June 2007
30 minutes with Boysie Bollinger Operator’s Perspective: Richard M. Currence, Jr. Art of Going Public: Superior Offshore
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editorial
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contents 06.07
VT Halter Marine launches the Crowley tug Resolve.
VT Halter Marine: A Case Study
Editorial
Operator’s Perspective
Building on a Legacy and Rebuilding From Adversity
Baseball, Hotdogs, Apple Pie and...Hyundai
A Conversation With Richard M. Currence, Jr., Senior VP of Rigdon Marine Corporation
by Joseph Keefe
by Marex Staff
by Joseph Keefe
Executive Interview
Executive Achievement
Celebrating 100 Years
Brigadier General Boyd E. “Butch” King, U.S.A. (Ret.)
- Remembering Captain Thomas Johnson III - Upi Kamal, CEO - Fincantieri Marine Systems, North America
Markey Machinery Marks 100 Years of Remarkable Engineering and Design
by Joseph Keefe
by MarEx Staff
by Joseph Keefe
Washington Insider
State of the Industry
Deepwater Finds Itself in Deep Water
Shipbuilding - Summer 2007 A Half Hour With Donald “Boysie” Bollinger
by Larry kiern
by MarEx Staff
Turnkey Synergy
Art of Going Public
View From the Boardroom
Ship Design Turns the Corner With Improved Production Engineering and Product Data Management
Superior Offshore International Enters the Stock Market With Momentum
W&O Supply’s David Turner in Europe
by Marex Staff
by Marex Staff
by MarEx Staff
the maritime executive
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editorial staff
editor in chief Tony Munoz tonymunoz@maritime-executive.com managing editor Joseph A. Keefe jkeefe@maritime-executive.com senior copy editor John J. O’Connell, Jr. harvardjo@maritime-executive.com copy editor Valerie K. Leichtman valerie@tmmarket.com senior vice president sales & marketing Brett Keil bkeil@maritime-executive.com art director Daniel Bastien dbastien@maritime-executive.com graphic designer/MarEx internet services Rich Grable rich@tmmarket.com internet services manager Jason jaskolka jjaskolka@tmmarket.com sales administrator Elizabeth Cash elizabeth@maritime-executive.com published by TM Marketing Group, LLC The Maritime Executive, LLC (ISSN 1096-2751) 3200 S. Andrews Avenue, Ste. 101 Fort Lauderdale, FL 33316 Telephone: (866) 884-9034 www.maritime-executive.com For subscriptions please visit www.maritime-executive.com.
4 the maritime executive
editorial Baseball, Hotdogs, Apple Pie and…Hyundai
T Joseph Keefe
Managing Editor
Distribution of The Maritime Executive: Markets Served: Shipbuilders & repairers
15% Naval architects, lawyers, consultants, and insurers
58%
Ship owners, operators, managers, charterers, and brokers
13% 7%
Marine equipment manufacturers
5% 2%
Government
Other
International Circulation: Canada
19% 36% Asia
Western Europe
16% 14% Scandinavia
7%
5% 3%
South & Central America
Eastern Europe Other (Africa, Australia, Misc. Island Nations)
Domestic Circulation: Other East Coast
2% 26%
28% Gulf Coast
West Coast
29%
15% Midwest
Managing Editor Joseph Keefe can be contacted at jkeefe@maritime-executive.com with comments, input and questions on this editorial or any other piece in this magazine. The Maritime Executive welcomes your participation in our editorial content.
6 the maritime executive
he world is flat. Yes, I think I read that somewhere. I have absolutely no idea what it means, but it does sound pretty good. On the other hand, the drumbeat of Jones Act advocates has a way of drowning out any of the white noise that might compromise the idea that all things American also means exclusively “made in America.” In the summer of 2007, the legal definition of a Jones Act-compliant vessel is anything but. That could change, and soon. At some point, however, we will have to come to a collective agreement as to what it means to be American within the context of the Jones Act, and how we cope with the aftermath of that decision. My dad was a real American. A veteran of WWII, he embodied the epitome of our “Greatest Generation.” He was one of countless American men who answered the call and went to war. And while I don’t necessarily look back on him as a war hero, he was an unabashed champion of American-made goods. He and millions like him formed the basis of what we enjoy today: a high standard of living and the security that can only come from the sacrifices that only a generation that grew up in the Great Depression can understand. And when the world began to flatten, he refused to climb on board. He didn’t have to, but we do. Joe Keefe, Sr.’s Buick station wagon had about 125,000 miles on it when I cashed in most of my frequent flyer miles to make it back up to the Cape for a visit in 2003. A bunch of the (six) kids and in-laws had also made the trip and, of course, the conversation around the barbecue naturally turned to politics. Eventually, my dad went off on one of his rants about “made in America.” Thoughtfully, my brother-in-law decided to open the hood of the car and, after a few minutes, he announced that the inspection plate on the engine block confirmed that it had been assembled in Brazil. The mood for the balance of that day at my parents’ house was somewhat less upbeat. In 2007, the U.S. Coast Guard defined what it means to operate an American Jones Act-compliant vessel. This takes the form of deciding what percentage of foreign modular parts can be inserted (assisted by visiting, helpful Koreans) into a series of ten coastwise product tankers being assembled by the Aker Philadelphia Shipyard. Savvy MarEx readers also know that coastwise American players like Matson have been accused of abusing the cabotage law, which allows limited alterations to U.S. coastwise (“enrolled” – for those of you coming in the middle of the movie) tonnage in foreign shipyards. Soon, the federal courts will make their own determination about the level of infractions perpetrated by these companies. This may or may not agree with what the U.S. Coast Guard has previously decided. Stay tuned. Allow me to make a safe prediction: The Jones Act will survive. This will happen because it is absolutely the right thing to do, including its caveats. And like anyone on either side of the handgun debate, I understand how difficult it is to compromise on such a divisive issue. Nevertheless, national security issues dictate we maintain (a) a robust domestic shipyard industry, (b) competent merchant mariners and (c) a sealift capacity that will support the war machine in times of conflict. We are an ”island nation” and arguably the world’s last superpower (soon to be joined by China?). When all is said and done, however, we still need to compete in the global arena. According to Donald “Boysie” Bollinger, American shipyards are currently enjoying the best business climate in the last thirty years. For the mid-tier yards that got absolutely nothing from the federal government in recovery assistance from Katrina’s wrath, the short-term prosperity is both welcome and very much needed. I’ve been to Gulfport, Mississippi and have seen the “before” and “after” photos of the city. Those of you who doubted the fortitude of American shipyards need only visit VT Halter’s Pascagoula Shipyard. Better yet, join General “Butch” King for the company’s monthly crawfish boil at the Halter fabrication house. Believe me, it doesn’t get any better than that. I’m still not sure (and in no way bitter) that it was an accident when mud splashed onto my trousers during the harrowing golf cart tour through King’s Moss Point yard. But honestly, I’ve never had more fun. How are American shipyards positioned for the next down-cycle in building? We know it is coming, and the question is, “Will it be a soft or hard landing?” The state of the U.S. shipbuilding industry in the near future will define the Jones Act. There’s plenty of work to go around right now. However, down the road that may not be the case. Being able to compete in the global marketplace will determine whether or not we allow the import of foreign parts to supplement the shipbuilding process. Both Butch King and Boysie Bollinger have strong opinions regarding the matter. America’s Jones Act issues are far broader than the discussion surrounding Korean parts and incremental ship repairs done overseas. The players on either side of the debate extend well beyond a group of American shipyards. American merchant mariners, helped by an aggressive stance by the U.S. Maritime Administration, are now preparing to rejoin the highly technical world of LNG shipping. They’ll do so, at least at first, on board foreign-flag tonnage. America has a lot to offer the global maritime world, and we can compete. The tide that ebbs out also floods back in. I, for one, can live with that. MarEx
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executive achievement
executiveachievement
By MarEx Staff
In Memory of Captain Thomas (“Tom”) S. Johnson III Captain Thomas (“Tom”) S. Johnson III, U.S.C.G. (Ret.) passed away on May 22, 2007 after a lengthy illness. His final resting place will be in Arlington National Cemetery. A memorial service will be held at 1:00 p.m. in the Fort Meyer Chapel on August 27, 2007. Tom is survived by his loving wife, Donna, and two daughters, Jamie and Rachel. After graduating from the U.S. Coast Guard Academy, Tom began a distinguished career in the U.S. Coast Guard, including extensive shipboard experience and as a designated Coast Guard aviator for both rotary-wing and fixed-wing aircraft. He was also assigned to the areas of drug interdiction and law enforcement, which included an appointment as liaison with the Department of State and the Drug Enforcement Agency. Captain Johnson was selected for service at the U.S. Coast Guard’s Graduate School and Senior Officer School. He received a Master
of Science in Industrial Administration from the Krannert School of Management at Purdue University and attended both the National War College and the National Defense University. Tom was also an Adjunct Professor at Elizabeth City State University and St. Petersburg Junior College. After retiring from the U.S. Coast Guard, Captain Johnson continued his involvement in the maritime industry by working as a Business Development Consultant for the Maritime Institute of Technology and Graduate Studies in Linthicum, Maryland. He also worked for eight years as the Director of Training for the Star Center in Fort Lauderdale, Florida and Toledo, Ohio. Additionally, Tom spent much time specializing in liaison work where he represented organizations that conduct business with the U.S. Coast Guard, the General Services Administration, and other government organizations. Tom’s areas of expertise includ-
ed contract proposal drafting, negotiating, and market strategy development. In addition to his work within the maritime industry, Tom also worked with numerous business associations. Tom was Co-Chair for the U.S. Maritime Administration’s Ship Operations Cooperative Program, past Director
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8 the maritime executive
executive achievement of the Dania Beach Chamber of Commerce, and Chairman of the Professional and Military Training Advisory Committee. He was also a dedicated member of such organizations as the International Council of Cruise Lines-Third Party Program; the Nautical Institute-South Florida Chapter; the National Safety Council; and the Embry Riddle Aeronautical Academic Advisory Group. Tom was also a guest speaker at many maritime events around the country and a published author that was recognized in numerous maritime publications. Captain Tom Johnson was a close friend of not only The Maritime Executive magazine and its staff, but many other executives in the maritime industry and government organizations as well. He will be greatly missed by all that knew him. MarEx
Upi Kamal
Chief Executive Officer
Fincantieri Marine Systems - North America The mention of the name Fincantieri evokes European shipbuilding at its best. With a lineage traceable back 200 years and with over 7,000 vessels on the company’s mantle, it’s hard to dispute its viability or its strategic position within the industry. The current company was established in 1959 as a financial holding. However, the company was converted to an operating company in 1984. Currently the industrial production is divided into six business areas: cruise ships, merchant ships, naval vessels, mega yachts, servicing and transformations, systems and components. The last business unit designs and builds marine components and systems for ship propulsion and power generation, for stabilization and positioning. It also builds products for land application, especially industrial and traction diesel engines and steam turbines. Meet Upi Kamal, Fincantieri Marine Systems’ North American Chief Executive Officer. The company has tripled its revenues in the States over the last few years, which is attributable to its next-generation Upi Kamal marine systems and highly-skilled employees. “Our employees are our biggest asset,” Kamal says. “Surely you hear this again and again, but ensuring employees feel like part of a family is truly the right recipe for success.” Fincantieri Marine Systems is located in Chesapeake, Virginia, as the U.S. subsidiary of Fincantieri, which provides this market (mainly defense) with marine systems and components and Isotta Fraschini engines, including maintenance services . Fincantieri Marine Systems, formerly FDGM, was launched in 2005 as part of the strategy of Trieste, Italy-based Mr. Giuseppe Bono, Fincantieri’s Chief Executive Officer, to expand into the global maritime markets. Upi Kamal is a graduate of the Merchant Marine Engineering Academy in India and sailed for more than a decade before obtaining his
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the maritime executive
9
executive achievement
Upi Kamal
Chief Executive Officer Chief Engineer’s license in the United Kingdom. After emigrating to the U.S. in 1983, he continued his education at the University of Michigan where he studied naval architecture and marine engineering. He went to work for QED in 1986 integrating Isotta Fraschini Motori diesel engines into the U.S. Navy’s Mine Force ships. He later became Assistant General Manager of FDGM and eventually was promoted to Vice President of Operations before being appointed Chief Executive Officer of Fincantieri Marine Systems, North America, two years ago. Kamal attributes building the North American division to patience and hard work. “In the beginning,” he says, “we focused on one project, one program, one vendor and one client, and solely supported marine diesel engines for the U.S. Navy’s Mine Sweeping fleet. Today we are a multi-project corporation with several
10 the maritime executive
divisions working with cruise line companies, the U.S. Navy, and the U.S. Coast Guard for integration services as well as mechanical products.” To illustrate, Kamal cites contract awards for the Navy’s Littoral Combat Ship (LCS), supplying U.S Coast Guard cutters with marine diesel engines, and the sale of landbased steam turbines. Fincantieri is the supplier of the “Ship’s Service Diesel Generators” (Isotta Fraschini V1708) and the “Ride Control System” (fin stabilizers and interceptors) to the Lockheed Martin Littoral Combat Ship Team. The company was also selected to re-power the U. S. Coast Guard’s 75-foot WLR and WLIC-Class Cutters with light-weight, keel-cooled Isotta Fraschini Motori V1312T2 marine diesel engines in December 2004. The first and second sets of engines were delivered in 2005 and 2007, and the U.S. Coast Guard intends to purchase its third set later this year. The company also supports landbased operations and has sold its steam tur-
bines to Harvard’s Engineering and Utilities Group in Cambridge, Massachusetts, Lincoln Paper and Tissue Paper Mill in Lincoln, Maine, and Tradewinds Forest Products, LLC in O’Okala, Hawaii. Kamal believes the company can become a serious contender in the U.S. market by providing clients a comprehensive package of services from engineering to final installation. “As a world-class shipyard, building the full gamut of merchant ships, naval vessels and virtually every cruise ship operating today,” he says, “Fincantieri has the knowledge and experience to integrate the machinery and plant components as well.” Kamal is positive about the company’s continued growth, “While I never underestimate the challenges ahead, I am very optimistic about the future. Fincantieri is synonymous with shipbuilding, and integrating engines and machinery is a successful by-product of who we are.” MarEx
washington insider
washington insider
Deepwater
Finds Itself in Deep Water
by Larry Kiern, Winston & Strawn LLP
E
lections matter. The contemporary relevance of that maxim is playing out these days in Washington, D.C. as the new Democratic-controlled House and Senate have taken the reins of power firmly in their hands and put their own stamp on Washington’s political agenda. The new way of the new majority is having an impact on the maritime field as well, including legislative and policy matters affecting shipyards and ship construction.
Deepwater Finds Itself in Deep Water The decision of the new majority to make oversight a top priority in the 110th Congress was hardly a surprise following years of powder-puff congressional supervision. It may have surprised some that the Coast Guard’s Deepwater program – and its shipyard contractors – proved to be the biggest target on Congress’ procurement radar screen. But for those of us familiar with the program, this was no surprise. For the uninitiated, Deepwater is the Coast Guard’s ongoing $24-billion modernization program. It was conceived and launched a decade ago to replace the bulk of the service’s aging fleet of cutters, aircraft, communications and information technology equipment. At the time, the program was pitched by the agency as a ground-breaking reform to major government procurements because, among other things, it featured a system-of-systems approach that emphasized integration among the various components to be modernized. The approach promoted by the Coast Guard also featured a commercial lead systems integrator responsible for functions heretofore performed by the government itself, such as managing the program to a far greater extent than previously seen in major procurements.
In the past several months the new Congress has seized upon alleged mistakes by the contractors and the Coast Guard to decry Deepwater as a failure. Congressional scrutiny and legislative proposals prompted the Coast Guard to announce that it would end its contract with the lead system integrator, Lockheed Martin, and assume the role of system integrator itself. The Coast Guard has also recently announced that it will pursue a claim for tens of millions of dollars against the contractors. Time alone will tell if the Coast Guard has what it takes to outperform its commercial integrator and where responsibility rests for Deepwater’s disappointments. While the lead system integrator aspect of Deepwater drew criticism from Congress from the start – because Congress was not enamored by the promises of either a system of systems or a lead systems integrator concept – fundamental flaws in the Deepwater program drew little meaningful public attention because they implicated the budgetary decisions of both the White House and the Congress, for which neither institution welcomed criticism. And of course the Coast Guard’s own leadership had proven consistently ineffective at challenging the political leaders in either branch on this score. To be candid, Deepwater was sunk before it got underway because it was largely a desperate effort by the Coast Guard to come to grips with the failures of the Reagan, first Bush, and Clinton Administrations to fund properly the service’s needs. While it is easy to forget, those were the days of budget austerity when OMB (Office of Management and Budget) demanded each agency and department to offer up “savings” and “reductions in force.” Institutional pressures worked decided-
ly against new expenditures, especially large capital outlays that could be deferred. Ships, aircraft and information systems that should have been modernized in the 1980s and early 1990s were not because of the political imperative to cut the federal budget and restrain discretionary non-defense spending. Thus it was the official policy of the political leadership of both parties, which swapped control of the Congress and the Executive Branch, to defer the basic investments the Coast Guard required to do its job properly. Faced with this political reality, the Coast Guard leadership played along and developed Deepwater, which should be understood for what it principally was – a budgetary strategy to pretend to modernize by actually putting off modernization (and the cost) 25 years into the future at a spending rate that was politically acceptable at the time. Funding proposed for Deepwater was to be at the ridiculously low rate of $500 million per year in 1998 dollars. Invoking a concept that was music to the ears of the budgeters at OMB, the Coast Guard even hinted that it could do more with fewer ships and aircraft because of improvements in technology. Fast forward a decade and we now find that Deepwater’s promises are fool’s gold. First, the notion that the Coast Guard could be modernized for $500 million a year has been exposed for what it was – a sham. Second, the notion that a system-of-systems approach provided for superior integration of ships and aircraft, etc., not previously possible, was simply a non sequitor. While it is true that integration and interoperability may not have been given as much weight in previous individual procurements, that never meant it could not result had adequate funding been provided. Finally, whether deserved or
the maritime executive
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washington insider
not, the lead system integrator concept has suffered a serious setback because of the intense congressional criticism. Like Deepwater, the Navy’s Littoral Combat Ship (LCS) and the Army’s massive combat systems procurement, which also feature lead system integrators, have been subjected to severe criticism for cost overruns. If the new majority has its way, the Defense Authorization Act for 2008 being debated on Capitol Hill will end lead system integrator contracts at the Defense Department. While it is vogue to blame the contractors, including the shipbuilders, for the mishaps of Deepwater and the LCS highlighted by Congress, the full story has not been published in either case. The Coast Guard and the contractors’ explanation that the Deepwater program has accomplished a great deal to improve Coast Guard capabilities already has been drowned out by criticism. As a practical matter, the contractors who continue to work with the Coast Guard and the Navy must restrain themselves publicly to avoid biting the hand that feeds them. Even if
they believe the government bears substantial responsibility for cost escalation due to change orders and other aspects of procurement mismanagement and oversight, it would be unwise for them to declare so publicly. Rather, now that the Coast Guard has announced its intention to assert claims, the issue of respon-
solutions that stressed innovation rather than tried-and-true ones that presented lower risk. As part of budgetary savings, it also dismantled its staff of contracting officers and managers as part of its 4,000-member reduction in force that was endorsed by a bipartisan majority on Capitol Hill. Thus we should not be surprised by stories declaring that the agency exercised insufficient oversight and citing examples like the composite patrol boat design and extension of the 110foot patrol boat, both of which were abandoned at the cost of many millions of dollars. The Coast Guard’s procurement design for Deepwater rewarded such high-risk proposals, and budgetary imperatives trumped more vigorous oversight. Now the political retribution for the risk undertaken has come home to roost. The great irony of the Deepwater misadventure is that a program conceived largely in response to budgetary imperatives to constrain government spending is today having exactly the opposite effect. Over $100 million will have
…fundamental flaws in the Deepwater program drew little meaningful public attention because they implicated the budgetary decisions of both the White House and the Congress, for which neither institution welcomed criticism. sibility will likely be addressed through the claims and litigation process. Moreover, the reality is that the blame goes above these entities to the political leaders of Congress and the Executive Branch, who failed to fund the service’s needs long before Deepwater was launched and who then imposed a severe budget cap on what Deepwater funding could be planned. When the Coast Guard defined the Deepwater procurement, it further compounded the preexisting flaws by encouraging the competing teams to propose low-cost
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washington insider
been wasted on the failed patrol boat modernization component of Deepwater alone. And in a remarkable about-face, the Coast Guard has declared that it can improve performance and oversight and save money by dumping the lead system integrator. This represents a stunning reversal for the service and confirms the original critics who argued that the Coast Guard has been squandering money on the lead system integrator for years. It is therefore no surprise that Congress enacted new legislation contained in the Iraq War Supplemental Appropriations Bill mandating greater oversight and accountability by the Coast Guard and barring the obligation of $650 million in Deepwater funding previously appropriated until specific safeguards are adopted. While the new safeguards may avoid the mistakes of the past, they will likely also delay the program and increase costs. The early markup of the Deepwater 2008 appropriation indicates substantial further cuts by Congress are likely. Meanwhile, the Coast Guard will continue to do more with less while it struggles to navigate Deepwater with an aging fleet of declining capability.
What Is a “Preliminary Rebuild Determination” Anyway? One of the most hotly contested issues affecting the domestic shipbuilding industry today in Washington, D.C. centers around the Coast Guard’s implementation of its own regulations under the Second Proviso of the Jones
The Coast Guard’s implementing regulations, enacted over a decade ago, define “rebuilt” using steel weight thresholds to guide both shipowners in planning the work and the agency in making administrative determinations. The thresholds assume that work is permissible if it amounts to less than 7.5% of the vessel’s steel weight and impermissible if more than 10%. Between these levels, the matter is one for the Coast Guard to determine on a case-by-case basis. The Coast Guard process provided by regulation involves submitting information to the agency, which evaluates it and then issues a “preliminary rebuild determination.” The agency has been doing this since 1969 when the responsibility for these determinations was transferred from the Department of Treasury. The Coast Guard has issued 30 such determinations involving 40 vessels in the past decade alone. The Shipbuilders Council of America and PASHA Hawaii Transport, a coastwise carrier serving the California-Hawaii ro-ro trade (collectively the SCA), recently sued the Coast Guard in federal court in the Eastern District
If the new majority has its way, the Defense Authorization Act for 2008 being debated on Capitol Hill will end lead system integrator contracts at the Defense Department. Act. Domestic shipyards and certain of their coastwise shipping company allies are up in arms over a Coast Guard ruling that allowed a coastwise shipping company competitor to perform some shipyard rebuilding work abroad. The domestic shipyards and their shipping company allies appear determined to stop what they see as a threat to their businesses. Simply put, the Second Proviso requires coastwise trade-eligible vessels to be rebuilt in the United States, and if they are not, then their coastwise eligibility may be forfeited.
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the maritime executive
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washington insider of Virginia, challenging a preliminary rebuild determination issued by the agency in 2004 to Matson Navigation Co. This preliminary determination effectively gave comfort to Matson, just as it would to any coastwise-eligible shipowner, to undertake specific shipyard work on a vessel in a foreign shipyard with assurance that if the work conformed to the Coast Guard’s preliminary determination, then its coastwise eligibility would remain secure. In its lawsuit, SCA alleged that Matson would enjoy a competitive advantage over PASHA as a result of the Coast Guard’s preliminary determination. While domestic shipyards who are members of SCA are apparently relatively united in their position, coastwise shipping companies are divided. The SCA challenged the Coast Guard’s preliminary determination allowing the work to proceed without risk to the coastwise eligibility of the vessel by arguing that the agency misapplied both the Jones Act’s Second Proviso and its own regulations. First, SCA alleged that the Coast Guard failed to adhere to the Second Proviso’s language requiring the “entire rebuilding” to occur domestically. Second, SCA alleged that the agency ignored the Second Proviso’s bar against the addition of major components to a vessel and argued that a major component should be defined as one representing more than 1.5% of the vessel’s steel weight. Third, it argued that the Coast Guard failed to apply its own regulations correctly by counting only the steel weight added to the vessel abroad. According to the SCA, all the steelwork (removed and added) both abroad and in the United States shipyard should be counted under the regulation. In response, the Coast Guard argued that
14 the maritime executive
SCA fundamentally misunderstood the Second Proviso, which has never been applied to bar all foreign shipyard rebuilding work. To the contrary, the Coast Guard argued that Congress left it to the administering agency to define the word “rebuilt” and that both agencies involved over the years, Treasury and the Coast Guard, have always permitted foreign work to be done, relying on the legislative history and their discretion under the statute to define the term. Moreover, the Coast Guard argued that the SCA failed to challenge the pertinent regulation when it was last revised in 1996, and therefore the challenge is barred by the six-year statute of limitations. Finally, the Coast Guard argued that its preliminary rebuild determination doesn’t constitute “final agency action” for purposes of the Administrative Procedure Act, which is the only proper basis for jurisdiction by the court. On April 6, 2007, the court granted the Coast Guard’s motion to dismiss the case for want of jurisdiction, agreeing with the agency that its preliminary rebuild determination isn’t final agency action. For the time being, at least, the Coast Guard has rebuffed the challenge. However, at some point it is likely that final agency action will occur in the form of the issuance of a coastwise endorsement for a Matson vessel that is the subject of the preliminary determination, and the issues may be rejoined. Despite the apparent determination of SCA to challenge the agency, it faces a daunting task. Simply put, federal courts are reluctant to overturn either the agency’s interpretation of the statute, as manifested in its regulation, or the agency’s issuance of a coastwise endorsement. In this instance, these are matters that the Congress has left to the agency and over which it has discretion.
Since the agency is likely to prevail in the courts, the battle over the meaning of the Second Proviso will likely ultimately return to the Congress. But because elections matter, the new majority controlling this Congress has bigger and more pressing issues to handle, and time is already running out on this year’s legislative agenda. Since next year is an election year, this will further complicate getting much done. Importantly, the reality is that while the domestic shipyards may be relatively united on this issue, the Jones Act maritime industry remains divided; and this always complicates effecting substantial change in this particular maritime area. In the near term the most likely outcome may be a legislative provision taking aim at the Coast Guard’s process, e.g., requiring the agency to revise its regulations and its process to provide greater public notice and a more transparent and articulated process, but without effecting substantive legislative change to resolve an ambiguity that Congress has historically left to the administering agencies to handle.
About the author: Larry Kiern is a partner at Winston & Strawn LLP, an international law firm of 900 lawyers. His practice concentrates on maritime issues, including legislative, regulatory, and litigation matters. Before joining Winston & Strawn, he was a Captain and law specialist in the U.S. Coast Guard who served as the Legislative Counsel and Deputy Chief of the Coast Guard’s Congressional Affairs Office.
MarEx
art of going public
The Art of Going Public
Nasdaq: DEEP
Superior Offshore International Enters the Stock Market with Momentum A Discussion with Executives Josh Koch, General Counsel, Senior Vice President and Director, and Roger Burks, Chief Financial Officer (CFO) and Director, About the Art of Going Public
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Superior Offshore International (SOI) became a publicly-traded company on April 25, 2007 (Nasdaq: DEEP). The offshore subsea company entered the stock market with a lot of interest and momentum due to its financial savvy, preparation, and timing. MarEx’s May 2007 edition introduced Louis Schaefer, Chairman, and Jim Mermis, Chief Executive Officer, and their innovative company (which is also building the Superior Achiever, a $125-million, multi-purpose subsea vessel due to be delivered in 2008) to our global readership. While executives contemplating going
public might find the due diligence process overwhelming, if not downright exhaustive and intrusive, the shared experiences of two key members of SOI’s IPO team might provide a little encouragement and solace to those facing a Mount Everest of Securities and Exchange Commission (SEC) compliance rules. Josh Koch, General Counsel, Senior Vice President and Director, and Roger Burks, Chief Financial Officer (CFO) and Director, are recent veterans of the arduous IPO process. MarEx caught up with these two busy executives to get a better spin on going public.
art of going public
A Conversation With Josh Koch, General Counsel, Senior Vice President and Director Josh Koch first met Louis Schaefer 14 years ago when he was hired to represent his then company, Superior Diving, to recover payment for the successful salvage of an oil production and storage barge in the Gulf of Mexico. A Philadelphia investment company had purchased a producing oil field in the Gulf of Mexico, but before legal transfer could be completed, the barge, which was significantly deteriorated from its years on the seabed, and partially filled with petroleum, had to be removed. Schaefer was able to salvage the barge intact with no damage to the envirorment and arranged to have it towed safely to shore. On arrival the barge was found to be severely contaminated with NORM (naturally occurring radioactive material) and its owners, who were then able to close on the purchase of the field, refused to accept the barge or to pay Superior for its successful salvage. Koch was successful in the lawsuit and continued to represent Superior and Schaefer from that day forward. “Even back in those days,” Koch said with a big smile, “Louis had a dream of taking his company public. He only had five employees at the time and was struggling to make ends meet, but he had a vision of the future and began building his business one brick at a time. He didn’t buy lavish homes or fast cars. Whatever he earned he put back into the company. In the end, his hard work, experience, vision, and integrity positioned Superior to take the opportunity presented by Hurricanes Ivan and Katrina and, as they say, the rest is history.” After Hurricane Katrina devastated the Gulf Coast, Schaefer evacuated Superior’s New Orleans headquarters and split the business interests between Lafayette and Amelia, Louisiana and Houston, Texas. As new business poured in because of the destruction, and with Koch’s New Orleans law office under water, Schaefer offered Koch an opportunity to work out of Superior’s Houston office, where he could closely advise the company while trying to maintain his law practice. Koch eventually discovered that the pace of Superior’s growth was completely taking over his practice and eight months later succumbed to Schaefer’s offer of full-time employment as Superior’s general counsel. As the company continued to grow, Schae-
IPO. While he was neither an SEC attorney nor a banking attorney, he was there every step of the way to ensure Superior received expert legal and financial guidance. Bracewell and Giuliani, Merrill Lynch, and Chase worked tirelessly on the many drafts of the prospectus to ensure that it was correct in respect to and in full compliance with the law. They advised Superior on the timing of “going public,” worked with the management team on the presentation materials for the “road show” to potential investors in the company’s stock, and assisted Mermis (by then CEO) and the new addition to the executive team, Roger Burks, a knowledgeable Sarbanes-Oxley CFO, in arranging and handling the logisR. Joshua Koch, Jr. tics of the “road show.” General Counsel, Senior Vice President Not every company that enters the and Director public arena is successful. Nevertheless, Superior had the right timing and a clear fer set his sights on raising capital to build a and concise vision of the future. “For a comnext-generation vessel (Superior Achiever). pany to enter the stock market and achieve its Koch arranged for a meeting with a long-time Initial Public Offering goals,” said Koch, “invesand well-respected business associate with tors and financial groups must have a positive Bracewell and Giuliani, a Houston-based law perception of the company and its managefirm, to discuss the various alternatives to raisment and believe in their ability to meet shorting capital and the pros and cons of each. Merand long-term financial goals. Having a strong rill Lynch was then engaged to value the commanagement group that passionately believed pany under different scenarios and to provide in the company, its goals, and its people was its opinions on the merit of the various options key to Superior’s being successful.” for pursuing capital, including private equity. J.P. Morgan Chase was then brought in to provide additional depth. The management team Roger Burks, Chief Financial Officer (CFO) of Louis Schaefer, Jim Mermis, Chief Executive and Director – A Conversation About Officer (at the time Chief Operating Officer) Financial Oversight During the IPO and Josh Koch began meeting with investment Roger Burks was hired in December 2006 groups and interested suitors. because of his public company experience, “Our executive team reviewed all our his understanding of Sarbanes-Oxley, and his options and how each scenario might play previous experience of taking approximately 20 out with regard to future growth. Everyone companies public, to assist Superior Offshore provided their input, and our decisions were through its IPO process. Burks spent 10 years ultimately based on what was good for the with Deloitte & Touche in Houston where his company. We understood that a private equity last assignment was as “partner in charge” of firm was most likely in it just for the short haul the energy practice for the Gulf Coast region. and a quick buck,” said Koch. “It had always In August 2002, Burks began a consulting been Louis’ intent to build a world-class globfirm concentrating on the conflicts created by al subsea company which would place safety Enron and compliance with Sarbanes-Oxley first and treat its employees ‘as family.’ So regulations. After four years he sold the firm in the executive team opted for the IPO, which June 2006. allowed him to remain in control and pursue Burks brought SEC accounting methods his vision of the future.” to SOI. We asked him how the Sarbanes-OxAs legal counsel for Superior, Josh Koch’s ley rules changed the IPO process and, while job was to bring in all the right people for the he said the regulations may be overreaching,
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17
art of going public
the law is essentially based on the principle of making no untrue public statements, having accurate financial reporting, and a framework for internal controls. In Burks’ opinion, the 404 compliance is a “runaway train.” However, there are now a lot of refinements in the risk-based controls process. Burks also hired Deloitte & Touche to facilitate SOI’s Sarbanes-Oxley work. When Burks joined SOI, he was immediately asked to be a board member. Then he began learning how SOI made its money and where it spent its money. “I went about following the cash: cash-in and cash-out, receivables versus liabilities,” Burks said. “I also spent a great deal of time with Jim Mermis, the CEO, and other executive members of the company to better understand how the organization worked. Additionally, I went about financing the Superior Achiever with JP Morgan Chase. We received permanent funding for the ship in February 2007, which allowed us to wait for a better market to launch the IPO.” The “art of going public,” Burks says, is knowing how to work with your attorneys, bankers, and investment advisors. “In my experience, you don’t force an IPO; you wait for an IPO to come to you,” Burks pointed out. “SOI could have gone out much sooner than it did. But there were many external events that were playing out in the marketplace. We simply went about keeping our financial statements up to date and, when we were ready, we went out on the ‘road show’ to the investment and financial firms making one-on-one or group presentations.” Preparation for the financial road show is an extremely important endeavor. In the case of SOI, Jim Mermis would take about 20-to25 minutes explaining the dynamics of the offshore energy industry, how Superior made its revenues, major market trends and the company’s growth strategies. “Mermis knows the offshore dive and construction business
18 the maritime executive
Roger Burks Chief Financial Officer (CFO) and Director very well, and he was able to capture people’s attention with his professional demeanor and expertise,” said Burks. “I followed up with my five minutes, explaining our historical financial results and our capitalization after the IPO.” While Burks was not a CFO in the offshore dive and construction industry, he has an excellent knowledge of the energy industry and its key economic drivers. “As a CFO, you need to interpret, understand, and put color behind the numbers for clarity,” he said. “In Superior’s business its constraints are its number of personnel and equipment. Ultimately, we coined the phrase, ‘We are a service company with equipment, not an equipment company that serves.’ And it’s an entirely different business model from our competitors, which is a tribute to our founder, Louis Schaefer.” If anyone thinks going public is an easy walk in the park, he or she will be sadly mistaken. Roger Burks and Jim Mermis did eighty-one road-show presentations in the weeks after
Easter 2007, from April 8 until April 19. The company’s stock was issued on April 20. “The investment companies wanted to know more about us, and they wanted to know if the management team was capable of taking the company to the next level. Each investment group wanted to know what were SOI’s growth strategies and what we were doing to execute them. On the financial side, they wanted to know what our capitalization strategies were and what we intended to do about reporting and keeping the company financially flexible,” added Burks. Superior Offshore was quite successful in its IPO, so we asked Burks what he thought might be the key drivers: timing, the presentation, or the financial prospectus? “First, you must work closely with your financial advisors to value the company properly. It is the underwriters and management who ultimately establish the pricing of the stock prior to the public offering. We spent a lot of time reviewing our expectations and those of the market. We wanted long-term investors, not quick roll-over investors. I tell people an IPO isn’t the end; it is the beginning. In a public company, transparency is key, and be sure to stay within the full-disclosure rules. I would also advise potential public companies not to run the company solely for the quarterly results, because they come every 90 days, but run the company for its long-term growth strategy. Don’t let the market influence longterm decisions. It’s like a politician being influenced by the polls. A company must build for the long term, and a CFO’s responsibility is to ensure that the numbers are accurate and provide some flavor to the forward-looking statements about what is going to happen in the future. Keep your investors and the public informed, and return phone calls.” MarEx
operator’s
perspective
Shipbuilding in America: An Operator’s Perspective by MarEx Staff
Richard M. Currence, Jr.
O
ne of the most aggressive shipbuilding programs in the United States is being managed by the Rigdon Marine Corporation, based in Houston, Texas and St. Rose, Louisiana. The company finished building 10 Rigdon 5000 Class 210foot platform support vessels (PSVs) at Bender Shipyards in Mobile, Alabama, which were delivered between 2004 and 2005. Today, the company is building 10 Rigdon 4000 Class 190foot platform support vessels at Bollinger Shipyards in Lockport, Louisiana, which will begin delivery in 2007 and go through 2008. It is also building four “fast supply vessels” at 181 feet and five crewboats ranging from 155 feet to 176 feet, all to be delivered between early 2007 and early 2009 as well. Over the next few years, Rigdon Marine will be receiving a vessel almost every 37 days. It will also be hiring more mariners than any single marine company in the States. Furthermore, Rigdon Marine’s next-generation PSV fleet has new and advanced technologies, such as Electronic Power Design, Inc. (EPD) power management systems and Cummings engines that fit into the Guido Perla and Associates-designed higher payload cargo vessels. The Rigdon 5000s have proven over the past few years that they are capable of transporting more payload than ships of larger size and capital cost, while still decreasing fuel consumption. Richard M. Currence, Jr. is the man appointed by the company’s Chairman and CEO, Larry Rigdon, to oversee the production of vessels and the hiring of its enormous marine staff. MarEx was fortunate to catch up
20 the maritime executive
with Mr. Currence, who had just returned from a two-week European business trip. MarEx: Richard, you have been with Larry Rigdon since the inception of Rigdon Marine and, at that time, your primary focus was initiating the company’s building program. Tell us about beginning the process and your approach to the building project. Currence: First let me say that the general health of the U.S. shipbuilding industry is good. In 2002, when our company was looking for a shipyard to build the GPA 640 series (today the series is called Rigdon 5000), Bollinger Shipyards was booked and could not offer desirable delivery schedules. While there were alternative yards, there was a significant absence of yards that had traditionally kept the bidding process competitive. Halter Marine over the years had provided an excellent building scale for our type boats, but they were on the heels of a bankruptcy and would have cost our company a premium to do the work. In the end, Bender Shipyards did present us with competitive pricing and, in the end, did a fine job delivering our first 10 offshore boats. At Rigdon, we have a philosophy and a core value regarding our approach to a building project. First, it is our belief as operators that we can design the best vessel for our specific needs. We always try to approach the shipyard with a class-approved design. The design and the drawings represent a significant upfront cost but we make the investment and submit them to the American Bureau of Shipping (ABS) for approval and comments before the shipyard even sees them. We think
it’s the fairest approach to our shipbuilding requirements. At Rigdon, we have a philosophy and a core value regarding our approach to a building project. First, it is our belief as operators that we can design the best vessel for our specific needs. We always approach the shipyard with a class-approved design. Designing the drawing is an upfront cost, and these designs are sent to the American Bureau of Shipping (ABS) for certification and comments before the shipyard even sees them. We think it’s an intelligent approach to our shipbuilding requirements. MarEx: OK, so your company controls the architectural design of the ships, but what
operator’s
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road truckable housing. The theory is to test for the overall vessel structure. Larry and I over the equipment at their facility and bring it up time convinced them that our design, which to almost the level of commissioning before was a next-generation vessel and had never being shipped to the yard for installation. been built in the States before, was in fact a This in itself has reduced the damage and good design and easy to build. Eventually, they increased the productivity of building the vesbecame comfortable with our design. sels on time and without delays. At the end of the day, I think Bender ShipMarEx: You say this is significant. In what yards will tell you that the Rigdon design was way has this method of early commissioning a good one and that it was relatively easy offsite changed the shipyard experience? to build. They soon became very efficient at Currence: The challenges in 2002 in getbuilding the series. We incorporated a numting our shipyard contracts placed are much ber of concepts in the GPA 640 (Rigdon 5000) different in post-Hurricane Katrina and Rita design that were new to Bender. There were Gulf Coast shipbuilding. The effect on shipa number of European features that had preyard labor has been significant, and we are in viously inflated shipyard pricing. In addition, reality assisting in the shipbuilding process by there were some new technologies, such as using non-shipyard labor. diesel-electric, that also caused a price-inflation By working through the commissioning proissue. On the front end, we convinced Bender cess of power and generator equipment offsite that it could learn to build these vessels effiat EPD, we have managed to reduce the cost ciently and, I believe, this did take some of the of labor at the yard. By using power source prouncertainty out of the contract price. fessionals to do their own work and testing the The final contracted price relied on the equipment ability DNof Rigdon to integrate all the key venUP offsite before installation, we have UP CO2 reduced the time at the shipyard and thereby dors into the final package. To be able to hand HVAC HVAC RM (1) ROOM (2) pulled man hours out of the shipyard, where Bender Shipyards and, eventually, Bollinger, EXHAUST EXHAUST they are under supply constraints. a fully-negotiated package certainly provided (2) TRUNK TRUNK Said the yards with a huge comfort level to build UP UPanother way, we decided we were 30 25 10 5 35 30 25 20 15 (1) 20 15 10 5 0 -5 DN (2) asking shipyards to do work that they were, our vessels. DN perhaps, not the best at doing. Due to the open MarEx: After building the first 10 vessels (1) (2) (1) (2) nature of a shipyard, we found that our elecat Bender, was there a learning curve for RigUP FS #3 DN tronic andUP power source equipment was being don when it handed off its new PSV package damaged or contaminated. So by taking that to the Bollinger yards? FOCSLE DECK ARRANGEMENT 01 DECK ARRANGEMENT (5) 2-MANhave STATEROOMS (4) 1-MAN STATEROOMS equipment out of the yard, we found the Currence: Absolutely. There were many process moves quicker, and there is considerthings we learned from the construction of the ably less of a finger-pointing session during the first ten vessels at Bender that changed our 10t TUGGER WINCH, P commissioning of(4) the power sources. approach with Bollinger, the most significant MarEx: By allowing vendors and the shipof which was that some of the work done by EXHAUST (4) yards to do what they do best in their respecthe shipyard was of no value. We identified HVAC TRUNK RM tive fields, has this reduced the cost of building the scope of the work and removed it from the UP 65 60 55 50 45 40 35 30 25 20 10 5 0 15 -5 DN PANTRY a vessel or simply reduced the problems of package given to Bollinger. building a vessel? First and foremost, we are building our CREW MESS REFRIG Currence: The cost of steel and labor is switchgear and other electrical equipment GALLEY what it is. The cost of building a vessel is offsite at Electronic Power Design’s Houston FREEZER just what it is, a major capital facility. They are being built into an over-theMAIN DECKexpenditure. ARRANGEMENT 33" X 75" DRAWERS UNDER
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about the other vendors for such components as engines, pumps, galley equipment, and generators? Currence: In concert with our discussions with prospective shipyards, we are also in discussions with our key vendors to ensure technical compatibility and delivery schedules that meet the needs of the yard. By allowing a shipyard to build a series of vessels, one after the other in sequence, it allows them to increase their efficiencies and to experience the benefits of a learning curve, which is simply impossible when a yard is building one or two similar vessels. MarEx: In 2002, the shipbuilding market wasn’t at the magnitude it is today. Since then, the shipbuilding business has gotten really hot, and finding a yard or vendors to be able to deliver product isn’t easy. Did your company experience any problems with product deliveries or a desire to renegotiate your contracts? Currence: No. While things were becoming DN tight in the market, we had been working very closely with the equipment vendors and the shipyard, and it wasn’t problematic at the time. However, I believe everybody today is experiencing some level of delivery problems with5the 15 35 30 25 20 10 35 DN current lead times for equipment. MarEx: Let’s step back for a moment and address bringing an approved vessel design to a shipyard and telling them it’s what you want DN built. It is not a normal process, so did you run BRIDGE DECK ARRANGEMENT into any resistance? Currence: Every yard we spoke to had its own design for each piece of equipment and
perspective
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the maritime executive
21
operator’s
perspective
What we have done at Rigdon is streamlined the process and reduced the problems. We were building vessels for the deepwater that required a well-built platform, which meant that we had to be intimately involved. It’s a different process now because in 2002 we did not have an operations department. Today we do. In the beginning, I spent 100 percent of my time in the yard overseeing the building process. Back then, we hired Jim Whitley, who is a naval architect, to assist me at the yard. For a year and a half, Jim and myself were in the yard almost every day until the Orleans, our first vessel, was delivered. MarEx: Is it normal for a ship operator to send its own people to a shipyard to oversee vessel construction? Currence: First let me say that building a vessel is not for the weak of heart. It is a major undertaking, and to build a fleet of vessels all at once is a monumental achievement that requires oversight and total involvement. We are lucky to have had Jim Whitley work with us first as a consultant and, eventually, as Rigdon’s Technical Director. Not only is he an excellent naval architect; he is one of the most knowledgeable people in the industry building these types of vessels. There are few people
22 the maritime executive
in the world who have built or assisted in the design of more vessels than Jim Whitley. Today we have 27 vessels under construction. Neither Jim nor myself are in the yards with the regularity we once were. That being said, our approach to our shipbuilding contracts has allowed us to feel comfortable with the process. Bollinger is about to deliver the first Rigdon 4000. The results of the inclining experiment were what we expected, and all the machinery is in the process of commissioning. We expect sea trials to begin in June, and for the First and Ten to be delivered to Rigdon Marine in July 2007. MarEx: Congratulations on a well-managed shipbuilding program. Are the Rigdon 4000s on schedule for their estimated deliveries? Currence: Bollinger has done an excellent job of compressing the building schedule. In fact, they are expected to deliver all the vessels on time and, perhaps, ahead of schedule. MarEx: Is that due to your company’s well-conceived building package and management of its key vendors? Currence: In this case, you have to give 100 percent of the credit to Bollinger. However, I would put an asterisk next to that and say it is also because we remain so closely engaged
in the shipbuilding process. But honestly, I feel that Bollinger has really stepped up and put their best efforts forward on our building campaign. It is a tribute to their professionalism. MarEx: Finally, is there a piece of advice that you would like to offer a company contemplating an aggressive building program such as Rigdon has embarked on? Currence: In a universal sense, I would say sit with the shipyard and spend lots of time working through the details before committing to a building program. It is essential that there are mutual expectations on both sides. There are so many details in a building process that, if not careful, there could be ill will fostered. And nobody wants that. The most important thing that must be maintained, especially from the owner’s side due to these projects being so difficult, is that the owner’s interests are aligned with the shipyard’s. We worked very hard at Rigdon Marine to maintain that order of magnitude and mutual respect because the project needed to move forward productively. Just remember: Align the expectations and work together to build a quality ship. It truly benefits both the operator and the shipyard and, ultimately, the customer. MarEx
Celebrating 100 Years
Markey Machinery Marks 100 Years of Remarkable Engineering and Design By Joseph Keefe, Managing Editor
Markey President Blaine Dempke Carefully Builds on the Past, But Looks to an Even Brighter Future
24 the maritime executive
I
Celebrating 100 Years
n a little cabin nestled in the mountains of North Carolina’s Blue Ridge Mountains, there is a rough-hewn, two-and-a-half square-foot wooden plaque made from old oak pieces, which is covered with about a million coats of some sort of marine varnish. On this plaque are about twenty-five brass “boiler” plates of various marine applications. Most of these plates date back to the early 1940s, and one or two are even older than that. Plates from venerable names such as Westinghouse (marine force draft propeller blower) and General Electric (steam turbine) are bolted to the board with solid brass screws. Near the bottom and on the right of the board’s centerline is a simple but substantial plate from a company named Markey Machinery. It is dated March of 1943. This plate was taken from a capstan manufactured by Markey for a series of vessels produced by the Kaiser Shipyard in Vancouver, Washington. Ironically, I found the wooden plaque in a nautical curio shop on Maryland’s Eastern Shore a number of years back while on a sailing trip with my brother-in-law. He saw me lingering over the item and encouraged me to purchase it, but I declined because the shop owner wanted what I thought was too much money for it. However, on the following Christmas morning I found it under my tree. How he got it there without me knowing I’ll never know, but as a former mariner and collector of all things “maritime,” that plaque remains one my favorite possessions. The use of an old boiler plate affixed to a casual wall decoration is probably a corny excuse for the central theme of this article about an industrial marine manufacturer, but it is also true that the 64-year-old Markey plate is the perfect embodiment of the depth of experience represented by one of America’s oldest marine manufacturers. What that plate won’t tell you is where Markey has come since it opened its doors 100 years ago. And that’s a much better story.
Celebrating 100 Years; Laying the Groundwork for the 100 That Follow You’ll see the phrase “Celebrating 100 Years” attached to virtually every piece of correspondence that emanates from Markey Machinery’s Seattle offices. While it may be a great marketing pitch, it is not necessarily what Blaine Dempke wants to dwell upon when he talks about the company. Dempke became Markey’s president when he and his
partner, Robert A. LeCoque, purchased the company from the Markey family. Today, LeCoque is responsible for manufacturing and product support while Dempke’s attention is mostly focused on business development. That’s not to say that Dempke is not involved with the guts of a Markey winch. While Markey Machinery may be under new management, Dempke has been with the firm since he was 19 years old. He is now 48 and was taught everything about the business from now “retired” Mike Markey. Beyond the technical competence learned by Dempke during those formative years, he likes to elaborate about the working environment at the company: “It’s a culture that is hard to describe without other experiences to base it on because I’ve been here since the beginning of my working career. But when new employees come in from other companies, they quickly learn
manufacturer of marine equipment. Make no mistake about it: Dempke has not forgotten about the product base the company was built upon. “We remain committed,” he says, “to serving our existing clients with new, state-of-the-art products.” Within that simple statement is the underlying strategy for Markey’s future business plan.
The New Markey: Same As the Old Markey (With a Twist) First and foremost, Blaine Dempke wants the maritime industry to understand that those who think they know about the company should think again. “Most importantly, we are engineers,” he says with emphasis, “who just happen to manufacture marine winches. We’re not unlike naval architects. Our company is developing and refining the next generation of marine winches, and our designs are leading-edge technology.” He tells us that the company spent the last year changing its methodology for designing and developing winches. These new systems are being built for operators performing high-liability work. Markey Machinery calls these new systems “Methodology for the Selection of Winches and Ropes for Assist and Escort Tugs in Dynamic Seas.”
Our biggest strength is that we design and develop virtually everything inhouse. We focus exclusively on hightech, high-end winches, which are used in demanding services. Quality and reliability are what Markey has been known for from 1907 to 2007. that how it was done at other companies is not how we do it here.” That isn’t to say that Dempke and his partner are averse to change. The last seven years leading up to the 100year anniversary have been anything but status quo or easy. A new business strategy has been implemented at Markey, and it is based on diversification, modernization and an increased use of outside manufacturing. However, Dempke is quick to point out that outside manufacturers must meet the company’s high quality standards. Meanwhile, Dempke has been busy positioning the company for the next step in its development as a modern and highly technical
Dempke believes these new winch systems could be a significant breakthrough in marine safety, performance and quality. In North America, there are currently as many as fifty LNG projects, which have been either proposed or are under construction. In this highly-charged energy market, many of the projects have already received regulatory approval and, with few exceptions, most are working with Markey Machinery in the development of winch solutions for tug-assist and offshore escort requirements of LNG tankers. It’s sweet music to Dempke’s ears. However, it is not only about obtaining the business; it is
the maritime executive
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Celebrating 100 Years also about changing how tankers are handled in real-world environments. Designing winches is more than sitting around in a vacuum thinking of new concepts, Dempke says. “Operators are just too busy to talk,” he offers. “But we tell our clients to take a few minutes and get it right before spending $1 million on a high-performance, high-end winch.” While tractor tugs are usually the vessels of choice for tanker escorts and various tug-assist duties, the all-important winch, unfortunately, tends to be an afterthought or final add-on. And that’s a mistake, he adds. Markey clearly wants to be the “go-to” com-
which was previously referred to as the “constant tension” system. The company is in the process of obtaining a trademark on its capabilities. “Crowley Marine, one of our best customers, pushed us along with the ‘render and recover’ trademark name,” Dempke says. “And I agree it’s a great way to differentiate ourselves from the competition and position us beyond the wannabes.” The introduction of the tractor tug Leo in Boston harbor by Foss Maritime is the company’s first attempt to enter the East Coast tug market. The tug Leo features Markey’s “High Performance Asymmetric Render and Recover” (ARR) winch as part of its standard equipment. The tug also features heated decks to prevent slip-andfall accidents during the severe New England winter conditions. However, it is unlikely the deck will ever get used by the line-handling crew because the Markey winch is fully automated and controlled from inside the wheelhouse. Foss Maritime is a well-known, cutting-edge operator and one of the first companies to introduce a “green” hybrid tug to the maritime industry. That they also chose the Markey ARR design for the tug Leo is no surprise. It is also no surprise that Boston harbor has an LNG terminal with two more in the planning stage, so look for the competition to heat up in Boston. The Leo’s Markey deck equipment will most likely be a primary selling point against other players in the Bay State harbor or Massachusetts offshore LNG tug-assist game.
We remain committed to serving our existing clients with new, stateof-the-art products. pany for customers wanting innovation, performance and reliability in winch applications. However, Dempke readily acknowledges that a lot of his sales come from naval architects working on various projects. Dempke laments, “We often see project specifications designating ‘Markey winch or equivalent.’ But who is our equivalent and, more importantly, who is qualified to make that determination?” While he’s flattered by project plans being written to Markey specifications, he believes customers need up-front support rather than later adjustments in contracted specifications. In his mind, the U.S. Navy and a few other contractors could have benefited by a more hands-on approach in the government’s LCS (Littoral Combat Ship) vessel designs.
Meeting the Regulatory Challenge:
“Operating Environment” - Driven Designs In today’s regulatory environment, operators ordering ship-assist tugs need to be buying state-of-the-art deck equipment. Tractor tug applications are usually the most complex due to their exertion of powerful bollard pull and their ability to perform the in-direct mode, which essentially uses the boat’s hull for braking and controlling huge tankers or post-Panamax container ships. Due to the increased demands on tugboat operations, Markey now manufactures what it calls a “render and recover”-capable winch,
26 the maritime executive
Markey winches are becoming the commercial tug standard in North America and ports on either side of the U.S. border. The Markey systems have also had a great impact in tanker escort work and now in the LNG tanker-assist business. Additionally, Markey is working with Sempra, the energy giant, as its Cameron LNG facility nears completion in Lake Charles, Louisiana. While the Sempra Cameron project has not been without its detractors, especially those along the Calcasieu River, many of the next-generation tractor tugs being built for the LNG facility will have Markey equipment. However, many of the tankers calling at the refineries in Lake Charles are not fitted to withstand the exertion that modern tractor tugs can apply to a vessel. But Dempke says Markey’s winches are designed to address those fears. “The worst thing that could possibly happen,” he points out, “is that a line may break or a bollard might be ripped off the deck.” He adds that his winches can prevent “snap loads” that break soft lines by a “dial-in” feature, which allows an operator to specify a 50-ton maximum even if the tug is capable of delivering 70 tons of bollard pull.
Managing Costs, Maintaining Quality and Meeting the Workload Just a few years ago, what Markey could produce was limited by the capacity of its Seattle facility. Today, in contrast, approximately one-half of the company’s production is being built in South Korea. While Dempke is keenly aware of the criticism this practice may evoke from American customers, he is also pragmatic enough to understand that manufacturing in
Celebrating 100 Years South Korea can take his company to the next level. “We’re not manufacturing there because it’s cheap, because it’s not,” he insists. “We are manufacturing there because our partner’s workforce is highly skilled and productive. The Seattle group is great at designing, developing and building prototypes, and our South Korean partners are prolific in production.” Today, Dempke has Markey Machinery on solid ground as the company moves into its second century of manufacturing. But following September 11 and for the rest of 2001, 2002 and into 2003, he wasn’t sure if it was going to survive. “Suddenly the maritime industry simply stopped building. Our business is dependent on our customers’ ability to invest in new capital equipment, meaning each boat needs a winch,” Dempke said. “In response, we sold our main manufacturing building after occupying it for nearly 80 years in order to generate cash. We moved our engineering and administrative people into leased offices near our now only manufacturing site near Georgetown, which is a 30,000-square-foot facility. We also expanded the use of subcontractors rather than staffing up and down during economic swings with the goal in mind of maintaining
our core people and the core tribal culture.” Markey’s 100th year has been dedicated to a new commitment to what Dempke calls the “no-compromise quality” philosophy. The company has 51 employees, and it is now looking at adding 5,000 square feet of warehouse space and 6,000 square feet of final-assembly space. Both projects are expected to be completed by the end of this year. The company has also made many key improvements to existing tooling machinery by adding digital readouts along with other modern components. Markey Machinery is America’s oldest privately-held winch manufacturer, and next on its agenda is expanding into the offshore and anchor-handling markets. Dempke says that it is applying existing technologies and improving on them as it develops the next generation of anchor-handling winches. He also predicts that the company’s tugboat industry reputation should serve it well as it expands into the offshore support vessel market. There’s every reason to believe him. A lesser-known part of the company’s business, but no less important, is its support of the oceanographic community. The company is a leader in building dependable oceanographic research winches, including hydraulic
and electric, for these organizations, including the Woods Hole Oceanographic Institute.
Markey’s Future: Sound Business Strategy, Deep Roots and Innovative Quality
When MarEx contacted Dempke about featuring his company in an article, he simply laughed, saying, “Well, we don’t photograph well.” When he understood that we were serious, he said, “Our biggest strength is that we design and develop virtually everything in-house. We focus exclusively on high-tech, high-end winches, which are used in demanding services. Quality and reliability are what Markey has been known for from 1907 to 2007.” There are many maritime enterprises that have been around for as long as Markey Machinery, and some for a lot longer. Dempke is building on the past in order to create a future. In his mind, today’s company is the same company that delivered a series of fifty warping capstans to the United States Maritime Commission for World War II vessels. While vessels and technologies have dramatically changed, a winch is still a winch, and Markey Machinery is still synonymous with quality and innovation. MarEx
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the maritime executive
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VT Halter Marine: a case study
Building on a Legacy and Rebuilding from Adversity
R
VT Halter’s General Boyd E. “Butch” King Retools an Old-Line Shipbuilding Company
eturning VT Halter from adversity and building its three Mississippi yards into a premier mid-tier ship construction company have not been empty promises coming from the likes of General Boyd “Butch” King, the company’s Chief Executive Officer. The retired Brigadier General and thirty-five-year veteran of the U.S. Army is not in the habit of failing at much, and his impressive record of managing and improving infrastructure precedes him at VT Halter. King has a folder which contains two photographs that he likes to pass around for inspection. The first shows an aerial depiction of VT Halter’s Pascagoula operation circa spring 2005. The second photograph offers the same aerial view a few days after Hurricane Katrina ripped through the region. It shows total devastation of the yard. Today, looking at the progress of rebuilding since Katrina, it is easy to understand a bit more about King’s tenacity and his commitment to build Halter into a
30 the maritime executive
force to be reckoned with in the U.S. shipbuilding industry. As we approached the main operations building, a picnic table was pointed out as the base of operations for King and his executive staff as they rebuilt the shipyard. VT Halter Marine is a wholly-owned subsidiary of VT Systems, a large multinational firm with four subsidiaries operating in four different industries. VT Systems, Halter’s parent, is a wholly-owned subsidiary of ST Engineering, which is based in Singapore. Additionally, VT Systems has established a presence that mirrors ST Engineering, as both firms own aerospace, marine, landbased engineering and electronics compaWilliam E. Skinner, Boyd E. “Butch” King, Paul J. Albert nies. VT Halter is VT Systems’ marine divicompany to survive in the rough-and-tumsion in the United States. ble world of shipbuilding. In 2001, during a The Halter Shipyards have not always had sharp downturn in the market, the predecesthe deep pockets of a global organization to sor owner, Friede Goldman Halter (FGH), had support them, which has allowed them to to file for Chapter 11. VT Systems entered to invest in capital expenditures essential for the
VT Halter Marine: a case study
VT Halter Marine: a case study by Joseph Keefe
salvage the old-line company as it purchased the majority of the Halter assets, including the shipyards, in a U.S. Bankruptcy Court-sanctioned auction for approximately $66 million. The deal was widely hailed as a “win-win” for the creditors and employees, as well as for VT Systems, which had already been searching for a shipbuilding operation in the United States. VT Halter, in the wake of that deal, has not disappointed its parent. Those in the know will tell you that the addition of Butch King as CEO is another key reason the company has returned to prosperity.
Taking Care of Business Means Taking Care of the Employees It has always been clear to King that labor will be the key to the company’s success. That maxim became painfully evident in the destructive wake of Katrina as the majority of the company’s 1,000 workers found themselves either homeless or displaced. For the VT Halter employees who managed to escape relatively unscathed, the realization came quickly that rebuilding infrastructure was going to be necessary in order to support a normal way of life that had so quickly been taken away from them. King understood that as well.
King remembers vividly that it was one thing to reopen the shipyard again after the hurricane, but getting labor back to work was the real challenge. “In the days following Hurricane Katrina,” he says, “our senior management instructed me to take care of our people. We provided all our employees with a paycheck for the first two weeks after the event and, during the next month, we paid everyone’s medical. In a month and a half, 95 percent of our employees returned.” King’s experience in the Army of overseeing three U.S. military communities with approximately 50,000 personnel provided him with the tenacity and skills to take charge of VT Halter’s post-Katrina dilemma. First, the company gave financial aid to its employees, which allowed them to remain in the region and become involved in the rebuilding and recovery process not only at the shipyard but within the local community as well. King understood that people coming together and working as a team can overcome hardships by uniting into a powerful force. Soon an entire community began rebuilding at every level. Schools began to reopen; empty concrete slabs were again full of activity, and people had hope once more. The progress was slow at first, but
because companies like VT Halter and people like Butch King believed in the community, progress in the region was soon in full swing. Managing labor may very well be one of King’s great strengths. To King, human resources are more important than all the high-tech equipment in the world. While he is not a shipbuilder by trade, he is a savvy human resource manager, which may be his greatest attribute. As a senior officer in the U.S. Army in Germany, he was responsible for negotiating workforce reductions with 15 German labor organizations with an absolute minimum of labor unrest. It is his ability to manage large groups of people that is the driving force behind the success at VT Halter Shipyards today. While the core employees of Halter are loyal, King also uses a lot of contract employees to bridge the gaps in the regional labor pool. As shipwork is cyclical, employing contractors makes perfect sense because the last thing King wants to do is layoff loyal employees. Besides, he points out, contractors move between Houston, South Louisiana and the Gulf Coast shipyards with regularity. The recent work stoppages at the Northrop Grumman facilities are a stark reminder of the
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VT Halter Marine: a case study fragile nature of shipyard work, where time is money. Delays in ship deliveries can mean loss of confidence from prospective customers or worse – going out of business completely. At VT Halter, there is clearly a family atmosphere within the rank-and-file. The monthly crawfish boils in the fabrication shop are well attended by management so that the workers feel a sense of being part of a team. While Halter is a non-union shop, there is a family pride which breeds loyalty amongst co-workers, which goes much deeper than an occasional crawfish boil. King is not complacent about hiring and retaining quality employees. However, his immediate attention extends beyond the gates of Halter’s three facilities to a new steel mill being built in nearby Mobile. “The new steel mill is going to put some pressure on me at first,” he admits, “but it’s also going to bring a lot of skilled workers to the region. A welder is a welder whether they work at a steel mill or a shipyard.” He also acknowledges that the mill will be good for the community at large, which is still in the recovery process.
Rebuilding Smarter In the weeks that followed Katrina, the VT Halter management team met each day in Pascagoula at the executive picnic table in front of the main operations building. As the insurance money and the capital infusion from VT Systems became available, King and his team brought the three yards back into full production in remarkable time. “After Katrina, and this is important, we were able to deliver the first ATB only 30 days late,” he says with pride. “This is truly an accomplishment considering
32 the maritime executive
the regional devastation. The third and fourth units are being built right now and are due to be delivered later this year. Because of various interruptions, our cutting tables were down for five months. Consequently we fell behind on those deliveries. However, it must be said that, because of our synergies, we were able to continue working on the side-shells at our other yards and were able to bring them back here and begin assembly.” King and his team wanted to get back to making money in the short term while also fulfilling long-term goals and building confidence among clients. Moreover, the team literally began planning for the next disaster by doing such things as raising the height of the electrical equipment in the yards in case of flooding. As hurricane season kicks off, King is focused on preparing and improving the yards in case another storm tears through the region. He is also hoping that these improvements and safeguards will figure into the decision-making process of potential customers.
ogy as a result of the improvements made after Katrina. That helped us do it,” he explains with a bit of satisfaction. In Butch King’s world, he has taken a company coming out of bankruptcy and put it on stable ground and was able
VT Halter’s financials are not widely known and, in fact, these are closely-guarded numbers. King won’t talk dollars but insists that his firm’s backlog extends through the end of 2010.
Positioning the Shipyards With Capital Improvements Delivering Crowley Marine’s articulated tug and barge (ATB) in a timely fashion after Katrina was a good place to start for Halter, says King. “In an instant, we went from thirtyyear-old technology to state-of-the-art technol-
to modernize the yards due to an unparalleled catastrophe. Halter is truly a mythical phoenixfrom-the-ashes story. VT Halter has installed and expanded its launchways, which will allow the company to build barges faster and increase the “return on investment” factor much sooner. The company is installing a new fabrication shop as well. King states with a lot of pride that VT Halter’s current capacity is that of the six yards of the previous owner, but admits that the apples-to-oranges comparison is a difficult one.
The VT Halter Way: Three Yards – One Business Plan VT Halter’s financials are not widely known and, in fact, these are closely-guarded numbers. King won’t talk dollars but insists that his firm’s backlog extends through the end of 2010. With the company at 70 percent capacity on smaller vessels, he expects that the OPA
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VT Halter Marine: a case study 90 phaseout boom will most likely hit American yards between 2011 and 2014. While he claims it is impossible to make predictions beyond five years, he is still in high gear preparing for the future. The small boat market has been the company’s bread-and-butter. Offshore support vessels and articulated tugs and barges have been filling its yards. King says the jury is still out on whether the domestic oil transportation industry will build tankers or ATBs to replace the OPA 90-mandated retirements. But he acknowledges Crowley Marine is investing heavily in ATBs and should be far ahead of the curve. “An articulated tug and barge is as efficient as a traditional tanker, especially along the Gulf Coast,” King says. “American yards will build many more of them.” Therefore, he is strategically positioning VT Halter to take advantage of the economies of scale of ATB construction. This will allow the mid-tier builders like Halter to compete with the big yards that have traditionally built tankers. When asked about “modular parts” from places like South Korea, King acknowledges that it’s an issue that cannot be avoided. He also says the company has not yet made a decision about using these types of parts.
“We are not involved with this practice now,” he says. “We have looked at the possibility of using foreign components in the construction of tankers and car carriers. VT Halter needs to remain competitive, and we will continue to review and consider the matter. The Jones Act needs to remain strong, and we won’t contribute to weakening it.” While the company is doing approximately 65 percent commercial and 35 percent government work, King is adamant about not getting back into the repair and conversion business again. King would like the mix of work to be 50-50 between commercial and government. To accomplish this, the company is aggressively bidding on more government contracts, and there has been a major effort to convince the U.S. Coast Guard and the Navy that it is well equipped to meet their requirements. Halter Moss Point is being equipped to handle military contracts. The yard is already building National Oceanic and Atmospheric Administration
(NOAA) research vessels. And while government contracts are quite different than commercial work due mostly to electronics, King has positioned the yard for military requirements. In fact, he is going to bid on the U.S. Coast Guard’s Fast Response Cutter, which, at 160 feet, is perfect for Halter Moss Point.
Mr. King Goes to Washington: Selling the Plan Unquestionably the ability to negotiate government contracts fits well into King’s
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VT Halter Marine: a case study quiver. He will draw on his Army experience to navigate the maze of contracting with the federal government. He also understands that the recent problems with the Deepwater Program and the LCS (Littoral Combat Ship) mess are not going to make the contract process any easier. Dealing with the federal government requires the ability to speak in MILSPEC (“military specifications”) terms. Building ships for the government involves risks, such as fluctuating steel prices or labor costs. “So you have to share these costs with the government,” he says, “and focus on the incentives, which the shipyard can control.” While Halter’s financial problems are a distant memory, government contracts consider past performance and financial condition. Today, VT Halter has a parent company with deep pockets, and its Gulf yards have two solid years of earnings behind them. Armed with NOAA and U.S. Army contracts, the
company also has a definable track record with the federal government. Over the past 50 years, VT Halter and its predecessors have delivered more than 2,600 vessels to commercial and government customers in 29 countries. King has been concentrating on short-term issues, but he has a vision of building a highly-regarded, premier group of shipyards on the Gulf Coast of the United States. Along with Bill Skinner and Paul Albert, King has more than luck on his side.
He has synergy, modern facilities and a strong business plan going forward. King’s philosophy is a simple “You are what you are because of what you were.” The hurricane season is here once again, but VT Halter has installed safeguards to weather the storms. From a business perspective, the three yards are strategically positioned to meet the needs of their customers; and from the leadership perspective, VT Halter is in good hands. MarEx
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the maritime executive
35
executive
executive
interview
by Joseph Keefe
interview Brigadier General
Boyd E. “Butch” King, U.S.A. (Ret.) Chief Executive Officer of VT Halter Marine
G
etting to Pascagoula, Mississippi to visit Brigadier General Boyd E. “Butch” King, U.S.A. (Ret.) was easier said than done. However, my epic journey is a story for another place and time. The mission at hand was to interview King for the shipbuilding edition of MarEx. Today, the VT Halter Shipyards story is one of resurgence and success, and VT Halter and Mr. King are only focused on the future because the past is a distant memory. King retired from the United States Army in 1998 after more than 35 years of military service in supply, maintenance and transportation. He has had other key jobs since then, most notably as a senior associate with Booz Allen and Hamilton, a major Washington, DC-based consulting firm. He has expert knowledge in integration of the military supply chain from strategic planning through operational execution to the tactical arena. His Army background in automated systems and
their relationship with other Department of Defense (DOD) automated systems is unparalleled anywhere. It is from this foundation that he has brought a new sense of purpose, organization and discipline to VT Halter. Mr. King’s education includes a Master of Business Administration, with a concentration in Logistics, from the Florida Institute of Technology at Virginia’s Fort Eustis campus, and a Bachelor of Arts in Psychology from Auburn University in Alabama. He is also a graduate of the Army War College and the Industrial College of the Armed Forces. In the military, General King initiated a $3.9 billion improvement program for facilities and equipment in Army overseas deployment. While Director of Logistics and Technology Development for Birmingham Steel Corporation, he negotiated contracts with contracted motor carriers that saved two percent a year on a budget of $38 million. He developed and implemented “Electronic Data Interchange” with various railroads, which saved the company thousands in additional billings and overcharges for weight discrepancies, and implemented an in-house automated system for the auditing and paying of freight bills, which saved an additional three percent on a budget of $78 million. Butch King’s ability to manage and implement programs is remarkable. With a four-day
36 the maritime executive
notice of an executive order, he transported U.S. Army units by road, rail and inland barge through 33 seaports and 15 airports in order to meet military contingencies. He used the same logistical plan to implement the movement of U.S. Army forces to the Southwest Asian and Balkan theaters. King is truly a master of negotiations. While still in the Army in Germany, he negotiated with 15 German labor organizations that resulted in a 33 percent worker reduction, in line with an Army mandated drawdown of military personnel, without labor problems. In the aftermath of Hurricane Katrina he drew from his experiences of commanding over 50,000 personnel throughout three military communities to help get VT Halter up and running again, a feat which ultimately impacted the local community as well. MarEx is certain that our readers will find the forthcoming interview with General King as interesting and refreshing as we did in meeting with him. MarEx: Halter Shipyards has undergone serious changes over the years. Can you provide an overview of VT Halter’s fifty-year history? King: First let me say that VT Halter is a new company with fifty years of experience. Harold Halter began his shipyard by primarily building platform support vessels (PSVs) for the offshore industry. He enjoyed designing
vessels, which were in the 185-foot range, and used many of his own PSV designs for clients. Today, we’re building offshore support vessels (OSVs) and anchor-handling ships in the 285foot to 300-foot range. Offshore support vessels are still a major product of the Halter yards. Harold Halter built the business working with both military and commercial clients, and we intend to do the same going forward. Several years before I joined the company, Halter went through a merger with Friede Goldman and became Friede Goldman Halter. Unfortunately, times were rough in the industry, and the company went bankrupt. VT Systems purchased most of the Halter assets, which became VT Halter Marine. Today, our business plan is to be the premier newbuild competitor instead of focusing on repairs. Once we had six shipyards, of which three were quite small. Now the decision has been made to do the premium and mid-tier work here in Jackson County. And since I joined the company that’s what we’ve been working on. We’re focused on becoming a top engineering and newbuilding company with a great reputation and great people working for us. In keeping with the company’s storied past, we bought the rights to all the designs. MarEx: You mentioned something of importance. VT Halter is going to focus strictly
executive
on being a newbuild shipyard. Are you doing any repair work at all? King: No. We’re keeping strictly to newbuilds. We are no longer in the repair business, which includes conversions. We determined that newbuilding would be much more profitable. And we are capital-expensing our yards to be more efficient and effective with regard to our newbuilding program. MarEx: Congratulations. In terms of newbuilds, what are the largest vessels that can be built at VT Halter? King: Approximately 50,000 deadweight tons at our Pascagoula facility. Additionally, we’ve extended the launchway to about 720 feet in length and 102 feet in width. By our calculations that boils down to approximately a 50,000-deadweight-ton tanker. MarEx: Isn’t that a perfect-size vessel for the domestic Jones Act market? King: Indeed. Recently, 47,000 deadweight tons seems to be the magic number. Aker Shipyards is building 10 product tankers in Pennsylvania. Of course, we’re also looking at the product tanker market. And there is a lot of excitement and growth in the articulated tug and barge (ATB) market. Consequently, we are reviewing those opportunities as well. Additionally, there is some movement towards larger ATBs with tanker like speeds. MarEx: How many employees does VT Halter have on its payroll? How does this compare to the former Friede Goldman Halter yards? King: Currently, we have approximately 950 employees in our engineering, administrative and production groups. MarEx: It is my understanding that the three yards are doing what the former organization did in six yards. Is that due to the new
company being more efficient? King: Exactly. It is truly exciting to watch the synergies come together. Bill Skinner, Paul Albert and myself are working together to operate the three yards more efficiently and leverage their capabilities. MarEx: I would like to discuss your background in a little more detail. You have been at Halter since December of 2002 and, as our introduction explained, you have had a very distinguished military career. I am sure our readers would like to hear more about that. Also, include how your military career has positioned you to lead the VT Halter team.
interview
ter job became available. I interviewed for the position, and that’s how I ended up in Gulfport. MarEx: Our condolences on the loss of your wife. King: Thank you. I appreciate the sentiment. MarEx: Your background in Macedonia is an interesting part of the story. Compare the task of bringing a fledgling army up to standards versus the organizational logistics at VT Halter. I am sure there is a lot of correlation. King: Absolutely. Maintenance, supply and repair are essential to any organization. When I was in the Army, I ran seven repair depots in four countries in Europe. When I
Today we are a cutting-edge production facility with a strong aluminum welding group capable of building aluminum superstructures for ferries and vessels. King: I would be delighted to share my background with your readership. I retired from military service in 1998 and went to work for Birmingham Steel in Birmingham, Alabama. On a personal note, one of the primary reasons I went to Birmingham was because my wife was from there and she was diagnosed with ovarian cancer and wanted to spend her last days with her family. So I worked at Birmingham Steel for a couple of years and, eventually, she passed away. I then went to work for Booz, Allen and Hamilton, a consulting firm based in Washington, DC. In fact, I was in Macedonia, working with the Macedonian Army on its logistics to become a member of NATO, when the VT Hal-
was hired by VT Halter, the person who hired me said: “I know you don’t know anything about building ships, but you’ve managed large industrial organizations, so you need to go down there and organize our operations. And you will have shipbuilding people working for you.” MarEx: So would it be fair to say that your military background and organizational skills were the deciding factors in VT Halter’s hiring you? King: Yes. VT Halter understood it was becoming a diverse operation that had just come through some very rough times, and it was looking for someone to pull all the elements together. MarEx: Are you a West Point graduate? King: No. I’m afraid I had a different career path. I joined the Army at 19 as a Private and was assigned to Germany. I made Buck Sergeant in Germany in the Infantry. I applied to and was accepted to the Warrant Officer Flight Program and became a helicopter pilot. Eventually, I went to Vietnam and, in Vietnam, I received a direct commission to Second Lieutenant. I flew helicopters for two tours in Vietnam and then came back to the States to continue my career path in the Army. So, as I like telling people, I’m one of the few people in the Army who has been a Private, a Sergeant, a Warrant Officer, a Commissioned Officer and a General. There are not too many of us around. My wife, on the other hand, used to say that I could never hold a job.
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MarEx: VT Halter is owned by a foreign company. Where does the company fit into the hierarchy? Do the VT Halter yards have any synergy with the overseas organization? What
am under what is called a “special security arrangement.” I deal with the parent company and its directors, but I do not interact with the overseas entity due to the “firewall,”
Halter Moss Point is building the NOAA research vessels and we plan to build military vessels there as well. are the mix and sources of your contracts? Finally, what is the foreign parent’s overriding interest in operating three mid-size shipyards on the U.S. Gulf Coast? King: VT Systems is a wholly-owned subsidiary of ST Engineering. VT Systems was given a charter to come to the States and establish a presence, which mirrored ST Engineering. ST Engineering is very large and has aerospace, marine, land systems and electronics divisions. VT Systems has the same makeup and owns Mobile Aerospace, which is a repair facility in Mobile, Alabama. VT Halter is their marine division. There is also an electronics division along with various other companies, including a land systems division. Part of ST Engineering’s goal is that it wanted U.S.-based operations in these four divisional areas. And we leverage the ST marine functions in Singapore. We can use them for engineering and ship design. We can utilize their ships of any design, and they send personnel to assist us with our organizational infrastructure and building efficiencies. While we have some synergies, our contracts are for vessels built for the Jones Act trade and we use many of the old Halter designs. MarEx: Whom do you report to in the organization? King: I report directly to the CEO of VT Systems. One of the other anomalies here is that we do some government contracts. So I
which allows VT Halter to bid on U.S. government contracts. Furthermore, we are fully authorized by the United States government as a “DOD-approved storage facility” and as an entity which is allowed to bid on U.S. government contracts. The company is structured to invite government investment, but we also protect the sanctity of U.S. government-classified information. MarEx: We have already discussed that VT Halter has more than one shipyard and fabrication facility. Provide our readers with an overview of all of them, in terms of capabilities and capacities at each location, and highlight the synergies among them. King: As I have said before, we have the three yards: one in Pascagoula, Halter Moss Point and Moss Point Marine. Let’s begin with Pascagoula, which is the largest yard. At Pascagoula we can build the largest vessels, and it also maintains a fabrication shop with two cutting tables. It also performs fabrication for all three yards, which allows us to keep the fabrication shop operating twenty hours a day, five days a week, and we keep it fully utilized supporting the three shipyards.
An important element of our operations is that all three yards are within seven miles of each other, and they are all connected by water. We also own a tug and own barges as well. As the Pascagoula yard cuts and fabricates parts, we have the capability of loading the barges and distributing product to the other yards. Pascagoula also performs aluminum welding. Currently, we are building an aluminum superstructure for a National Oceanic and Atmospheric Administration (NOAA) vessel, which is being assembled at Halter Moss Point. Recently, we were awarded a contract to build ten 185,000-barrel ATBs, and we are building the barges here in Pascagoula. After Katrina, and this is important, we were able to deliver the first ATB only 30 days late. This is truly an accomplishment considering the regional devastation. The third and fourth units are being built right now and are due to be delivered later this year. Because of various interruptions, our cutting tables were down for
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executive
interview
five months. Consequently, we fell behind on those deliveries. However, it must be said that, because of our synergies, we were able to con-
military are quite different than they are for commercial. A prime example is electronics. Remember, Halter Moss Point is building the
...our company goal is zero accidents. With that being said, our actual record is about 50 percent of the SCA total recordable incident rate, and my goal is to drive that percentage down even further. tinue working on the side-shells at our other yards and were able to bring them back here and begin assembly. I would also like to point out one other thing about the Pascagoula yard. We are the first shipyard to have ever built a pure car/pure truck carrier for the Jones Act trade. This location has allowed the company to get back up to speed after Katrina and, because of that, we’re making a lot of capital expenditures here now. The Halter Moss Point yard is focused on government contracts. We don’t think it’s wise to mix government and commercial work due to the different requirements and specifications. Government requirements for the
NOAA research vessels and we plan to build military vessels there as well. MarEx: What are Halter Moss Point’s maximum vessel capacities? King: We can build ships up to 400 x 70 feet in Halter Moss Point. We are currently looking at corvette-type ships, something in that range. We have also built a 314-foot logistics support vessel in the yard and want to bid on the U.S. Coast Guard’s Fast Response Cutters. These vessels would be perfect because they are approximately 160 feet in length. MarEx: Do you think VT Halter is an alternative to the big yards? King: I believe that VT Halter has done
a good job distancing itself from the recent bankruptcy issues. On a related note, recently we won a contract from the Navy to build a vessel called the TAG M-25, which is the replacement for the Cobra Judy. The vessel is being fitted with new radars and sensors because it is a range instrumentation vessel. There were three yards in competition for the design, and we were selected to build it. Recently, we passed the critical design review and are now preparing for production. We should be cutting steel early next year. MarEx: Where does VT Halter stand in obtaining U.S. Coast Guard work? King: Our proposal for the Fast Response Cutter is an excellent design crafted by our Singapore affiliate. The U.S. Coast Guard requires a proven hull form to reduce procurement risk. So we’re excited about the possibility of being involved with the project. MarEx: I believe most in the marine industry have heard about the difficulties surrounding the U.S. Coast Guard’s “Deepwater” project. There has been lots of criticism about too much responsibility being given to the contractors, who didn’t get the job done right. What are your thoughts on this issue? King: First let me say that I spend a lot of
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40 the maritime executive
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vessels. Companies are time in Washington, DC now building 285 to communicating with the 300-foot offshore ves“NavSea” people about movsels and they are a pering their projects forward fect fit for Moss Point on time and to specificaMarine. As business tions. Based on my Army in the Gulf of Mexico experience, every time we increases, our customcontracted out the sub-coners are looking at buildtracting process we got in ing these types of vestrouble. With projects of Computer-generated image (left) and actual building of the ship (right). sels. I envision a good this magnitude there must mix of commercial, govthe Department of Commerce for a NOAA always be diligent oversight. ernment and military work. contract. We came right in the middle, more or When VT Halter deals with contracting In Pascagoula, I envision vessels around less, on four NOAA vessels and never received parties, including the Navy, we provide a 600 feet, whether it’s an ATB or a 47,000-deadany savings and they didn’t have to pay any firm, fixed price. They get what they paid for weight-ton tanker. Pascagoula is a mid-tier percentage of cost overruns. and none of these “cost-plus” deals. I mean yard. At our other yards, an 80,000-barrel unit In the current contracts being written, you you can’t get away with these things in the is about as low as we want to go, and we are bid it and you get the audited pricing rate. If commercial arena. So why is it so prevalent not really into building hopper barges or small you can build the project in fewer hours, you with government contacts? I believe that the inland units. We just can’t compete on the can make more money. Beyond that, it’s a government is beginning to recognize that pricing of the specialty yards. We are staying fixed price deal. controlling project cost is in the best interest with what we do best. MarEx: The brown water market for shalof the taxpayers. MarEx: Let’s talk about shipyard safety. low-draft vessels was Halter’s bread-and-butter MarEx: We interviewed John F. Lehman in In the marine industry, if safety is not part of 10 to 15 years ago and perhaps still is. How do a recent issue of The Maritime Executive, and the corporate culture you will fail. Explain VT you see your business mix going forward? he spoke about providing incentives to the bidHalter’s safety programs and, more importantly, King: It is our intent to leverage each ding and building process. Have you ever been what is your company’s safety record? yard to its maximum capabilities. The Moss involved with this type of contract? King: Comparing shipyards would be hard Point Marine yard will construct our offshore King: Yes. We had this type of clause in
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to do in terms of what we do and how we do it. You are, at this moment, talking to the Corporate Safety Officer for VT Halter, because the buck stops here. Upon arriving in this job,
the work flow through the fabrication shop. Now our cutting tables are directly inline, and the space in our shops is better utilized in terms of torches and manpower efficien-
I envision vessels around 600 feet, whether it’s an ATB or a 47,000deadweight-ton tanker. cy. Today we are a cutting-edge production I immediately began discussing safety issues facility with a strong aluminum welding group with our safety manager. We established a capable of building aluminum superstructures policy that clearly states if an accident hapfor ferries and vessels. pens, our safety board must review the event MarEx: Let’s touch on a couple of key to ensure it doesn’t happen again. I am in management issues. Often a CEO’s managecharge of the safety board, and I go to each ment style is reflected in the corporate culture. and every accident site. What is your most important achievement at We use the Shipbuilder’s Council of AmerVT Halter? ica (SCA) Safety Program as our benchmark. King: When I joined the company, it was Furthermore, each quarter we share our safety clear that the company was very centralized statistics with them. Obviously, our company and decisions were only made at the highest goal is zero accidents. With that being said, our levels of the company. My military background actual record is about 50 percent of the SCA taught me to pick good people and give them total recordable incident rate, and my goal is to authority and responsibility. My management drive that percentage down even further. style is to empower people and then ensure We have a safety award and we give safethat the job is getting done efficiently and ty bonuses. Every morning we have a safety effectively. I think that’s my biggest contribumeeting before work to stress that safety is tion in the short term. everybody’s responsibility. In the military, I had I like an organization where people are a saying, “If you see somebody doing something incorrect or unsafe and you correct them, then you’ve just set a new safety standard.” So I stress safety to our leader men and foremen because they are our safety officers as well. MarEx: What is being done at VT Halter that separates you from the pack? King: First, we have a great relationship with ShipConstructor, which provides shipbuilding software. Hurricane Katrina wiped out VT Halter’s cutting tables and panel lines. So we had to buy new cutting tables. In an instant, we went from thirty-year-old William E. Skinner Paul J. Albert technology to state-of-the-art techresponsible. But I am never more than a few nology. Now our engineers can send designs people away from the person with a tool in his and specifications via Local Area Network hand. Finally, “I don’t eat my young.” If somedirectly from the computer aided drawing to one drops the ball, I ensure they recognize it the steel cutting tables. Basically, VT Halter and fix the problem, but don’t make the same has improved efficiency by 35 percent. We mistake twice. I don’t believe in draconian tacare producing more steel products than ever tics to get things done. before and enough to keep our three yards fully MarEx: After Katrina, the government said employed. While Katrina was a nightmare to it was going to spread a lot of federal money the region, the devastation forced us to buy around the Gulf Coast shipyards to assist in new equipment and forced us to re-engineer
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their recovery. Was your company the beneficiary of any of that money? King: No. However, we did get some help from NOAA, but it was a small amount of money to assist in the Halter Moss Point recovery. To tell the truth, if any money was given, it went to the big yards and it didn’t flow to the mid-tier shipyards. Currently we’re dealing with the state to do CAPEX work here in Pascagoula. We will have to guarantee an increase in jobs offered and, perhaps, a few other things. It’s certainly not a giveaway program. At this time, our parent company is investing money in the three yards and we have whatever we got out of the insurance. MarEx: VT Halter is foreign-owned and ST Engineering is traded publicly in the foreign stock markets. Consequently, VT Halter’s financials will never be truly known because the company is very closely held, even more so than before. With the bankruptcy behind the organization and a multitude of enhancements to the facilities in the aftermath of Hurricane Katrina, is the company staying busy enough to make returns on investments? King: While Katrina surely had an impact on our financial progress, we did make money last year and it looks promising for this year. The company was in a strong recovery from bankruptcy in 2003 and 2004, and we were progressing nicely in 2005 until August 29 when Katrina devastated the region. MarEx: Modular parts from places like Korea are becoming popular in domestic shipbuilding. According to the federal government and the U.S. Coast Guard, the practice is legal as long as the total parts do not exceed a certain percentage of the vessel’s composition. What is VT Halter’s policy on the practice of using foreign parts for U.S. shipbuilding? King: We are not involved with this practice now. We have looked at the possibility of using foreign components in the construction of tankers and car carriers. VT Halter needs to remain competitive and we will continue to review and consider the matter. The Jones Act needs to remain strong, and we won’t contribute to weakening it. MarEx: Today there is a practice of sending U.S. flag vessels overseas for incremental repair work, which is about 10 percent of the allowable financial repairs. Critics point
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out that certain operators, including staunch supporters of the Jones Act, are abusing the system. What is your company’s position on this matter? King: It is absolutely wrong, and the U.S. Coast Guard needs to enforce the Jones Act as it is written. At our Pascagoula and Moss Point Marine facilities, we are building ten 185,000-barrel barges and ten tugs for Crowley Maritime. Crowley is being totally compliant with Jones Act regulations. How can Crowley compete on a level playing field with a company that is re-skinning equipment overseas and then bringing it right back into domestic waters to work directly against them in the Jones Act trade? MarEx: What is the company’s breakdown between commercial and government? King: Currently, we manage approximately 65 percent commercial and 35 percent government, but we are working hard to achieve a 50-50 split. MarEx: Today, conditions for shipbuilding in the United States are better than they have been for a very long time. Building in brown water, offshore and even tankers is robust.
What is VT Halter’s backlog, and what is your prognostication for the future? King: I won’t talk dollars with you, but we have a backlog of orders to 2010. While we are only at 70 percent capacity in vessels of 400 feet or less, I feel that it is still very healthy. To tell the truth, it is hard to project beyond five years. However, there will be closure to the domestic Oil Pollution Act of 1990 (OPA 90) tanker fleet through 2014. Obviously, the market will settle down a bit, but I do see a robust future for U.S. shipbuilding. MarEx: What is the future of the Jones Act in your opinion? King: Jones Act shipbuilding is an important part of the American industrial base. The Act ensures that the country has strong shipbuilding capacity and skilled workers in times of national emergency. There is a lot of turmoil in the world, and I don’t think we should allow those who would like to compromise by doing away with the Jones Act to prevail. This nation needs the Jones Act to
interview
survive as the leader of the free world. MarEx: In terms of skilled labor, has your company had an issue getting workers back to work as they have had to rebuild their own lives? King: In the days following Hurricane Katrina, our senior management instructed me to take care of our people. We provided all our employees with a paycheck for the
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I am one of the few people in the Army who has been a Private, a Sergeant, a Warrant Officer, a Commissioned Officer and a General. There are not too many of us around. first two weeks after the event and, during the next month, we paid everyone’s medical. In a month and a half, 95 percent of our employees returned. With regard to Halter employees, I never want to fire anyone. As we rebuilt from Katrina, I used a lot of contract labor. I can pull back from those folks because they are transient and work in different yards as needed. During this period, we were also competing with local, state and federal rebuilding efforts for labor. But the Gulf Coast is coming back, and available labor will remain strong for our local residents and for our shipyards. MarEx: You have already pointed out various upgrades in your yards due to Hurricane Katrina. Are there any other upgrades or yard
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projects being planned by your company? King: Currently, we have an exciting program going on, which I previously mentioned. We are extending the launchway in Pascagoula, and I have a Crowley Maritime barge on it right now. But let me also say that I have enough space on it to build two barges simultaneously, and we have plans to extend them even more to handle three barges at a time. Right now, we can deliver one barge every seven months approximately, but Bill Skinner and Paul Albert are dedicated to reducing the timeframe down to six months. Reducing the time to build barges is important to companies like Crowley Maritime. As we increase our launchway capacity, we can move barges along a little faster, and I guarantee that Crow-
ley can get a contract for them. More importantly, we will add to U.S. shipyard capacity. Additionally, we are building a new launchway and fabrication shop at Halter Moss Point. MarEx: We have discussed many things, not only about your company, but also the state of affairs in U.S. shipbuilding. Please provide us with your final thoughts. King: First, let me say that U.S. yards are as good as any in the world. What is currently being built is different than what has been built in the past. An articulated tug and barge is as efficient as a traditional tanker, especially along the Gulf Coast. American yards will build many more of them. However, OSG is building traditional tankers, but more for the West Coast oil trades. OSG is building 10 tankers and that is significant. At VT Halter we are facilitating our growth for the ATB-type vessel and mid-sized ships. They are perfect for our mid-tier yards. MarEx: We appreciate your time and all the best with your shipyards.
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state of the industry: shipbuilding
state of the industry:
shipbuilding - summer 2007 A Half Hour With Donald “Boysie” Bollinger
I
by MarEx Staff
n May, as MarEx completed its southern swing through the U.S. Gulf Coast in preparation for this year’s “Shipbuilding and Repair Edition,” we caught up with one of the industry’s busiest executives in New Orleans. If you were to ask anyone in the shipbuilding industry whom they would most like to spend
a half hour with, we think most would choose Donald “Boysie” Bollinger. Bollinger has long been recognized as a prominent and well-connected industry executive. While his opinions have at times gone against conventional wisdom, his company and leadership within the shipbuilding industry are without question held in high
Donald “Boysie” Bollinger
utes, we used it wisely and asked a lot of important questions of Boysie Bollinger, Chairman, President and CEO of Bollinger Shipyards. We think you will enjoy hearing what he has to say. As the summer of 2007 begins to heat up, Bollinger remains bullish on the state of the shipbuilding and repair industry overall and has high expectations heading into the third and fourth quarters of this year. As we settled in for our quick conversation, he offered, “It’s obvious that the U.S. shipbuilding industry is enjoying a phenomenal demand rate not seen in the last thirty years. The late 70’s and early 80’s were the last true boom period for U.S. commercial yards, but that was short-lived once the oilfield support and brown water sectors finished their burst of building. Today, those industries are again strong, and I feel there is a lot more discipline due to the tremendous amount of consolidation.” Bollinger goes on to say that this new discipline in the oilfield support and inland transportation industries has been focused on not overbuilding, because no one wants to drive down rates and instigate another market crash for the transporters or shipbuilders. Additionally, he states that the current construction trend is replacing existing tonnage with next-generation tonnage and building new tonnage for new markets, such as the deepwater markets in the U.S. Gulf of Mexico and around the world. The Oil Pollution Act of 1990 (OPA 90) is another driving factor for increased building activity in the U.S. due to the phase-out implementation kicking in. Bollinger smiles as he calls the current boom a “perfect storm” for American shipbuilding with the various sectors suddenly and all at once having an urgent
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esteem. Consequently, understanding that we had only 30 minneed for new equipment. The oilfield support, inland waterways and oil transportation sectors all require new tonnage, he says. Another factor pushing this robust building market is the increased activity in the ship repair sector. “However, today the real challenge for the shipbuilding industry,” Bollinger says with a look of genuine concern, “is a serious lack of skilled labor at all levels of the business, and it is having a direct impact on the delivery of vessels on time. Furthermore, we are seeing
double-hull units. Consequently, there was a “logjam of building in 2005, 2006 and 2007, which was far in excess of what a proper transition should have been.” But, he adds, even an orderly transition would have created some level of excessive demand on the shipyards. Beyond this, some sectors are still having a tough time finding the right balance of new tonnage versus existing tonnage. Ultimately, Bollinger foresees a robust OPA 90 replacement demand that should take the industry far into
You have the ability to apply technology that didn’t exist before and apply it in the maritime arena. This will allow certain ships to do things they couldn’t do before. For example, shuttle tankers will be DP [dynamic positioning]-capable so that they can go to FPSOs [Floating Production, Storage and Offloading vessels] to load. This is something people never even thought of five years ago. vendor delivery problems with winches, main engines and electronics, which are also affecting ship deliveries.” Bollinger has his own ideas on whether the current boom will end with a “soft or hard landing” but, when asked about the end of the OPA 90 phaseouts, he replies, “The OPA phaseout is a factual evaluation and very predictable, except that we are witnessing an increase in demand that is not necessarily true replacement tonnage.” Bollinger maintains that the OPA 90 replacement planning surge came later than most people expected - primarily due to operators not receiving justifiable rates to build
the future - perhaps as far as 2015. While there are still many unanswered questions, Bollinger thinks there is enough work for all the U.S. shipyards. However, he also stresses that there may not be enough players in the game. “In terms of OPA 90 replacement,” he interjects, “there are a lot of articulated tugs and barges (ATBs) being built, and it is really boiling down to product tankers versus ATBs. We understood that at least twenty product tankers were needed, and between Aker and Nassco there are approximately twenty tankers currently under construction. It’s probably the right number for
state of the industry: shipbuilding now, but I feel that there is still a need for more because, despite the fact that these twenty product tankers are being built, there are still customers out there looking to build more.” When asked about a “soft or hard landing” for the industry, Bollinger replies, “In the inland sector, Ingram Marine alone has ordered more than 2,000 barges. Now let’s put that into perspective. The inland industry sees the power side of the equation (tugs versus vessels) a lot differently than the ocean transportation sector does. Barge operators only require minimal power units to move a lot of barges, while the ocean sector needs lots of power units to transport its commodities.” Bollinger continues by pointing out that inland operators tend to make their power units (tugs and push-boats) last longer through constant upgrades and continual maintenance programs. Bollinger remembers the last offshore support industry crash, which resulted from an oversupply of oil in a low-demand market: “Demand absolutely drives the offshore support industry. For the near future, oil will sit far beyond $40 dollars a barrel, and that in itself is dictating the strong offshore vessel-building activity.” Moreover, Bollinger feels that American yards are building offshore vessels just as well as their foreign counterparts, which will ultimately allow U.S.-built equipment to successfully move into international markets. “The cost of building offshore support vessels in the U.S. versus overseas is very close. American yards can and do compete with our international counterparts,” he says without blinking an eye. Bollinger does not see a soft landing from the current boom. Rather, he calls it “an intelligent landing.” The players today are much more sophisticated in their market analysis and much more flexible in their business structures to react to a down-cycle, he states. “Frankly, I think most companies are more focused on
being leveraged properly than they were in the 80’s. Back then, the banks were very aggressive and they didn’t allow any latitude for operators in trouble. Today, owners and shipbuilders are a lot more sophisticated. In the old days, companies built vessels without any clue about what might happen beyond next week. This time, if a major downturn takes place, I believe everyone will be much better prepared and it
were allowed to do emergency work in foreign yards. It didn’t mean they were allowed to have their vessels rebuilt overseas and then turn around and use them in the Jones Act trade. Because of Matson’s actions, we are beginning to see a pattern of abuse with other Jones Act carriers as well. While they may think they are slipping through the cracks by rebuilding an entire ship overseas, we’re all aware that those
However, today the real challenge for the shipbuilding industry is a serious lack of skilled labor at all levels of the business, and it is having a direct impact on the delivery of vessels on time. will be an ‘intelligent landing.’” Despite incredible consolidation over the last fifteen years, Bollinger projects there will be an increase in capacity at American yards through what he calls “organic growth within certain firms.” The recent consolidations and mergers did not reduce capacity, he concludes; it simply consolidated who had the capacity. “Change in ownership is just that,” he adds. “It didn’t necessarily mean there were fewer yards. It simply meant that while some yards took decreased capacity, others increased capacity.” Any conversation about U.S. shipyards will ultimately turn to the two hottest issues in the business: the use of foreign-built, modular parts to help construct U.S. Jones Act product tankers, and the practice of taking U.S. vessels to foreign shipyards for incremental refits. While both of these scenarios are considered legal by the U.S. Coast Guard, the litigation against these alleged Jones Act infractions is extremely aggressive. Whether the practice is right or wrong, assuredly there is no shortage of opinions on the issue. Bollinger, as might be expected, has plenty to say: “Matson Line vessels
most protected under the Jones Act provisions are the ones abusing it the most by not adhering to the letter of the law. How can they say they need protection from low-cost foreign carriers and then turn around and abuse the system that protects them?” Regarding the practice of using modular parts to build ten product tankers at Aker Philadelphia, Bollinger has strong opinions as well. “While I don’t know the particular details regarding these tankers, what I do know is that the initial plan to use modular parts was very appropriate. These components are approximately one and a half percent of the total hull.” However, Bollinger adds that the U.S. Coast Guard and the shipbuilding industry are about to learn much more as the first delivery by the yard will most likely be challenged by Crowley Maritime. “Thus far the U.S. courts have been quiet. However, it will be interesting to hear what the courts say to the U.S. Coast Guard, because it’s the first time it has had legitimate jurisdiction over a vessel built under this circumstance.” Regarding the practice of using for-
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state of the industry: shipbuilding eign-built modular parts, Bollinger’s attitude is that one and one half percent of any hull is an insignificant issue. “The quality and workmanship on these types of components are much better overseas,” he concludes. “The U.S. doesn’t necessarily have the capacity to produce them. Therefore, I don’t have a problem with the practice. With that said, I am the biggest supporter of the Jones Act. And I am opposed to foreign conversions and the abuse of these privileges.”
48 the maritime executive
The conversation eventually turns to the recent woes of the U.S. Coast Guard’s ”Deepwater” re-capitalization program. Bollinger asserts, “I am definitely interested in bidding for that work. If it were put out again for bid, I plan on being an aggressive bidder. It is a program that has been taken away from the Deepwater unit, and I would be interested in procuring it through the normal acquisition cycle of the U.S. Coast Guard.” Concerning some of the Deepwater failures, Bollinger would only
say, “Fault belongs in a lot of places.” Most of the future U.S. Coast Guard work, including the National Security Cutter, will be “mid-tier capable” work, according to Bollinger. “You can expect the mid-tier yards to bid on the Deepwater project and some Navy work. Most of the mid-tier yards are just as capable as the big yards at building quality products,” he adds. Bollinger has a few more predictions regarding both the U.S. Coast Guard and Navy. “They’re going to be working a lot closer on future projects. The LCS (Littoral Combat Ship) is a good case in point. The U.S. Coast Guard is definitely watching this project closely to see how it works out. Why would you try to reinvent the wheel on a vessel that has already been built for the Navy?” With time running out, we squeeze in one more question: “What’s the next big thing in shipbuilding, and is it already here?” Without hesitation Bollinger responds, “If you look at the boom of the 70’s right up until the turn of the century, you had little or no technology enhancements in shipbuilding. Mainly, you had size enhancements. In the last five years, however, the application of technology within shipbuilding has been phenomenal. And to me, that is the excitement that you see in the future: You have the ability to apply technology that didn’t exist before and apply it in the maritime arena. This will allow certain ships to do things they couldn’t do before. For example, shuttle tankers will be DP [dynamic positioning]-capable so that they can go to FPSOs [Floating Production, Storage and Offloading vessels] to load. This is something people never even thought of five years ago. So now we build ships that can do different things. Before, maybe you built a little bit bigger or a little bit faster. The technology is allowing us to do so much more.” Before we parted, Bollinger waxes nostalgic about a few things, but it all comes back to technology in the end. “I never dreamed we’d be drilling in 10,000 feet of water; now I think that if we had a hole that was 50,000 feet deep, we’d find a way to do it,” he says. Going on, he insists, “The majority of my career has involved periods of very slowly evolving technological advances. Now the technology advances are so rapid. This is the future of all industries, not just shipbuilding.” And with that, Bollinger departs to give an address to the graduating class of the University of New Orleans’ School of Engineering. His topic? Technology, of course. MarEx
view from the boardroom
view from the boardroom And No Time to Enjoy It | An American in Europe by MarEx Staff
David Turner
Less than six months ago, David Turner was heading up W&O Supply, the North American marine valve subsidiary of PON Power. But on March 1, 2007, Turner was “kicked upstairs” and headed off to Europe to assume his new job as Director of Business Development of PON’s Power Systems Group. Since then, the former President and CEO of W&O Supply has rarely had a chance to relax. Back in the Netherlands, after a whirlwind 18-day swing through Asia, Turner made time for an interview with MarEx.
During our conversation, Turner told us that he had still another important engagement to attend after our interview: a two-week total immersion in the Dutch language, in which he was not allowed to speak anything but Dutch. So we made the best of his last moments of English-speaking freedom before the big event. PON Power is based in the Netherlands, and Turner has quickly become accustomed to the nuances of living and working in an international environment. Fresh off his two-and-a-halfweek trip to China, Taiwan and Korea, we asked him about the cultural differences between being in the United States and his new assignment of globe-trotting. Turner shrugged off the potential barriers that might present a roadblock for another executive or business. When we asked Turner about being an American in the center of the maritime universe in Europe, he said, “Certainly there are cultural differences, but the marine business has always been a global business and is certainly even more so today. That trend will continue. You now have European shipyards with operations in Asia. But there’s a certain ‘language’ which is spoken within the marine business that makes it a little easier than, say, if you were going into a different kind of enterprise.” For all the talk about the world being “flat,” however, it is still a rarity to see an American expatriate make it in the European maritime game. But Turner brings to the game a work ethic that grew W&O Supply’s revenues by 500 percent during his tenure. You get the distinct feeling,
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while talking to him, that this will be more than a passing “curiosity” for his Dutch colleagues.
Mr. Turner Goes to Europe Turner further insists that the change in cultural environments has been, at least for him, a non-issue. “The marine business has different nomenclature, and it’s still a niche business,” he explains. Turner steered the conversation back to where he wanted it: “My job now as Director of Business Development is to look at a European growth strategy, a U.S. growth strategy and a global growth strategy for PON Power Systems’ marine business.” This is where Turner has found his biggest challenge in the new, high-profile position. It is a fact that Turner’s job function has changed radically. How he handles these changes will ultimately define the degree to which he can bring further increased success to his employers. Having now had a few months to look back on the line of demarcation between his old job and the new one, he says, “I think the biggest difference – and I was at W&O for 15 years – of the 200 employees there, maybe seven or eight had been there longer than me. And I watched the company grow from $20 million when I joined to what will probably be $125 million in revenues this year. And in that regard, I’m referred to by some as ‘the company historian.’ I knew the customers, the products, the stories; and frankly I had
hired most of the employees.” That comfort zone is no longer present for him, but it has also provided new opportunities to focus more of his time and attention on developing new business. No longer part of the day-to-day micromanaging that can sometimes happen in an operational role, Turner’s duties now encompass long-range tactical decisions. Turner expands on that change by explaining, “The biggest difference is that I formerly would walk into the office every day knowing virtually every detail of the day-to-day operations. And so it was a very comfortable feeling. Here in the Netherlands, it’s now a strategic role. I don’t get involved in the day-to-day operational business. I don’t even know if the word ‘challenge’ is the right word. It’s just different. It’s about coming from an operational environment where you’ve been making decisions for fifteen years and now having to look out even further in terms of time strategy than I ever did at W&O Supply.” Still, talking to him, you can tell that he relishes the new role, one he views as the next chapter in a very long book and certainly not the end game.
The Way Forward: A Shared Strategy for PON and W&O Supply In his new role in Europe, David Turner will be developing business for not only the PON Power Systems Group, representing Caterpil-
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view from the boardroom
For all the talk about the world being “flat,” however, it is still a rarity to see an American expatriate make it in the European maritime game. But Turner brings to the game a work ethic that grew W&O Supply’s revenues by 500 percent during his tenure. You get the distinct feeling, while talking to him, that this will be more than a passing “curiosity” for his Dutch colleagues. lar and MAK, but W&O Supply as well. The Caterpillar business is primarily centered in Scandinavia, the Netherlands and France. The two groups are married by their marine roots with PON Power dealing with marine engines and W&O’s main focus being marine fittings and valves. Turner himself best explains the synergies between the two businesses, separated for the time being by an ocean, but perhaps very soon to see crossover in each other’s markets: “W&O is, of course, primarily a valve outfit here in the United States. And although the PON Group decided at one point to get away from the valve business, it did decide to hold onto W&O Supply because it had a good growth record and a history of good earnings. In the meantime, PON acquired the Caterpillar Marine engine business and at that point began to look at W&O as not just a valve company but as a marine company – a total engine room package, if you will.” And while Turner declined to describe the relationship as PON’s version of vertical integration – a turnkey business – the company has undeniably taken on more of a marine focus. Turner hinted at more to come, “We’ll look to acquire other marine companies along the way, creating other synergies within the marine business, as appropriate.” For both PON Power and W&O Supply, Turner is looking to expand in two ways. One is growing the existing businesses with existing products and services. Along with that, he says, “goes servicing our existing customers better.” On that last point, Turner spoke of the unique W&O concept of “Shared Services.” The concept of shared services allows W&O to operate as a seamless distribution company with 13 branches and more than a few subsidiaries. As he further explains, “We have as
50 the maritime executive
many as 25 employees in San Diego to as few as three in Long Beach. But our inventory is a common inventory that every salesman in the company can view ‘real time and live,’ whether it is sitting in Linden, New Jersey or Fort Lauderdale, Florida. That equipment is available to every salesman in the company. So we feel like we’ve developed as seamless and efficient a backroom operation for our branches as possible. As we grow, of course, there’s even more pressure to make sure it’s even more refined – from a logistics and IT standpoint. All of those things, as a distribution company, we live and die by.” While Turner clearly likes to talk about the synergies between PON Power and its American cousin at W&O Supply, he’s not about to micromanage his old job from the Netherlands. Instead, Turner has left the ball squarely in the court of the man who replaced him. Jack Guidry is the new President and CEO of W&O Supply and has been tasked with shaping a five-year plan for growth, management and improvement of internal and external processes. Guidry, who also joined Turner for our discussions in May, told MarEx, “As a distributor, you are only as good as your inventory and how fast you can get that inventory to your customers. So ‘shared services’ means one reporting line for IT, logistics, warehousing and material management. In charge of all of that is John Kilbride, our Vice President of Shared Services. In the past, these functions were more broken up from a reporting line standpoint. Now these somewhat different functions work better, hand-in-hand with each other.” Guidry defines W&O Supply’s Shared Services Department as the process that combines materials management, information
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technology, warehousing and logistics, while enabling the company to improve communication and workflow among these services for its 13 locations across the U.S. In essence, Shared Services is an operations or delivery function from warehouse to the customer. All of that goes to support W&O Supply’s Engineered Products and Automation (EPA) Division. “EPA,” explains Guidry “is a sales function. It’s specific products and disciplines that we sell, and technical expertise that we have. Shared Services is an internal function so that we do perform well externally, while the EPA is an external function that operates as a sales and marketing function.” As W&O grows larger, Guidry made it clear that Shared Services would provide an integral internal control and “quality system,” unifying the local branches to operate as one. And no matter what, there will be a continued focus on supporting EPA through all business lines. As part of his rapidly developing five-year plan, Guidry defined his biggest challenge as the requirement to identify, attract and retain qualified people to support the firm’s rapid expansion: “We need to focus on training and knowledge within the company to help our own people grow and put them into positions which will in turn help the company to grow.” Unspoken in all of that was the plain truth that all the Shared Services and EPA in the world would go for naught without the right people to implement them. And the degree to which Guidry can construct and implement his fiveyear plan will quickly define the wisdom of one of David Turner’s first decisions as a PON Holdings executive.
view from the boardroom
In his new role in Europe, David Turner will be developing business for not only the PON Power Systems Group, representing Caterpillar and MAK, but W&O Supply as well. The Caterpillar business is primarily centered in Scandinavia, the Netherlands and France. The two groups are married by their marine roots with PON Power dealing with marine engines and W&O’s main focus being marine fittings and valves. Growth: How Much, How and Where? David Turner says flatly, “We’ll see tremendous growth in W&O in the next few years.” But when asked to define tremendous growth, he declined to be more specific about the fiveyear plan’s goals. He did say that he expected revenues to expand from $102 million in 2006 to as much as $130 million this year. That having been said, he didn’t appear ready to sit on his hands just because revenues would potentially increase by 27 percent in the coming year. After acquiring AT Controls in December of 2006, Turner says that a Letter of Intent to cement another deal has also been signed. As MarEx went to press, that deal hadn’t closed, but the two transactions give MarEx readers an indication of things to come. And it is hard to imagine the global boom in all things maritime coming to a grinding halt any time soon. “We see great opportunities in offshore oil and gas, as well as in Europe, the Middle East and even Asia,” says Turner. He adds, “That could entail opening new W&O offices there or acquiring local outfits. We’ll look at all possibilities.” And Jack Guidry was particularly effusive about expanding further into the automation business in a new facility in Houston where, very soon, the development of the “W&O Automation Services” division will be kicked off. Beyond this, he says, “A real opportunity exists in the waste water business, where we’ve had some success in the past, and hope to ramp up efforts there again.”
W&O Supply’s Hat Trick: Three New Innovative Products At the end of the day, a distributor is only as good as the products it has to sell. Asked to hang his hat on just one of these products, Turner instead chose three: “Secure Plus” Valve Assembly: Recently,
FM Approved Gas Safety ShutOff Assembly
W&O Supply has reached out to its attorneys in an effort to secure a patent for the “Secure Plus” valve system assembly. The valve is an adaptable and intrinsically safe unit that can be used in a variety of industrial applications. The AT “Tri-AC Zero Emissions Ball Valve”: This unit prevents any sort of leakage and is becoming more and more important for barge
operators and other similar marine operators. This product has a stem extension which has been patented. RISE (cable penetration product for fire and watertight bulkheads): Manufactured in Holland – a non-traditional product, a way to
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view from the boardroom
While Turner clearly likes to talk about the synergies between PON Power and its American cousin at W&O Supply, he’s not about to micromanage his old job from the Netherlands. Instead, Turner has left the ball squarely in the court of the man who replaced him. RISE Installation
seal bulkheads and deck openings for cable and pipe installations. It reduces installation and engineering time. The product has been described as a “win” for the shipyard installing it because of reduced installation time / man hours, as well as the ship because it’s easy to modify in the aftermarket and add cables. But the primary function of the product is safety – in terms of both watertight integrity and fire prevention. “All three products answer the needs of
the oil and gas industry, upstream and downstream. We listened to what the customers had to say and acted accordingly,” says Turner. Perhaps more importantly – and not coincidentally – all three products address the key concern of the maritime world today: safety.
he has left the company that experienced such explosive growth under his leadership in good hands. Nevertheless, you get the feeling he’d like to bring W&O Supply along for the ride. It’s probably not a good idea to bet against it.
Going Global
W&O Supply is the nation’s largest distributor of pipe, valves and fittings to the marine industry. The company also provides valve automation services to its customers through its Engineered Products and Automated Services Division. W&O Supply services all segments of the marine industry, including commercial shipping, the U.S. Navy, Military Sealift Command, MARAD, USCG, cruise lines, barge owners, offshore oil and natural gas rigs, and shipyards that build and repair vessels of all sizes. The company represents the most recognizable brands and carries more products at more locations than any other marine products distributor in the United States. It provides convenient access to complete valve automation networked systems that are assembled, tested, delivered and ready to install in ships or offshore platforms being built or repaired. W&O Supply began supplying piping products to ships and shipyards in Jacksonville, Florida in the mid-1970s. Since that time, the company has grown to thirteen branch offices in the United States as well as one location in Antwerp, Belgium. W&O Supply is a wholly owned subsidiary of PON Holdings B.V. of the Netherlands. As members of the PON Holdings Group, PON Power, W&O Supply and their sister companies throughout Europe, the Middle East and Asia focus on servicing the global maritime industry and its needs for piping-related products, marine engines and power system solutions. Reach W&O Supply at www. wosupply.com.
The guy who led W&O Supply through a good portion of its halcyon years has moved across the pond. By all outward appearances,
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turnkey synergy
Turnkey Synergy:
Ship Design Turns the Corner With Improved Production Engineering and Product Data Management
by MarEx Staff
A Robust Shipbuilding Market: A Good Time – To Improve It is a very good time to be in the business of shipyard repair, conversion and newbuildings in North America. The summer of 2007 promises a continuing and robust market for American shipyards, and the active ship-replacement business related to the Oil Pollution Act of 1990 (OPA 90) phaseouts is anything but over. Today’s good times all but obscure the agony created by a devastating 2005 hurricane season for Gulf Coast yards. Because
most prognosticators foresee continued prosperity on the local level for at least the next five years, the temptation for mid-tier American shipyards to sit on their hands and continue with the status quo must be overwhelming. Surprisingly, a quiet but effective effort to improve service, value and technology is under way instead. Efforts to improve the capabilities of the American shipbuilding base have been going on for years, of course. In 1998, the current version of the National Shipbuilding Research Program (NSRP) Advanced Shipbuilding Enterprise was established to pursue a collaborative environment, which was conducive to cooperation among American shipyards without damaging the unique qualities of the individual compa-
54 the maritime executive
nies. The effectiveness of the NSRP in achieving its objectives and the value of the program in terms of the amount of money spent are a matter of some debate. In general terms, the NSRP was created by U.S. shipyards at NAVSEA’s (Naval Sea Systems Command) request to reduce the cost of building and maintaining U.S. Navy vessels. The NSRP includes at least 11 U.S. shipyards that have turned their focus to the industry-wide implementation of solutions to common cost-drivers. At a minimum, the NSRP has heightened awareness on both government and industry levels of the importance of continuing to improve and maintain the American shipbuilding base. More importantly, the NSRP’s goals stipulate the additional benefits of improving customer satisfaction, industry safety, product quality and environmental compliance. The collaborative search for solutions that include both the leveraging of best commercial practices and the creation of industry-specific efforts is ongoing – and takes many forms. Among them is the aggressive technology transfer to, and buy-in by, various U.S. shipyards. From the pack of promising technologies related to this aspect of shipbuilding come ShipConstructor Software, Inc. and its AutoCAD-based 3-D product. Originally introduced in 1989, the ShipConstructor 2006 (SC 2006) software provides modeling and production planning software for the marine industry and marries AutoCAD’s ease of drafting with the logical powers of a sleek SQL (Structured Query Language) server database design. The computer provides a powerful tool with which to create drawings with a tremendous amount of information. When used with a software program such as ShipConstructor,
three-dimensional solid models of the structure, equipment, piping, ducting and wireways can be built. This can greatly reduce interferences and improve shipyard productivity. The three-dimensional pictures are appealing and useful when trying to sell the program to a prospective client, but the real value of a product like ShipConstructor lies in the database it uses and builds and the product data management which comes from it.
In the Beginning The bid for the typical design package for a newbuilding deal usually starts with a two-dimensional presentation. Once the winning bid is announced and awarded, the “production engineering” phase of the operation commences. For many shipyards, this can be done in-house with on-site engineering departments. For others, however, it can involve the use of a naval architecture and design firm. Whichever route is chosen, the key to the effort always includes packaging the design information to put it onto the floor in the right fashion so that the production people can best put it into play. In the case of those using ShipConstructor, the software is laid on top of – and depends on – proven AutoCAD technology and also leverages the wealth of AutoCAD experience that already exists in the industry. This significantly reduces the time it takes to migrate to a ShipConstructor solution and simplifies data exchange with other parties. According to Ken Lane, Executive Vice President at Elliott Bay Design Group (EBDG), “ShipConstructor started out as a tool for lofting metal parts. By developing this 3-D model, users can better track shapes such as the lengths of perimeters and side roll templates.” ShipConstructor provides better accuracy and fewer missed pieces, and the 3-D presentation removes the need for guessing on the production floor. Unspoken in all of this is the importance of better information for production personnel in a shrinking industry where the number and skills of these technicians are diminishing over time.
turnkey synergy In Actual Practice Perhaps one of the biggest proponents of the ShipConstructor solution is Elliott Bay Design Group, a Seattle-based, full-service naval architecture and marine engineering firm. EBDG provides production support for the commercial marine industry, and its client base spans the full gamut of owners, operators, shipyards and government agencies. Committed to working in the CAD/CAM (computer-aided design/computer-aided manufacturing) environment and staying on the front edge of technology to best serve its clients, EBDG is also committed to using the ShipConstructor product to get there. Like any tool, however, the ShipConstructor software is only as good as the operator. Using a unique DDROM™ SmartParts™ technology, ShipConstructor 2006 can now be used much earlier in the design cycle. The 3-D structural classification model is created and delivered automatically, derived from 2-D drawings. Back-end changes can be implemented into the production detail model. In essence, ShipConstructor provides all the necessary functions to build a production-grade 3-D product model consisting of hull plating, structure
with all details, pipe, HVAC (heating, ventilating and air conditioning) and equipment, all rounded off by the penetrations. EBDG President John Waterhouse says, “ShipConstructor is evolving towards a full three-dimensional model, oriented towards production information. For example, the software determines the exact lengths of pipelines and cabling. A piping run in 3-D pro-
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vides production information for bend ratios and flange information.” All of the data is stored in one single database, making it easy not only for designers but also for managers and production to get up-todate information when and how they need it. There are other products out there, of course. EBDG’s Waterhouse says that ShipConstructor
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turnkey synergy is the right product for EBDG and adds, “This is the best software for handling a variety of shipyards and a variety of ship types. The product is robust and flexible, and we successfully serve a variety of clients with it. Those design groups dealing with just one or two shipyards or a single class of vessel might very well choose another product.” Shipbuilding, at least in the actual construction phase, is ultimately moving towards more of an assembly process. Gone are the
days when an individual yard engages in constructing components such as engines, winches or other critical items. Increased and better technology is a big part of that reality, but as shipbuilding capacity in this country has contracted over the past half century the numbers of qualified personnel on the cutting floor has followed suit. The decision-making process on the floor has thus become a more critical part of the equation at a time when that expertise is going away. As such, software programs like ShipConstructor are helping to bridge the gap between the design and production stages. Using the industry-standard AutoCAD product, ShipConstructor provides essential information to the production floor that ultimately produces an efficient assembly process. Along the way, shipbuilders can proceed with confidence, knowing that all departments are using the same data from the central product model at all times. There is no time wasted by having to inform other departments of design changes or, even worse, of errors being made by working with the wrong data. The hull, structure, piping, HVAC and equipment data all feed into the same 3-D product model that is concurrently accessed by all parties involved. Concurrent engineering is critical to the ShipConstructor process. In the space of two years, ShipConstructor Software, Inc. has increased its customer
56 the maritime executive
base by 100 percent, and the product is now the industry standard for production-oriented design software in the American mid-tier shipyard market. Although the larger shipyards primarily use another product, interest at that level is increasing. Beyond this, ShipConstructor is reporting some penetration into European markets. ShipConstructor Software, Inc. recently announced the decision to release ShipConstructor version 2008 (SC 2008) in late summer. The move towards quickly following SC 2006 with the release of SC 2008 was largely prompted by a desire to provide users with the ability to utilize AutoCAD versions 2006, 2007 and 2008 with the ShipConstructor software. Although ShipConstructor 2005 and ShipConstructor 2006 are not compatible with AutoCAD 2007, the newer version of the software will be compatible with both AutoCAD 2007 and AutoCAD 2008.
The Turnkey Package Although the ShipConstructor software is designed for ease of use by local users on site at the shipyard, there may be instances where the use of a naval architect is desired right on up to and including the design stages of the project. With a large OSV (offshore supply vessel) project taking as much as 12,000 to 15,000 man-hours to complete, it sometimes makes sense for a yard without a lot of internal engineering staff to enlist outside technical support. Arguably, no one outside of ShipConstructor itself has more experience with the software than does Elliott Bay Design Group. Fewer still have and provide the full spectrum of engineering, design and production support experience that EBDG can offer. The production game isn’t for everyone, though. And EBDG’s John Waterhouse adds, “Some design houses get in and ultimately decide that it is too tough to do it all.” There’s little room for error on the production floor, he says. Waterhouse also says that it was a conscious decision to remain deeply involved in all phases of the shipbuilding game. “I don’t think you can properly service your clients if you haven’t been involved in the production end of things, especially if there is a problem at that
point of the process.” And when a mistake happens at that stage of the operation, it can often be an expensive one. Waterhouse speaks from long experience on any number of extensive projects performed for demanding clients. One such project involves EBDG’s participation in the development of a new class of 260-foot offshore supply vessels. In a near-perfect example of collaboration between the customer, the shipyard and Elliott Bay Design Group, EBDG was retained by Hornbeck Offshore Services to complete the detail engineering and 3-D structural and erection modeling of the vessel for Atlantic Marine/ Alabama Shipyard as part of Hornbeck’s newbuild program. The job was not without its challenges, but EBDG’s involvement in the project was a key to its ultimate success. Leveraging EBDG’s state-of-the-art detail engineering technology to develop a full 3-D product model of this sophisticated 260-foot OSV series, the ShipConstructor suite software and EDBG’s engineering organization allowed the shipyard to realize significant savings in production labor hours. At least four vessels have been built to this Leevac Industries’ design, utilizing the engineering support of EBDG and the ShipConstructor platform. Waterhouse is also especially proud of EBDG’s involvement with Bollinger Shipyards on a new class of barges being constructed there.
Infrastructure and Technology Today: Building the Ships of Tomorrow The way that ships are being constructed is evolving for the better, both here and abroad. At the forefront of these changes, ShipConstructor software is also evolving, leveraging the industry standard AutoCad product and producing three-dimensional imagery and product database management to more efficiently build the ships of tomorrow, today. Shipyards and naval architects alike are unlocking the power of ShipConstructor. In an era where shipbuilding activity in this country has reached levels not seen in thirty years or more, U.S. yards are also competing in a global market. On the commercial side of the balance sheet, this can and does mean competing against foreign-subsidized efforts overseas. The ShipConstructor software – and the design groups and shipyards who utilize it – are ensuring that the American shipbuilding effort keeps pace. Making money in a robust market is one thing; keeping that base working and efficient in the down times that may follow is quite another. MarEx
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