Shipbuilders Discuss Gameplan

Friday, April 07, 2000
Shipbuilding leaders convened in Washington D.C. last week to discuss the means and methods to propel the U.S. Shipbuilding market at the dawn of the new millennium.

By Regina P. Ciardiello, Associate Editor

Under the auspices of the seeking a candid and creative discussion regarding the country's shipbuilding future, the U.S. Maritime Administration sponsored a seminar dubbed Marketing Issues and Challenges Facing the U.S. Shipbuilding Industry last week.

Attended by industry executives from most of the country's premiere facilities, the conference was held on Wednesday, April 5, at the Ritz-Carlton Hotel in Pentagon City, Va.

Stressing the pressures of competition form the lucrative Asian shipbuilding powerhouses of Japan, China and Korea, many conference speakers mulled and brainstormed ways that the U.S. shipbuilders could recapture market share.

Setting the tone for the day was Maritime Administrator Clyde J. Hart, Jr.'s, who acknowledged that there is a need to "help others understand the many facets of marketing - both nationally and internationally."

"We need to be brutally honest in enunciating the major marketing issues and challenges facing U.S. shipbuilding industry - diffidence is for diplomats," Hart said.

Hart was not the only industry insider to voice his feeling on this crucial issue. His colleague, The Honorable Herbert H. Bateman, was right in step with him. Following his well-received introduction, Bateman, who sits on the House of Representatives, summarized what could perhaps be noted as the primary question of the conference's purpose - What is the ultimate marketing challenge for U.S. Shipbuilding? The answer, according to Bateman, lies within none other than the American people, who need to gain a better understanding of U.S. shipbuilding and how it affects the state of the nation. Citing Title XI as "a crucial move for shipowners to secure commercial financing," Bateman added that certain vessels wouldn't have been built if Title XI, which grants a firm foundation, did not exist.

While some may find both the Jones and Passenger Vessel Services Acts as mere inconveniences, Bateman, who plans to retire later this year from his post, emphatically disagrees. He feels that vessels wouldn't be flying U.S flags if it weren't for these laws.

Shedding some light on the conference's focus from an international perspective was Cato Sverdrup, COO, Atlantic Marine Holding Company. Sverdrup, who previously was the CEO of Burmeister & Wain, mentioned that although Korean shipbuilding is impressive in terms of its order book, it doesn't have any firmly planted marketing plan. "Anyone can be competitive," Sverdrup said. "You just have to raise your prices."

Despite a boom Japan's recent run of success, the U.S. can take cues from the Japanese shipbuilding industry of the 1950s, which was a filled with yards which were literally in a state of ruin,. Key to the Japanese comeback - aside of from generous government subsidies and a home market with a voracious appetite for local built ships - was the evolution of the industry in a vertical fashion which included the support and supply of all ships equipment from the homeland.

A majority of conference attendees addressed that lack of readily available supply lists from U.S. builders could be a cause for concern among owners/operators.

Speculator or long-term investor?

Risk takers would easily find their niche in shipbuilding, since, according to John Burke, former vice president and director of Mobil Shipping Co., cited risk and money as the two main factors of contracting.

In his presentation, Burke, who is retired from his position at Mobil, expressed that there are two kinds of buyers in the shipbuilding industry - the speculator and the long-term investor. The speculator buys cheap, is seen as more of a risk taker and has the ability to perceive a rising market for a specific vessel. On the other hand, the long-term investor is representative of providing economical, reliable, environmentally safe transportation that is virtually maintenance-free.

The qualities possessed by these two groups are virtually cut-and-dry - owners fall into either category - not somewhere in between. In fact, targeting specific selling to a long-term investor is, according to Burke, "a ruinous experience that would require a call to the lawyers."

Proactive Methods of Change

Since, according to Ronald J. McAlear, vice president, operations Litton Avondale Industries, "the defense of the free world depends on the U.S. maritime industry," we need to be proactive in recognizing our weaknesses and be willing to change. McAlear stressed that a commitment and understanding between builder and owner is key, especially getting to know customers and developing beneficial relationships.

Unlike Bateman, McAlear believes that the Jones Act poses a problem for U.S. builders.

He feels that many owners are reluctant to call upon American yards because of this regulation. While not blaming this dilemma solely on the Jones Act, McAlear cited that taking a big picture look of the industry, as a whole would prove favorable, as well as working together.

"It seems everyone has their own agenda," McAlear said. "If we want to improve our competitive position, it needs to be a cohesive action."

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