THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, December 6, 1994 TAG: 9412060349
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 85 lines
Newport News Shipbuilding may be a step closer to an important contract to build ships for a foreign navy.
The Peninsula shipyard announced Monday that it has agreed to help develop a shipyard in the United Arab Emirates.
The deal may give it the inside track to win a pending contract to build four to eight fast frigates for the tiny Persian Gulf nation's navy. The frigate contract could be worth up to $2 billion and would help preserve thousands of jobs at the shipyard as it copes with cutbacks in U.S. defense spending.
``It certainly is a good sign,'' said James R. McCaul, president of IMA Associates Inc., a Washington-based shipyard consulting firm.
Newport News Shipbuilding is one of five finalists, and the only U.S. shipyard, in the running for the frigate contract, which is expected be awarded early next year.
``This shipyard project is totally independent of the frigate,'' said Michael Hatfield, a spokesman for Newport News Shipbuilding.
But by helping develop a shipyard in the United Arab Emirates, it may be laying the foundation to win the fast-frigate contract.
``It certainly gave us the opportunity to get to know the potential customer,'' Hatfield said.
Besides linking Newport News Shipbuilding to the U.A.E.'s military establishment, a shipyard there would give that nation the capability to repair the frigates after they are built.
Smaller than a destroyer, Newport News Shipbuilding's fast-frigate design calls for a 322-foor warship that could handle several different weapon systems. The shipyard has been marketing the design for two years and also has discussed it with Turkey, Saudi Arabia and several Asian nations.
The fast frigate is part of Newport News Shipbuilding's plan to survive in the wake of defense cutbacks that slashed the Navy shipbuilding budget. In addition to building ships for foreign militaries, the yard wants to get back into commercial shipbuilding.
It recently won a $152 million contract to build up to four petroleum product tankers for a Greek shipping company.
As the yard restructures for commercial business, it has been laying off workers. It plans to reduce its employment of 20,000 to between 14,000 and 15,000 by the end of 1996. It's not clear if the fast-frigate contract would reduce its planned layoffs or just preserve the jobs of those still working at the yard.
The planned shipyard in the United Arab Emirates isn't likely to take business away from the Newport News Shipbuilding.
The shipyard, to be called Abu Dhabi Ship Building Co., will be a privately-owned ship-repair and construction business serving both military and commercial customers in the Persian Gulf.
It is scheduled to open in three years. Newport News Shipbuilding will manage the construction. The project has yet to be given a price tag.
Shipyard spokesmen declined to speculate on estimates.
Newport News Shipbuilding and its parent company, Houston-based Tenneco Inc., will be minority shareholders in the yard, which will be mostly owned by individuals in the United Arab Emirates. A stock offering is scheduled for early 1995.
``For Tenneco and Newport News Shipbuilding it makes good business sense,'' said Tom Olds, a spokesman for Newport News Shipbuilding. ``It helps achieve the company's goal of expanding globally.''
Newport News Shipbuilding has done a market analysis of the demand for ship repair and construction in the Persian Gulf. ``It's been concluded that there is sufficient demand to make this thing a viable business,'' Olds said.
In addition to repairing vessels in the U.A.E.'s navy, Abu Dhabi Ship Building will be able to repair commercial oil tankers and other ships. It will focus on repairs at first, expanding to construction of tugs, barges and small military ships later.
The new shipyard also could serve as a forward repair facility for the U.S. Navy in the Persian Gulf, given that region's strategic significance and the Navy's relationship with Newport News Shipbuilding, McCaul said.
The new shipyard will take over a smaller shipyard known as Abu Dhabi Dry Docks Co. adjacent to the Mussafah Channel in the United Arab Emirates.
Capital improvements to the site include the erection of piers; installation of an 8,000-ton vessel lift and transfer system; construction of administrative and production buildings and employee housing; shoreline improvements; and new roads and utilities. ILLUSTRATION: STAFF Map
by CNB