demand for new tankers is expected to explode soon given the age of the world's merchant fleet and increasingly strict environmental regulations, Pena said. The Maritime Administration projects a $350 billion global market for more than 1,000 ships in the next decade, he said.
Newport News Shipbuilding is discussing the tanker with other potential customers, mainly foreign, but some domestic, Phillips said.
Newport News Shipbuilding has talked with between 20 and 30 possible buyers, and there might be another announcement soon, a yard spokesman said. It hopes to be building five or more product tankers a year by 1999, yard strategists say.
The market for this sort of work is very competitive. The small double-hulled tanker is a basic design, bread-and-butter work for shipyards worldwide. Newport News was competing with subsidized yards in Japan, Korea and Europe for the contract.
A newly created indirect federal subsidy program helped the shipyard land the contract. The program is part of President Clinton's plan to revitalize U.S. shipbuilding. The loan guarantee program assures buyers of U.S.-built ships better interest rates and a 25-year loan term, much longer than they could get on their own.
Gregory Hadjieleftheriadis, vice president and director of Eletson, credits the program for providing ``the ambience for American shipyards to come back in the world.''
He said later that Eletson is getting a good deal for its money anyway. ``In my view the price is very competitive for what we are getting,'' Hadjieleftheriadis said.
Eletson also expects that building the tankers in a U.S. yard will help it get contracts from U.S. oil companies, he said. ILLUSTRATION: Color photo
``The United States of america is back in the shipbuilding industry
to stay.''
Federico Pena, U.S. Secretary of Transportation
Color artist's illustration
by NEWPORT NEWS SHIPBUILDING
The Double Eagle Tanker
To be built for Eletsen Corp., a Greek shipping company.
The first commercial ship order from a foreign company to a U.S.
shipyard since 1957.
Two ships ordered, to be delivered within 26 months, with an option
to order two more.
Each 46,500 tons, 600 feet long; carries 14.4 million gallons of
petroleum products.
KEYWORDS: NEWPORT NEWS SHIPBUILDING
SHIPBUILDING INDUSTRY
by CNB