Fate of Avondale shipyard in limbo as deadline looms

Three years ago, the defense giant Northrop Grumman dropped a bombshell, announcing that the Avondale shipyard — once Louisiana’s largest private employer and a key source of high-paying, blue-collar jobs for generations — would close by the end of 2013.

But as that deadline nears, the 75-year-old West Bank shipyard’s fate is still uncertain, as company officials scramble to reinvent the massive facility — long dependent on military work — into a manufacturer for the booming oil and gas industry.

Armed with a new labor agreement, Avondale’s parent company is frantically trying to land contracts with commercial customers as work winds down on the last boat the facility is building for the Navy — the amphibious transport dock Somerset, a 684-foot-long ship that will be used to transport Marines, equipment and supplies.

As the project nears completion, the shipyard’s workforce has been trimmed to about 1,500 employees, down from nearly 5,000 a few years ago. Among those still punching the clock every day: Annie Jackson, 47, who has spent the last 13 years as a welder.

Jackson is crossing her fingers, hoping the yard can be saved.

“There’s not a lot of work that’s paying out there like Avondale shipyard is paying,” said Jackson, who lives in nearby Waggaman. “I’m glad that they are still open, and hopefully they will stay open, because a lot of people depend on that.”

But it’s not clear what’s around the corner.

“We are bringing all our efforts to bear in redeploying Avondale, and we are very optimistic about the potential for success,” said Beci Brenton, a spokeswoman for Huntington Ingalls, a spinoff company created by Northrop to handle its shipbuilding business in 2011. “It’s also important to underscore that if we are not successful, we will have to close the facility. This is our least desired outcome, and we’re doing everything to prevent this from happening.”

In an August filing with the Securities and Exchange Commission, the company said shuttering the shipyard remains its “baseline assumption.”

Considering that position, local and state officials are bracing for further job losses at the facility, which got its start in 1938 building tugs and barges and has been “an important gateway … into the middle class for generations of families,” Jefferson Parish President John Young said in a recent interview.

“We’re trying to stay ahead of the curve and not get in their way, but at the same time, let them know that we’re here and available to help,” Young said.

Ideas aplenty

Avondale finds itself in much the same situation as the Michoud Assembly Facility, the huge industrial plant in New Orleans East that for decades depended on the federal government’s space program and has tried to reinvent itself since the shuttle program ended in 2011.

There’s been no shortage of ideas for remaking Avondale. Converting it into a general-purpose industrial park — as happened in Philadelphia in the mid-1990s when the country’s first naval shipyard closed, leaving thousands jobless — was an early favorite talking point. But that plan went nowhere.

Other, more radical ideas were kicked around, but also failed to gain much traction.

In 2010, a relatively unknown group of engineers and financiers talked about buying Northrop’s shipbuilding business and building a new class of double-hulled oilers for the Navy. The outfit, called Cleveland Ship, said it was interested even before the company announced it would close the yard. The plan soon fizzled.

A year later, union leaders organized a rally outside the federal courthouse in New Orleans, during which the head of a New York shipping company told a cheering crowd that he would hire Huntington Ingalls to build a fleet of small container vessels at a cost of $75 million per ship. But the company, American Feeder Lines, soon went out of business.

Louisiana economic development officials, meanwhile, spoke optimistically about a $214 million incentive package being offered to Huntington Ingalls to pay for workforce training and significant upgrades to the Avondale yard if they maintained 3,850 full-time workers.

Those incentives are still on the table. But unless it can lure commercial customers, Huntington Ingalls says it will shut down most operations at the facility once work is finished on the Somerset — the ninth such vessel built by the company — which it expects to deliver this month.

After that, the company plans to build ships exclusively in Pascagoula, Miss., but it will continue assembling some vessel components at Avondale until mid-2014. That will keep several hundred workers busy as Huntington Ingalls continues to seek customers in the energy industry.

“We’d love to see the workforce stabilize obviously and try to keep the people that are here until some commercial work comes along, but we’re not sure when that’ll be, and neither is the company, quite frankly,” said Warren Fairley, an executive with the boilermakers’ union.

Logical move

Most industry experts say turning to the oil and gas industry for work is a logical move for Avondale, given its skilled workforce, huge facilities and proximity to the Gulf of Mexico.

“They don’t have enough (military) work to keep that shipyard open, so I think it’s the right thing. There’s a lot of opportunity,” said Donald “Boysie” Bollinger, chief executive officer of Bollinger Shipyards, which has 10 shipyards along the Gulf Coast and may compete with Avondale for work in the energy industry. “When you’re a pure Navy shipbuilder, and the Navy’s cutting back on the number of ships, and there are six yards building ships, there’s not enough work to go around.”

One thing Avondale has going for it is a labor deal: Last month, union workers at the shipyard approved a new collective-bargaining agreement that runs through 2019.

Observers say cementing an agreement with the union was crucial, because now the company can predict its labor costs when bidding on commercial work.

Union officials are reasonably pleased with the new deal, which offers slight wage increases but fewer paid holidays and higher health insurance premiums. “They didn’t go cheap, didn’t cut wages, didn’t try to decertify the union,” said Ron Ault, president of the Metal Trades Department of the AFL-CIO, which represents several hundred workers at Avondale.

The lingering question is whether there will be any work for Ault’s members to do next year.

In its effort to break into the energy industry, Huntington Ingalls opened an office in Houston and hired a former French oil-services executive. Rene Mathieu, vice president and general manager of Avondale Industries Inc., declined to comment for this story through a spokeswoman.

Some observers, including those rooting for Avondale, believe Mathieu has his work cut out for him.

“It’s a new industry for them, it’s a strange industry, and I hate to use this term, but it’s also almost clique-ish,” said Fairley, the boilermakers’ union executive. “To get into that industry, to do work, you have to have either been born into it or know somebody that’s in it or hire somebody that’s doing it currently.”

Michael Hecht, president and CEO of Greater New Orleans Inc., a regional economic development alliance, is more optimistic about Huntington Ingalls’ chances in the new arena.

“Clearly, Avondale has an attractive strategy by entering what’s going to be a booming market in Louisiana for the next two decades,” Hecht said. “In making this pivot, however, there are some challenges, and one is just the necessary timing delay, as Avondale works through the cycle for new projects, and the second is that they have to move from being primarily a government contractor to competing in the private market.”

Hecht added: “They’re saying that they are deep into negotiations on multiple potential contracts, so overall that sounds reasonably optimistic.”

Even though he believes the move toward commercial work is shrewd, Bollinger said the facility’s uncertain status could scare off potential customers.

“It’s very difficult to try to sell work when people know you’re closing,” he said.

“The ongoing position of Avondale, I think, is a concern to the people who would want to buy their products in the energy business. In all cases, they are on very tight schedules, and they worry about the ability to finish projections on time.”

There are other challenges. The shipyard’s vast size may work against it in making the switch from massive naval ships to the smaller offshore supply vessels used by the oil and gas industry, said Eric Smith, an associate director of the Tulane Energy Institute.

“The problem is we don’t build a lot of big ships in the United States, and that’s what the yard was designed to do,” he said.

But Smith notes the shipyard’s location offers advantages, too, like access to deepwater ports and industrial electricity prices that are among the lowest in the nation.

A lot of would-be workers are watching closely.

“I’ve got a sense that they’ve got feelers out, and they’ve got leads now,” said Ault, the head of the metalworkers’ union. “Whether that means it’s going to take six months to get something going, or they’re going to have an announcement the day after tomorrow, I don’t know.” Huntington Ingalls has been kept their business plans “very close to the vest,” he added, “which they should be.”

Plan B, if needed

Stephen Moret, the state’s secretary of economic development, says he’s “optimistic that we’ll get to a good outcome.” He noted that state officials have spent “a good bit of time” acquainting Avondale’s owners with other major industrial players around Louisiana.

With the ongoing industrial boom in Louisiana, Moret said, huge industrial spaces like Avondale, with a foundation and a skilled workforce in place, will be at a premium.

“We’re literally limited by how much talent and how much infrastructure’s available, at a minimum, for the next five to 10 years,” he said. “What would not be acceptable is for them to say, ‘We’re going to fence it up and not sell it to anyone.’”

Lives in limbo

Amid the slowdown, it’s hard to gauge what’s has become of the yard’s nearly 3,500 displaced workers.

Ault said he has had a hard time convincing people to drive or move the 120 miles to Pascagoula, where thousands of openings remain unfilled. He said the union has kept in touch with laid-off members, and many of them have stuck around. “Bringing back people would be a fairly rapid transition,” he said.

Bollinger — who employs about 3,000 people in Louisiana and whose firm typically has hundreds of openings, mostly at its repair facility in Amelia — said he expected to be deluged with resumes when Avondale’s closing was announced. But it didn’t happen, and his company has hired only about 50 former Avondale employees.

“We haven’t seen nearly the applications that we had expected,” Bollinger said. “It’s been extremely slow, and we work with Avondale on that issue, so it’s not like we’re just leaving it on autopilot.”

Some longtime workers at the shipyard, like Andrew Croom, don’t plan to be around for the next chapter, though he’s hoping there is one. The 61-year-old Croom, who has worked at Avondale for 42 years, is planning to retire when the last ship is delivered.

He’s still struggling to process the news from 2010.

“It was a surprise. You never saw it coming. When they said they were going to close Avondale, nobody ever really expected that,” Croom said. “Avondale had been here, and everybody figured it would always be here. Hopefully it will.”