THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, July 9, 1995 TAG: 9507090206
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 90 lines
Newport News Shipbuilding firmed up its future as a commercial shipbuilder Saturday.
The giant Peninsula shipyard, Virginia's largest private employer, announced that it had received an order for two more petroleum tankers. The contract, estimated to be worth about $75 million, will help sustain hundreds of jobs at the shipyard as it strives to diversify its shipbuilding base.
Newport News Shipbuilding has built ships exclusively for the Navy since 1979, when it delivered its last commercial vessels - two supertankers for Shell Oil.
The Greek shipping company that ordered two of the 46,500-ton tankers nine months ago exercised its option to buy two more Saturday. The tankers will be delivered in 1997 and 1998 to Eletson Holdings Inc., based in Piraeus, Greece. Eletson operates a modern fleet of 21 tankers, carrying petroleum and related products around the world.
``These new tankers will be an outstanding addition,'' said Erric Kertsikoff, vice president and director of Eletson. ``They will provide our customers with affordable, safe and reliable transportation of their products.''
With the new order, Newport News Shipbuilding's backlog includes three aircraft carriers, three submarines and two vehicle transport ships for the Navy, and Eletson's four tankers.
The shipyard also has letters of intent from two other buyers to build up to 16 more of the medium-sized tankers. Those deals depend on pending approval of federal loan guarantees by the U.S. Maritime Administration.
The tanker, know as the ``Double Eagle,'' incorporates a double hull, which is designed to help prevent spills in the event of collision and leaks. Congress enacted a law requiring the use of double-hulled tankers in U.S. waters after 2015 in response to the devastating Exxon Valdez oil spill in Alaska.
The tankers, about 600 feet long, are able to carry about 343,000 barrels, or 14.4 million gallons, of petroleum products. It is much smaller than the so-called supertankers that tip the scales at several hundred thousand tons.
Eletson is the first foreign buyer of a U.S.-made commercial ship since 1957. U.S. shipyards were unable to compete in the global market for decades because of the strength of the dollar and foreign subsidization of shipyards.
U.S. shipyards also had little reason to compete. The Navy, their biggest customer, was buying many ships to fight the Cold War. And subsidized U.S.-flag shipping companies were required to build their ships in domestic yards.
Then after the Soviet Union collapsed and the Cold War threat faded, the Navy scaled back from about 580 ships in 1990 to fewer than 400 today. At the same time, federal subsidies for the U.S.-flag commercial ships were scaled back and the fleet dwindled in size.
So, U.S. shipyards had to retrench and start looking elsewhere for customers.
Newport News Shipbuilding has shrunk from nearly 30,000 employees several years ago to about 19,500 today. It aims to cut its payroll to less than 15,000 by the end of 1996.
With the help of a federal loan guarantee program revived and expanded to include foreign buyers by President Clinton in 1993, Newport News Shipbuilding aroused interest worldwide in its tanker design.
Eletson was the first foreign buyer to take advantage of the guarantees. Newport News Shipbuilding has since signed letters of intent to build the tankers with two other companies:
American Marine Tankships, a domestic shipping company, for two tankers with an option for up to four more, and
A Dutch shipping company, Van Ommeren Shipping Inc., for five tankers with an option for up to five more.
All told, the three deals could mean more than $750 million in revenues for the yard and keeping 1,500 or more employees busy for several years during the peak of construction.
The orders will allow Newport News Shipbuilding to develop a true series production, which yard Chairman and Chief Executive Pat Phillips calls ``one of the keys to any shipyard's international competitiveness.''
Series production involves the use of assembly-line techniques as used in the building of automobiles. A shipyard will absorb design and engineering costs up front and typically doesn't make money on the first several vessels in a series as it learns the best way to build them. It profits building ships later in the series as it gets better and more efficient.
Construction on the first Eletson tanker is scheduled to begin in September. ILLUSTRATION: Color photo
LAWRENCE JACKSON/Staff
Newport News Shipbuilding, Virginia's largest private employer, has
built ships exclusively for the Navy since 1979.
by CNB