Aker Philadelphia gets a reprieve with state infusion of $42 million

A new partnership between Aker Philadelphia Shipbuilding Inc. and the Commonwealth of Pennsylvania will keep the yard afloat for at least two years. The yard was facing closure for lack of new work.

The deal, which involves an investment by the state of $42 million to purchase the assets of the yard, is intended to preserve about 1,000 shipyard and 7,000 indirect jobs over the next three years, but beyond that the future is unclear. For its part, Aker hopes to raise $210 million to complete two new oil tankers that the yard has planned.

According to Manny Stamatakis, chairman of the Philadelphia Shipyard Development Corp. which owns the site, the deal will close before the summer.

Since taking over the shipyard from the Norway-based Kvaerner ASA in 2000, Aker Philadelphia has built 16 ships at the yard. "Hull 16 is now being completed," Stamatakis said. He said that employment levels will increase over the next six months as construction on the two tankers — hulls 17 and 18 — begins.

"The yard is uniquely positioned to successfully compete for future orders for commercial ships that must be built in the United States," said Gov. Tom Corbett, "and this partnership allows the shipyard to retain its extraordinary workforce and remain in operation until that time."

However, anything beyond that may be wishful thinking, according to industry analyst Tim Colton. In the mid-90s, Colton was a consultant to Philadelphia on what to do with the ailing shipyard. He observed that politicians have always fought closure of the yard to preserve jobs. He said that when Aker Philadelphia was a naval shipyard, there was a workforce of 7,000 people, but since then those people have drifted to other industries.

Of the current operation, he said, "The yard operates efficiently and has good people," but noted that lately the demand for ships has not been there.

With the infusion of state funds, the yard currently has plans to keep its workers employed by building two Jones Act compliant oil tankers, despite the fact that are no buyers for the vessels.

Aker Philadelphia's management believes that demand for new tankers will revive. "The forecast for the shipbuilding industry indicates that the demand for new Jones Act ships should increase significantly by 2014," said Jim Miller, Aker Philadelphia's chief executive in the company's press release announcing the partnership.

Colton doubts that prediction will come true. "There is no change in the demand for Jones Act ships expected between now and 2014, and, in particular, there is no demand for ships 17 and 18 (the two oil tankers), or for any more product carriers after that," he said. "If there were, would they not have been ordered by now?" Colton says that the funding the partnership provides may give the shipyard the time it needs to find other work but doubts that Jones Act orders will drive those sales.

But at least one vessel operator sees the yard as a place where it might build vessels. Rudy Mack, chief operating officer of American Feeder Lines (AFL), hopes to build five 1,300-TEU (20-foot equivalent unit) container vessels beginning in 2012. The New York-based company — whose mission is to build, own and operate the first fully Jones Act compliant short sea/feedering operation in the United States — announced on March 1 that it has submitted a letter of intent to Aker Philadelphia for the construction of five vessels. AFL has also submitted a letter of intent to Bay Shipbuilding Company of Wisconsin for another five vessels.

Mack, the former president of Hapag-Lloyd America Inc., is planning to build AFL's feeder service connecting Boston, Portland, Maine, and Halifax, Nova Scotia, with weekly service.

But before the vessels are built, AFL will need to secure financing for the project. The company's immediate plans are to charter a foreign flag vessel to begin feeder service between the three ports.

By Professional Mariner Staff