THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, October 27, 1994 TAG: 9410270440
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 65 lines
Congressional approval of a new aircraft carrier helps assure Newport News Shipbuilding's immediate future, but the yard still has a long way to go tocompete in the international shipbuilding market, Tenneco Inc. Chairman Dana G. Mead said Tuesday.
``The future looks a lot better than it did three months ago, because it (the carrier) doubles the backlog,'' Mead said. But he added, ``This yard is a long way from being competitive on a worldwide basis.''
And, in what Mead called a ``seminal event'' for U.S. shipbuilding, the yard expects to sign a contract next week to build at least two product tankers for a Greek shipping company. The signing of the contract will coincide with federal approval of loan guarantees for the buyer.
Mead's comments came Wednesday during discussions with reporters about Tenneco's third-quarter earnings. Tenneco is the shipyard's Houston-based parent.
Newport News Shipbuilding had a $52 million operating profit in the third quarter ended Sept. 30, Tenneco announced. That's up slightly from $51 million in 1993's third quarter, but included a $12 million one-time gain from reduced future-retiree costs.
With 20,000 workers, the giant shipyard is one of the state's largest employers. It announced earlier this year that it will reduceemployment to between 14,000 and 15,000 by the end of 1996. The addition of the carrier and other anticipated projects will not change that, Mead said.
The $3 billion-plus carrier contract, which the Navy is expected to award in November, will sustain the yard through the rest of the decade as it tries to build an international commercial-shipbuilding and repair reputation. The carrier contract will double the shipyard's backlog of work to about $6 billion.
If the shipyard continues to make productivity and quality improvements and control costs, it has the potential to be a highly successful competitor worldwide, Mead said.
A big part of its cost is labor. In addition to the announced layoffs, the yard's contract with the United Steelworkers Local 8888, which represents blue-collar workers in the yard, will expire in February. The shipyard is expected to seek wage concessions from the union.
``We're going to try to do everything we can, without asking for huge pay cuts, to improve the yard's competitiveness,'' Mead said.
In addition to the the two double-hull tankers, the yard expects the Greek buyer to exercise an option to build two more. Other buyers are interested in the yard's Double Eagle tanker design, too, Mead said.
Newport News Shipbuilding is also one of four finalists - and the only one from the United States - to build four to eight fast frigates for the United Arab Emirates. That contract could be worth up to $2 billion.
The shipyard was one of five of Tenneco's largest divisions reporting an increase in operating income for the third quarter.
The company made $151 million in the period, a 36 percent increase over the $111 million it made in 1993's third quarter. On a per-share basis, earnings rose to 82 cents from 64 cents. Revenues rose 5 percent to $3.3 billion.
Besides the shipyard, Tenneco has major interests in natural-gas pipelines, farm and construction equipment, packaging, auto parts and chemicals.
Tenneco also announced Wednesday that it has agreed to purchase Europe's leading manufacturer of auto exhaust systems Heinrich Gillet GmBH & Co. by CNB