THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, October 11, 1994 TAG: 9410110328
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 70 lines
Newport News Shipbuilding has sued one if its newest customers, the owner of the cruise ship S.S. Independence, which is leaving the shipyard today after an overhaul.
According to an internal yard memo, the cruise ship owner is disputing how much it should be charged.
``They have rejected our bill and haven't paid it,'' yard spokesman Jack Schnaedter said.
The Independence, one of only two U.S.-flagged cruise ships, arrived at the Newport News shipyard in July for a part of the renovation involving the yard and eight other specialized contractors.
The shipyard had to do additional repairs on the vessel when inspections by the Coast Guard and others turned up unexpected problems. The payment dispute is over the additional work.
The Independence's owner, Chicago-based American Classic Voyages Co., authorized the additional work, but now is balking at paying the $29.8 million bill, Schnaedter said.
``The extent of those repairs has grown significantly as a result of the unexpectedly poor condition of some interior hull structures discovered after the ship arrived here in mid-July,'' according to the memo distributed to employees late Friday.
A spokeswoman for American Classic Voyages had no knowledge of the suit and couldn't comment. The company's attorney was unavailable for comment.
The Independence will leave the yard today for a shakedown cruise. American Classic Voyages put $29.8 million in escrow account to secure the release of the ship pending the settlement of the dispute.
The yard hopes to reach a settlement with the cruise ship company, Schnaedter said.
The job involved some steel work aboard the ship, refurbishing its public and hotel spaces, propeller-shaft work, and blasting and painting.
Newport News Shipbuilding had hoped the Independence job would help establish its reputation in the cruise ship overhaul field.
``The cruise industry is watching this project very carefully,'' Rick Spaulding, the yard's superintendent of ship repair, was quoted as saying in the September issue of Newport News Shipbuilding's monthly newspaper Yardlines. ``We must show them we can tackle a job this big.
``The project also gives us an opportunity to educate ourselves on cruise ship work - the hotel aspects as well as the complex steel and machinery issues.''
Cruise ship repair is one of several areas the shipyard is focusing on to take up the slack from falling Navy ship orders.
The giant shipyard, known for building aircraft carriers and submarines, has been reeling from Navy cutbacks in the wake of the demise of the Cold War. In April it announced it would reduce its payroll to between 14,000 and 15,000 by the end of 1996 from the nearly 21,000 it employed then.
The shipyard has worked on 17 cruise ships since 1992, when it reentered the business, but the Independence job was the most extensive it's done on a cruise ship so far, Schnaedter said.
About 16 other shipyards bid for the job. A rehabilitation of the Independence's sister ship, the S.S. Constitution, is scheduled to be put out for bid next year. The two ships cruise around the Hawaiian Islands.
While Schnaedter said the yard wasn't worried about its reputation in the cruise ship business, the internal memo suggested some concern.
``As you know, filing a formal complaint is an unusual step for NNS (Newport News Shipbuilding),'' Friday's memo read. ``But it is considered necessary and proper to protect the interests of the company, as well as the reputation of the shipyard and the integrity of its business arrangements.'' by CNB