THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, February 8, 1995 TAG: 9502080453
SECTION: BUSINESS PAGE: D6 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 78 lines
A new contract ratified by the biggest union at Newport News Shipbuilding is an ``important first step'' toward becoming competitive in the international shipbuilding market, Tenneco Inc. Chairman Dana G. Mead said Tuesday.
``The shipyard has doubled its backlog in the past three months,'' Mead said. ``Its costs are down and it's well along the road to becoming highly competitive in the international shipbuilding market.''
Mead's comments came Tuesday during discussions with reporters about Tenneco's fourth-quarter and 1994 earnings. Newport News Shipbuilding is a subsidiary of Houston-based Tenneco.
With 20,000 workers, the giant shipyard is one of the state's largest employers. It has said it will reduce employment to between 14,000 and 15,000 by the end of 1996.
The labor pact was ratified early Tuesday by members of the United Steelworkers of America's Local 8888, which represents hourly workers at the yard.
``We can't continue business as usual and continue to survive, I should say thrive, in a very competitive world shipbuilding market,'' Mead said. ``We have to continue to find ways to get more productivity out of the work force.''
In the fourth quarter, the shipyard added the construction of a new aircraft carrier for the Navy to its backlog as well as an order from a Greek shipping company for two double-hull petroleumtankers, with an option for two more. It was the first order by a foreign buyer for a commercial ship to be built by a U.S. yard since 1957.
The new contracts boosted the yard's backlog by $2.7 billion to $5.6 billion at year's end.
Other commercial orders are possible, but ``we have a long way to go'' in getting back into commercial shipbuilding, Mead said.
``We're hopeful in the next two or three months that we can announce some new contracts to add to the (Greek shipping company's) order,'' said yard President William P. Fricks.
The yard is also one of four finalists for a $1.5 billion contract to build between four and eight fast frigates for the United Arab Emirates. The small Persian Gulf nation is expected to make its selection in the spring.
The yard's chairman and chief executive, W.R. ``Pat'' Phillips, is on a trade mission to the Middle East this week with Commerce Secretary Ron Brown to help develop the yard's international military sales, Mead said.
Until the shipyard develops some substantial non-Navy business, it isn't likely to be a growth vehicle for Tenneco like its natural gas, packaging and auto parts subsidiaries, Mead said.
``Really it is nothing more than an acceptance of reality,'' he said.
Tenneco is investing in the shipyard's future. The company announced in December that it was investing $68 million to upgrade the yard's design systems and automate its steel-fabrication and assembly processes.
Revenues at the shipyard slipped slightly in 1994 to $1.8 billion from $1.9 billion last year.
The shipyard made an operating profit of $47 million in the fourth quarter ended Dec. 31 for its parent. That's down from $66 million a year ago. For the year, the yard chipped in $200 million to Tenneco's till.
Newport News Shipbuilding was one of two of Tenneco's five major divisions that reported a decline in revenue. Revenues from Tenneco's natural gas operations also fell.
For the year, the conglomerate reported revenues of $12.2 billion, down from $12.3 billion. Earnings rose to $512 million, or $2.77 a share, from $426 million, or $2.44 per share.
Looking just at income from continuing operations, earnings soared 55 percent to $641 million from $413 million in 1993, thanks to strong results from its packaging subsidiary and Case.
In the fourth quarter, Tenneco made $136 million, or 73 cents per share, down from $159 million, or 88 cents per share. Tenneco took a $73 million loss from discontinued operations in the fourth quarter, compared with a $22 million gain in the year-earlier period.
In Tuesday trading on the New York Stock Exchange, Tenneco stock was unchanged at $44 1/2 per share. by CNB