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Avondale: Riding A Wave Of Profit With An Eye To The Future

Things are looking up for Avondale Shipyards, the shipbuilder headquartered in metro New Orleans, which amassed greater profits in the first quarter of FY 1994 than in any quarter since the 1980s. Avondale's $2.03 million first quarter 1994 profit is almost six times freater than the previous year's 348,000 — and it establishes more firmly the reversal of a trend of loss that the end of the 1980s' defense contracting boom and the setting in of the recession imposed.

Add to this a first installment Navy contract settlement that amounted to $85 million on a total $145 million, the winning of a $262 million contract for a Navy Sealift Ship (with options for five more), and a design contract to develop the next generation of Navy amphibious ships — not to mention a slew of commercial victories in the gaming vessel market — and what you have is a U.S. shipyard channeling as much energy into maintaining its current base of Navy work as it does into capturing new commercial opportunities. A Commercially Viable Yard "We are one of the five largest shipyards in the U.S., and one of the most commercially viable — we receive our share of the government contracts but we're still commercially active," said Ron McAlear, Vice President of Advanced Programs and Marketing at Avondale's Shipyards Division.

Avondale, which now employs 5,300 in its 268-acre main yard alone, has facilities which include three outfitting docks and supporting shops. The upper shipbuilding area allows the construction of ships as large as 250,000-dwt, or three ships of more conventional size all at once which are eventually launched from the yard's 81,000-ton drydock. The lower shipbuilding area allows the construction of five ships simultaneously. 1993: The Year In Review Avondale filed a Request for Equitable Adjustment (REA) in 1992 with the Navy, seeking reimbursement for complications stemming from design changes the Navy made to contracts in progress. The company anticipated (and recorded) an estimated minimum recoverable amount of $91.0 million. The settlement of $145 million allowed Avondale to comfortably pay off $44 million in debt, thus lopping off $6 million in interest payments. The company did take a loss of $8.8 million for the year — but the loss was an expected result of the winding down of several major contracts. Asked about the past year's deliveries, Mr. McAlear said that while all the vessels they deliver are important to the yard, "The delivery of T-AGS 45 (the oceanographic survey ship Waters) was especially rewarding, because we were dealing with an accelerated program, and the vessel had to be delivered in three years or less." "We're proud of our T-AOs," Mr. McAlear continued, noting that the yard has built 16 of the vessels — the last three of which had to be altered with double-hulls to conform to OPA '90 mandates on very short notice. The past year was also the one that saw Avondale win a major contract for a newbuilding Strategic Sealift ship, which since contract award has been dubbed the USNS Bob Hope (T-AKR 300). The contract comes with options for five additional vessels — options which, if exercised, boosts the Avondale orderbook to over $2 billion — enough to keep the yard going until FY '96.

A Look Ahead Avondale's Boat Division is aggressively pursuing the riverboat gaming market — it is currently building two paddle-wheelers and plans to deliver the Belle of Baton Rouge in July 1994 — while the Shipyards Division plans to deliver another cargo-variant dock landing ship, the Harper's Ferry (LSD 49 - CV), in the beginning of November. Avondale has been chosen as one of five yards to develop a preliminary design for the Navy's new class of amphibious ships — the LX, a multipurpose vessel that will replace the 30 amphibious vessels the Navy plans to retire in the next decade. The contract for the lead ship in the series, Navy number LPD-17, is expected to total approximately $833 million — a contract Avondale intends to pursue vigorously.

In early 1995, Avondale will deliver the minehunterPelican (MHC 53), and later in '95, Robin (MHC 54) will be delivered. Avondale will deliver the Patuxent (T-AO 201) in 1995 (June), as well as the Rappahannock (T-AO 204) in November and the dock landing ship Carter Hall (LSD 50 - CV) in July. (See chart, page 42, for full details on Avondale's orderbook).

Shiprepair "Obviously if we can build a ship we can do anything to fix one," said Mr. McAlear. He emphasized that shiprepair will be more of a focus for Avondale, and that Avondale's Algiers facility is able to accommodate topside repair in the main yard's huge floating drydock, which is often used for repair work. But the effort to capture more repair contracts requires more than just the ability to perform the contracts. "We're making ourselves more visible to those who trade on the river, Gulf Coast and East Coast," said Mr. McAlear. Overall, he said, the yard is "taking more of a pro-active position" in getting shiprepair business.

Mr. McAlear noted that the Port of New Orleans is one of the nation's busiest. This, says Mr. McAlear, combined with the second largest drydock in North America at 81,000 tons, gives the yard a pretty fair position with regard to the shiprepair market. In fact, when Holland America's 654-ft. (199.4-m.) luxury liner Noordam was damaged in a collision with a Greek cargo ship in the Gulf of Mexico, Avondale was chosen to repair the gaping 85-foot by 60-foot (25.9-m by 18.2-m) hole in her aft starboard side, which covered nearly four decks. After 10 days of round-the-clock repairs, Avondale released the Noordam to resume her regular cruising schedule. New Balance Avondale is confident about its future, but Mr. McAlear believes that the government's role is to balance out unfair competition — much as the shipyard's role is to strike a balance between military and commercial work to prepare for a future of dual-use marine technology. In an effort to balance the commercial end of the scale to match its impressive Navy orderbook, Avondale is currently seeking certification to the ISO 9001 standard, a certification the yard believes will further enhance its commercial viability. The standard recognizes excellence in organizational efficiency, and has become increasingly recognized as a mark of quality in the commercial sector. For more information on Avondale, Circle 85 on Reader Service Card




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