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Ad
► On 18 February, John Gaughan,
America’s shipbuilding hit bottom in 1987 as the last commercial oceangoing ship was delivered to Sea-Land Service, Inc., for its Alaska trade route. Outpriced by foreign yards, the nation’s 69 shipyards now must rely solely on the Navy for their business. Backlogged orders for U. S. yards stood at 83 ships, all Navy vessels.
Meanwhile, foreign shipbuilders in the Pacific found themselves competing with each other to be the lowest-cost supplier of the world’s ships. South Korea nipped at Japan’s heels for this status. China expanded and considered entering the U. S. market.
The U. S. merchant fleet continued its steady decline, prompting a spate of policy proposals and recommendations. None was adopted. A presidential commission made one major assessment of the industry, which raised hopes that some solutions might be forthcoming.
In 1987, ferries capsized, collided, or sank with stunning regularity. One year- end collision between a ferry and an oil tanker in the shark-infested waters off Mindoro Island in the Philippines claimed the lives of almost 1,600 men, women, and children. Other vessels, either from neglect or quirks of nature, vanished, taking scores more to their graves. And the missiles, mines, and lost tempers of war in the Persian Gulf crippled some of the world’s grandest ships.
U. S. Maritime
construction are discouraged and cargo preference rules are under attack.
The failure to stem the decline in the U. S. maritime business has had severe economic and military consequences for the nation. In 1982, there were 110 privately owned shipyards in the country, employing 112,000 people. By the end of 1987, the number of active yards had fallen to 69 and employment had dropped by more than 28%, to 80,000 workers.
At least 11 yards are now operating under Chapter 11 of the federal bankruptcy act, the Shipbuilders’ Council of America reported. The numbers explain why. In 1976, U. S. shipyards had orders for 155 vessels, half of which were for the Navy. Now, only 83 ships are on order, all for the Navy, the council said.
Moreover, the presidential Commission on Merchant Marine and Defense found the nation’s merchant fleet had declined precipitously. The number of U. S.-flag merchant ships, it said, had fallen by 50% since 1970 and was likely to drop another 50% by the year 2000.
As 1987 progressed, a number of changes were proposed in federal maritime policy.
► The year began with the introduction
of a bill to revise the maritime subsidy programs. Major elements of the legisla tion, introduced on 11 February by U Representative Mario Biaggi (D-N>' include: extending operating subsidies to offset higher U. S. crew wages to a U. S.-flag steamship lines through 199 ’ permitting U. S.-flag companies to but ships abroad; and paying subsidies to f°r eign-flag feeder vessels that use U- ' crews. In introducing his legislation^ Biaggi said the Reagan administration policy on the Merchant Marine wa “naive and destructive.” ministrator of the federal Maritime A ministration (MarAd), told a Senate ap propriations subcommittee that 1 Reagan administration wanted author't to prohibit new commitments under * Title XI ship financing subsidy prograhjj Gaughan said that defaults under Title X had required MarAd to borrow SI--’ billion from the Treasury since 1981- ( later General Accounting Office [GA assessment would find that loan defau under Title XI between 1985 and l9 were $1.9 billion, almost six times 1 amount incurred from the program’s 10 ception in 1972 to 1984.) Later, on
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The delivery of the Sea Land Kodiak, a 16,000-deadweight-ton containership built by Bay Shipbuilding Company of Sturgeon Bay, Wisconsin, on 9 November, marked the first time in the nation’s history that U. S. shipyards were not building an oceangoing vessel for private, commercial use. Neither were there any ships on order. Such a watershed reflects the demise of the nation’s maritime industry. From shipyards to shipping lines, the United States is now dependent on foreign yards to build its ships and on foreign-flag vessels to transport U. S. goods. Government subsidies for ship
American President Lines, Brothers Steamship Company, and Line, agreed that Congress
Gaughan told the board of direc- ^ of the Shipbuilders’ Council of inj(er|ca not to expect any major federal ^ lative to save their crippled industry. t)0ae Military Sealift Command an- ShjUnce(f on 25 March that Iceland Steam- Company won the first publicly bid for i?Ct unc*er a new treaty that ended, 0| t*le first time, the U. S.-flag monop] j^°n military shipments. Beginning rj(V ay> the Icelandic firm was given be. s to move 65% of the military cargo ^ ^een Iceland and the United States.
n 15 June, the Journal of Commerce c(Lr,e<f that major U. S. ocean-liner t(it Parties endorsed several changes in Era Ct'cra' ship-operating subsidy pro- The companies, the Sea-Land Cor-
hS>n'
^atson
should prevent subsidized carriers from operating in domestic routes now handled by unsubsidized, purely domestic carriers. Such nonsubsidized lines receive additional protection from foreign-flag ships by the Jones Act.
► As Congress was considering reflagging of the 11 Kuwaiti-owned tankers, some lawmakers worried that requiring only one U. S. citizen on board, the master, would have disastrous effects on maritime labor. On all other U. S.-flag ships, all officers and 75% of the crew must be U. S. citizens. On 29 June, Congressman Biaggi introduced a bill that would require U. S. citizens to crew all U. S.-flag ships.
► On 27 August, the GAO completed its assessment of MarAd’s ship-financing program and found the agency had failed to tell Congress in 1985 and 1986 that its
Seattle (facing page) and other U. S. ports will be handling more and more ships that are built abroad, in such yards as Hyundai in South Korea (above). No U. S. shipyard can underbid Far East builders. As a result, U. S. yards have no orders at present to build commercial oceangoing vessels; the Sea-Land Kodiak (left) was the last to be delivered, in November 1987.
program’s fund was no longer selfsupporting. Furthermore, the GAO found that MarAd had neither estimated the value of loans at risk of default nor did it have a process for developing future default risk.
Just more than two months later, on 15 October, the deputy maritime administrator, Elaine L. Chao, told a House subcommittee that defaults under MarAd’s ship construction loan program were slackening. Kenneth M. Mead, an associate director of the GAO, told the same subcommittee that 57% of the companies holding government loans are classified as having a moderate or serious risk of default. Eleven percent of the outstanding loans of $4.4 billion are likely to default, he said.
► On 21 October, the Reagan administration sent legislation to Congress that would revise the nation’s 51-year-old operating subsidy program for U. S. ocean-liner companies. The administration’s plan would extend operating subsidies to all liner companies, subject to a maximum of 20 ships for major companies and 10 ships for smaller ones; make subsidy payments to cover wage differentials; permit operators to buy ships abroad; and all but eliminate restrictions on subsidized companies. In making the proposals, the administration said the current system did not offer operating flexibility or sufficient cost incentives to make the U. S. fleet competitive. The industry issued no immediate reaction.
Shipyards
Todd Shipyards Corporation, the nation’s largest private shipbuilding company, which traces its beginnings to the famed iron-clad warship, the Monitor, traveled a rocky path into bankruptcy in 1987.
Beginning in March, a strike stopped work at the shipyard of its San Francisco subsidiary, Todd Pacific. By 29 March, the end of its fiscal year, the company posted a net loss of roughly $50 million on revenues of about $400 million. In April, Standard & Poor’s, the finance rating bureau, placed the parent com pany, Todd Shipyards of Jersey City- New Jersey, on its credit watch list, in bureau took the action because ot the company’s financial and labor problems as well as uncertainty over a potentia debt-restructuring plan.
A Merchant Marine Strategy.
those
cipitously. Anyway, there is no legal requirement for
soft!*
Sometimes a quiet scare is just what the doctor ordered. And it is exactly what the blue-ribbon Commission on Merchant Marine and Defense supplied.
The Commission issued a jolting report of its findings in September, and an ambitious report of recommendations in December. The reports make it clear that unless we do something soon, our Merchant Marine will be unable to help our armed forces win the next war. The long deterioration in our Merchant Marine has become a crisis, therefore, because it finally seriously threatens national security. So what should we do?
Forty years in Congress have taught me that there are two ways to deal with a problem like this. One way is to let our Merchant Marine continue to deteriorate until we effectively have none. Then, when we belatedly recognize the crisis, we must throw huge sums of money to reinvent a program we cannot do without. As Admiral William J. Crowe, Chairman of the Joint Chiefs of Staff, has said:
“If there were no United States-flag merchant marine, it would have to be replaced by a government-owned and -operated sealift fleet—at considerable additional expense to acquire and operate.”
The better alternative is to investigate the problems, their causes, and repercussions, and to work to resolve them. It was with this in mind that 1 drafted legislation to create the Commission on Merchant Marine and Defense. Now we should let the Commission’s excellent work serve as the first step toward building a national consensus to reverse the decline of the Merchant Marine. As the reports note, this cannot be done without significant government expenditure, as well as change and some sacrifice by all in the maritime community.
The complacent will note that our Merchant Marine has been in trouble for most of the last 120 years, except for brief periods of prosperity during national crises. But a survey of the current situation shows we arc headed for unprecedented decline.
Although the current administration has done more by way of adding Navy ships to enhance the nation’s strategic sealift capability than has been done during any period since World War II, the commercial sealift component, on which we would surely have to depend to transport the bulk of our strategic and economic lift capacity in time of war, is in serious trouble.
In 1970, 18 major U. S. liner cargo companies operated five or more ships in international trade—a total of 434 such ships. Today, only four U. S. liner companies that operate in international trade have five or more ships each, and among them they possess only 88 vessels. Even in the protected domestic trade, the number of liner cargo ships has dropped by more than a quarter, from 21 to 15.
Ironically, the decline in the U. S. merchant fleet come at a time when international trade, which nearly doubled in the 1970s, is projected to expand by roughly 40% by the end of the century. Unfortunately, during that same period, if nothing is done to prevent it, the U. S. liner^ fleet will shrink to about 50 ships, in addition to the 15 ,n protected domestic trade. The overall U. S. merchant fleet—the tankers, bulk carriers, barge carriers, container ships, and the like, which totaled 416 privately owned, active, and laid up units at the beginning of 1988—is Pr° jected to decline more than 50%. During 1987 alone, vvC lost 29 ships and 823,445 deadweight tons, and in January 1988, there were only 341 operational U. S.-flag mereha^ ships. Today, our Merchant Marine carries less than 491 0 our international trade; by the end of the century, if c°r' rections are not made, we will have about a 1% share o much larger market.
Why should this sad economic situation concern miHta™ leaders? After all, it has been argued, the United States can always obtain the sealift capacity it requires from ships of the U. S.-owned flag-of-convenience fleet or fr° the merchant fleets of our allies, can’t it? Alas, no. BaS' ing our strategic sealift plans on the availability of such fleets is, at best, imprudent, and, at worst, dangerous- There is simply no way of knowing whether foreign ere on U. S.-owned ships operating under the flags of Pan" ama, Liberia, Honduras, and the Bahamas will be will'0® to follow the U. S. flag into battle. NATO merchant fleets, on which we have depended to provide as many a 400 ships to lift strategic cargoes, are also declining Pre' fleets to aid the United States in areas outside of NATO- Can’t we turn to the expensively procured Ready Re' serve Force (RRF) of moth-balled merchant ships main' tained by the Maritime Administration? We could, if t*lC _ were trained crews to operate them. But the RRF is c°n posed mainly of aging ships propelled by steam, ships which trained operators will be increasingly difficult to find in a merchant ship world gone diesel. Moreover, 11 decline in the U. S. merchant fleet also means there are fewer skilled merchant seamen. The First Report of thL Commission on Merchant Marine and Defense estimates that by the year 2000 there will be a significant shortage of merchant mariners able to man ships reactivated fr°n'j the RRF. The Commission also estimates that by the en of the century the U. S. Merchant Marine will support skilled workforce less than one-third the size needed to sustain a global war.
Adding further to this dismal equation is the loss
odd withdrew its bid for construction (DD °n Navy’s new ^rleigh Burke 0-class gUided-missile destroy- JS 011 26 May, just hours before bids k ere to be opened. The company so acted ecause the Navy would not pay Todd’s tl.art UP c°sts for the $162.1 million con- vv?Ct, was a severe blow to Todd, lch had hoped the Navy work would
rekindle its finances.
Todd revamped its management in early July, by removing its chairman and chief executive, Hans K. Schaefer, and shifting him to the presidency of Todd’s West Coast subsidiary. David W. Wallace, a board member with a reputation for resurrecting financially troubled firms, was elected chairman.
By late July, Todd was restructuring its operations. First, it gave its dry docks, cranes, and related equipment to the port of San Francisco to entice the port to break a lease agreement with Todd. Then, a few days later, Todd turned over its shipyard in New Orleans to the port there, in exchange for ending a lease valued at $6.9 million. On 17 August the
ac*ily w°rse unless drastic action is taken immediately.
A “c|e "1ur°'P 50u“’
is thc Z ant* Krovv*ng danger to the national security” indusp6 TeCt *hc deterioration of the U. S. maritime MercheS’ reP°rted the presidential Commission on chaired *h ^ar'ne al,d the Defense. The commission is by Jeremiah Denton (above, with Reagan).
port
solve the
„ 5*e PUH cooperation and attention of the various fed- ► Urbanizations concerned with sealift
etnient of a meaningful operating differential subsidy
j|^e eased 30 December 1987, offer an integrated plan The Vhe nat‘on s strategic sealift shortfall. They include: SUfe thp rtCS,i,dent stating a national maritime policy to en- erai ° "
Representative Bennett (D-FL) is Chairman of the Seapower Subcommittee of the House Armed Services Committee, and a member of the House Merchant Marine and Fisheries Committee.
__________ By Representative Charles E. Bennett
program to restore the prospects of ship operators
► Implementation of a government-funded “procure-and- charter” program to begin the buildup and modernization of the merchant fleet and the shipyard industries
►The imposition of reforms to stimulate foreign trade and the use of U. S.-flag ships in that trade (for, without cargo, a peacetime merchant marine cannot be maintained)
►Support and improvement for the existing cabotage laws that are intended to reserve U. S. domestic seaborne trade for U. S.-flag ships and craft
►Improvements to federal policies, practices, and regulations to ensure that the maritime industries are not unfairly disadvantaged
►Government spearheading of a joint public and private effort to improve efficiency in the maritime industries.
Obviously, several of the Commission’s recommendations cannot be carried out without considerable public expense. But it must be remembered that government expenditures in support of the Merchant Marine are a necessary part of the overall cost of national security. Moreover, expenditures for the U. S. Merchant Marine also produce U. S. jobs, income tax receipts, and consumer savings.
The Commission on Merchant Marine and Defense concludes its Second Report with thc warning that if its recommendations are not followed now, it sees no alternative but the eventual imposition of more drastic measures, such as reserving commercial cargo to U. S.-flag ships or implementing a massive program of direct subsidies to the Merchant Marine to assure that enough ships, shipyards, and trained personnel are available to meet the nation’s crucial sealift needs. Our Merchant Marine, the “fourth arm of defense,” is as crucial a component of national security as are our armed forces.
The Commission on Merchant Marine and Defense presents the facts of the deficiencies we face. It outlines a plan of action. We now need estimates of the costs of implementing these recommendations. Then, the Commission must work with the relevent congressional committees and industry representatives to draft legislation to put their recommendations into action.
One hopes that some major legislation can be passed in 1988. But these challenges are great and it will probably take more than one Congress to pass the laws needed to provide a more viable Merchant Marine to improve our national security.
Only rln‘he Plow of raw materials during wartime. Thc onr .dy apparent alternative to reversing the decline of strjtep^1!'010 industries is to change basic U. S. military This h ruhng out military responses requiring sealift, if jt ^ °|'Vever’ *s a price this nation cannot afford to pay c°ntrol • CS t0 remain a leader of the Free World and to The *tS 0Wn Political and economic destiny.
^‘commendations in the Commission’s Second Re
chant1 ?.S*1'Pyard resources. With no new orders for mer- rnai .. Ps’ anc* w'th a declining inventory of ships to sun |am’ t*le shiPyard industrial base and the irreplaceable alscf lerS shipbuilding and ship-repair components will low Wlt'1Cr away- The shipyard manpower is already so and aS t0. hmit severely the nation’s ability to mobilize for
sustain a major conflict, and the situation will get lily -
proni
anada, Spain, and Australia.
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ber
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ederal safety inspectors on 4 Novem-
°anknUeC* *tS comehaclc- In late August, a aCceruPtcy judge ordered creditors to Payi^1 t*le Prm’s plan of reorganization, Pfote^'h16 way for full exit from court cat . 10n- While in bankruptcy, Tacoma Hew on operations and appointed a OriD]managenicnt team. In 1983, Tacoma Pcrso°^eC* ^’^0 labor and management mil"nel. as compared to the 233 ad- eniiv ratlVe and unionized workers pres- yarcj Working at the Puget Sound ship-
Ne
ickc^
sts cornPetition and thus keep of °Wn- The Electric Boat Division been .l era* Dynamics Corporation has clear6 S0*e builder of the massive nu- fines ^>'Vereci ballistic-missile subma- NewsesPite this attempt by Newport a i0vj however. Electric Boat submitted
1 sought protection from its creditors n ederal bankruptcy court. In the uncer- sainty lhat followed the bankruptcy filing, °me Todd employees were paid, but k e'r checks bounced. By late August, a
ankruptCy judge authorized a line of it that allowed Todd to continue its Perations while the court proceedings c°ntinued.
2 Iron Works, in another reorgani- • !on> albeit considerably less onerous, tur ate ^'ct0*5er sa'cl wanted to restruc- j e 'he company to make it less depen- new °n Navy s^'P contracts. Among its
w strategies are to market its services , CUstomers abroad, in such countries as a ,ProPosed fines totaling $4.2 million 0f lnst Path for endangering thousands tjle'Vor^;ers> including exposing some of six'1110 asPestos and raw sewage. After a cumonth investigation, the federal Oc-
tion t°na' Safety anc* Health Administra- mu 'OSHA) recommended the maxi- (,r , Pne because of a “complete heaUK °Wn 'n shipbuilder’s safety and f0r .. Program.” OSHA cited the firm Nov separate violations. On 24 sayien*er, Bath officials lashed back, perCg® they would appeal the fine. Eight Cont °f the violations were already ge([ectech Bath president William Hag- c0rsa,h- and the remainder were to be scary6’^ Soon' Daggett called the fine
WhipL0/”0 Boatbuilding Company, a (ja “ad operated under the scrutiny of eontj jruPtcy court for nearly two years, 00c;^°" News Shipbuilding and Dry ^. °mPony, according to a 1 Decem- si0nai Soc'ated Press report, told congres- to bU ]H°ntacts l^at ^ac* snbrnhted a bid cjjij, a Trident submarines. Navy offi- enCou^a'Se(l the move, saying it would
c°sts Gen
THE TIMES-PICAYUNE private shipbuilders agreed to find ways to cut design and production costs at their yards. The project may have come too late for one participant: Todd Pacific Shipyards of Los Angeles. The project will be directed by Newport News Shipbuilding & Dry Dock Company. Others include: Bath Iron Works in Bath, Maine; National Steel and Shipbuilding Company in San Diego; and Ingalls Shipbuilding in Pascagoula, Mississippi. Designed to help the firms compete with lower-cost yards abroad, the total cost of the project will be $1.45 million, of which the Navy will pay $1.05 million.
Steamship Lines
The first report on the state of U. S. shipping by the Commission on Merchant Marine and Defense was given to President Ronald Reagan on 19 October. Its findings, described by commission chairman Jeremiah Denton as sobering, were no surprise to the maritime industry. The seven-member commission, however, came to 24 conclusions about this maritime decline.
On 30 December, the commission issued its second report, which contained specific recommendations to address the country’s merchant fleet problems. (See Congressman Charles E. Bennett’s report in this section for further details on the commission’s findings.) Besides Denton, a retired Navy rear admiral and ex-U. S. senator, the commission is composed of officials from MarAd, United Airlines, Bath Iron Works, Council of American- Flag Ship Operators, the Maine Maritime Academy, and the National Maritime Union.
As the policymakers assessed the state of the industry, one key participant, United States Lines, continued its course toward dissolution. Operating under bankruptcy court protection since 24 November 1986, United States Lines, and its parent company, McLean Industries, Inc., sold ships and cut back operations in an effort to pay off debts of more than $2.7 billion. By late March, McLean and its affiliated companies agreed to discontinue its round-the-world service, eliminate its trans-Pacific route, and sell its Hawaii-Guam service to Sea- Land and its South American line to Crowley Maritime Corporation.
The deals, however, met opposition
The lack of orders for new business forced Todd Shipyards, like many other shipbuilders in recent years, into bankruptcy. This included the loss of its New Orleans shipyard (above).
from Prudential Insurance Company, one of United States Lines’s large creditors, which held tens of millions of dollars in ship mortgages. Prudential sought in late June the right to immediately foreclose on McLean’s ships to cover losses.
By September, the United States Line jumbo containership, the American California, was sold to a limited partnership of banks owed money by McLean. The ship, docked in Hong Kong, went for $4.48 million, one-tenth of her original cost. Earlier the partnership had purchased three of the American California’s 11 sister ships at an auction in Singapore for $3.8 million each. In mid-October, creditors seized eight United States Line Econships in New York and Seattle. On 21 December, following a U. S. District court order to proceed, six of United States Lines’s jumbo containerships, the largest in the world, were auctioned in New York and another two were sold in Seattle. The six ships in New York were sold to a consortium of banks, which are owed $170 million by United States Line, for a scant $4 million each.
Rumors in the maritime industry were that United States Lines would craft some sort of joint-operating agreement to get the large ships back in service. By year’s end, no plan had materialized. The vessels, 930 feet long, can carry 4,480 20- foot equivalent units (TEUs).
On 6 November, Topgallant Group, a new U. S.-flag shipping line, filed an antitrust law suit against Sea-Land Corporation and its parent, CSX Corporation, for allegedly trying to monopolize the North Atlantic market and put the fledgling company out of business. Topgallant, which began operations in February, and Sea-Land competed for Military Sealift Command cargoes for the cycles from April to September and from September to March 1988. Topgallant, with two leased ships, was the low bidder.
Seatrain Lines, Inc., which operated under bankruptcy protection since 1981, had its plan of reorganization okayed by the court and emerged from bankruptcy on 9 April. The company would be the
Co
des Comptes, issued a report in June th^ criticized the government for failing manage adequately the nation’s ports salvage its troubled ship repair industry | A lack of coordination was causing c°; ly duplication of cargo terminal facih1 in nearby ports, the report n°.j Dunkerque, with a new bulk terflUU completed for $65 million in 1983, ^ operating in 1986 at only one-third c pacity. In nearby Le Havre, a similar t minal was handling only slightly
city-
icity
second steamship line to successfully leave bankruptcy court. The first was Waterman Steamship Line, which began unprotected operations in 1986 after three years under court protection.
World Scene
Unlike their counterparts in the United States, European shipyards continue to build ships, albeit with less frequency and with more government assistance. One European Community (EC) assessment put that continent’s share of worldwide shipbuilding at just 18%.
Between 1975 and 1985, the European work force in shipbuilding industries fell by 48%, to 95,000. Two estimates, one by the EC Commission and the other by the International Metal Workers’ Federation in Geneva, predict further job losses in the next two years of between 30,000 and 45,000. In mid-November 1987, shipbuilders met with EC officials in Brussels, hoping to be granted increased
The completion of the Sovereign of the Seas may send all cruise ships sailing through a competitive “bloodbath.”
subsidies (up to 30%) to forestall the loss of business to lower-priced yards in South Korea and Japan. On 1 January 1987, EC nations put a cap on subsidies for large ships at 28% of cost for the next four years.
At the same time, West Germany boosted its subsidy to 20%, sufficient to produce $585 million in new orders in just two months. Spanish shipyards, exempted from EC subsidy rules, seemed able to compete for business. In October, Spain’s shipbuilders announced orders for 14 ships, including contracts for eight Soviet cargo ships valued at $160 million. The U. S. company, DelMonte Corporation, a subsidiary of RJR Nabisco, Inc., ordered six refrigerated ships, a purchase worth $100 million.
As Europe was assessing its shipbuilding industry, a London banking and consulting firm, the First International Capital Corporation, predicted in early November that orders for new merchant vessels would rise through 1990. The firm based its prediction on an aging fleet of dry bulk and tanker vessels and a steady growth in worldwide demand for such bulk products. According to the firm’s report, “a huge replacement and modernization program will be required” to replace aged ships. By year’s end, the corporation estimated that 90% of the world’s supertanker fleet, over 200,000 deadweight, would be more than ten years old. Sixty percent would be more than 12 years old.
Such a scenario prompted the banking company to urge a “new approach” to ship financing. One notion is to lease ships much as the airline industry leases airplanes. More than 70% of all passenger airplanes are owned by leasing companies, in contrast to but 30% of the ships.
The likely recipients of new ship orders, however, will be shipyards in the Pacific. South Korea’s official news agency, Yonhap, reported in mid-October that the nation’s shipbuilding industry had received orders by the end of August for 88 ships with a total tonnage of 2.3 million tons. Japan, which is feeling the competitive heat from South Korea, had orders to construct 67 vessels, Yonhap reported, with a total tonnage of 2.71 million tons. South Korea’s shipyards will export 39 of the ships, while Japan will export 24 vessels.
► World cruise ship business also appears headed toward some tough competition. In early March, workers at the Les Chantiers de l’Atlantique in Saint Na- zaire, France, placed the funnel on the Sovereign of the Seas, which, with room for 2,200 passengers, will be the world’s largest cruise ship. The ship was delivered in late 1987. Owned by the Royal Caribbean Cruise Line, the Sovereign of the Seas and two other new Norwegian ships are likely to create a competitive war, as vessel space outstrips demand for cruise vacations.
One cruise industry specialist told Norwegian businessmen to expect “a virtual bloodbath.” Others, more reassuring to the cruise industry, s«y the U. S. market has great potential to “double,” easily absorbing the new capacity.
► On 3 June, Norway’s new international ship register received final, though not overwhelming, legislative approval (18 to 16 vote) in the lower house of the Norwegian Parliament. The registry, which became effective on 1 July, permits shipowners to fly the Norwegian flag and to hire foreign crews at wages applicable in their home countries.
Within weeks after lower house approval, Bergesen d.y. Gruppen, a major
shipping firm in Oslo, decided to register 23 ships in the new system, 17 of which were in Norway’s existing registry. The firm had sought to transfer six others to foreign registry elsewhere. Bergesen’s V ships represent one-third of Norways total merchant ship fleet. By mid-June> another major shipping company, R°)a: Caribbean Cruise Line, also had decide to join the new registry. i
► In neighboring Finland, the govern
ment shipowners, and unions began implement an initiative to exchange cas subsidies for pay freezes, longer worker hours, and reductions in crew size Finnish-flag vessels. Beginning in and lasting three years, the governin'- will distribute 30 million markkaa $6.7 million) a year. The subsidy Pr^ gram was designed to stem the decline the number of Finnish-registered ships’ which has dropped 53% in the last fvf years to fewer than 120 vessels. To flia the nation’s registry more attractive, 01 government was seeking a 45% cut manning costs. . j
► Meanwhile, oil exploration in Not
Sea fields off the Norway coast begaIJ picking up at mid-year with hopes tna stable $18 to $20 a barrel crude oil pr*c® would sustain further drilling through th end of 1987 and beyond. ,
British Shipbuilders, the state-own^ j corporation, reported on 30 NoveniN that it had reduced its losses by hah the six-month period ending in SepteI1’ ber; losses were $40 million, down tr° $88 million in the earlier period. In ^ November, the company also re*eaSL j three new ship designs, increasing 1 number of ship types to six. The new d signs were for a compact containership’ refrigerated cargo ship, and a polar search vessel.
► In France, a watchdog group, the
nt°re
than one-quarter of its rated capa1 Similar problems of unused capaJ were noted in other areas of France: N' tes-Saint-Nazaire, Bordeaux, and at Fos extension of Marseilles. ^
In the nation’s shipbuilding sector, French Government had not been m11^ more successful, the report said. Bet'VL‘T 1983 and 1985, Cour des Comptes f°uP
of
such
port container terminal license.” No
requirement applies for the Taiwan^ The Federal Maritime Commission Pr° posed suspending either the tariffs of 1 wan carriers or the transshipment agr^ ments and terminal agreements at LI- ports, principally those along the PaCI Coast. Comments on the proposed N were accepted through 8 January 1° j ► During a two-week, get-acquam tour of the United States in Septem^ officials of the state-owned China St3j Shipbuilding Corporation said they hopf to open an affiliate in Los Angeles year’s end. The company, which help catapult China into the front ranks of1 world’s shipbuilders, also hopes to crea financing options for potential purchase of its ships. While in Los Angeles, 0 cials of the Chinese company met executives of the Security Pacific Cot?
tie*
:d
“Avoidable human error” caused the Herald of Free Enterprise to flood and then capsize one mile off the Belgian coast. Of the ferry’s 541 passengers and crew, 189 perished in the disaster.
that although $320 million in public funds were pumped into a number of yards, the money did not prevent the bankruptcy of two of the largest ones. ► In Greece, shipping interests sought to pressure the government into creating new protection for its home-flag fleet. In the last six years, the number of Greek- registered ships had fallen by about half to 2,000 vessels. On 20 March, Greek shipowners operating in Great Britain and those from Piraeus met in London to hammer out ways to increase the competitiveness of Greek-flag shipping. They also debated the effectiveness of the Greek Government’s action taken in late 1986, which reduced crew size and permitted the hiring of foreign seamen at lower wages. This action was partly obviated by a state-imposed settlement of a worldwide strike of Greek oceangoing ships that the Panhellenic Seamen’s Federation had called in December 1986. The government’s settlement resulted in a higher wage rate than owners were prepared to pay.
In October, the opposition to ruling socialist Prime Minister Andreas Papan- dreou, the conservative New Democracy party, announced its proposed shipping policy. The policy statement comes as leaders of New Democracy sensed rising political prospects in the next election, expected sometime in 1988. The shipping manifesto incorporates many demands of Greece’s shipping industry, including increased marine training, an overhaul of marine unionism, and financial support for the technically bankrupt Greek Seamen’s Pensions Fund. New Democracy also calls for the privatization of nationalized shipyards and the closure of a state- supported interisland shipping company, Coastal Shipping SA.
► In mid-January, talks between the United States and the Soviet Union on an agreement on cargo sharing and port use ended in an impasse. The three-day talks were conducted between John Gaughan, U. S. Maritime Administrator, and Igor Averin, chief of the Foreign Relations Department of the Soviet’s Ministry of the Merchant Marine. At the time, the impasse was due to low volume of trade between the two countries and the need for an agreement on larger issues confronting the two superpowers.
An official government assessment on the environment published in April by the journal Soviet Shipping reported that water pollution of the Baltic, Barents, Black, and Azov seas had declined more than tenfold over the past dozen years. According to the account, the Soviet Union adopted the long-term goal of the “almost total elimination” of pollutants into the environment. The price tag for the effort is staggering. The Soviets are spending $15 billion (U. S.) a year on environmental protection projects, up $4 billion (U. S.) from the beginning of this decade.
► On 24 February, the Journal of Commerce reported that “millions of dollars worth of South African goods” were entering the United States, despite the import ban enacted in 1986. The journal said South African exporters have disguised the origin of their goods or are transferring South African cargoes to other ships in foreign ports as a way of circumventing the U. S. import ban. Federal investigators are probing two separate shipments of South African lobster tails, valued at an estimated $10.5 million. Both were initially moved by a ship called the Southern Freedom, registered in the Cayman Islands, the newspaper reported.
► On 15 April, the Federal Mariti^ Commission opened an inquiry into re strictive rules governing non-Tai'va[’ ocean carriers in the Taiwan-UniK
States trade. At issue was the inability
non-Taiwan nationals or companies operate a trucking company, obtain a cense for a container terminal, or °"11 dockside facilities in Taiwan.
The inquiry culminated in a finduv published in the Federal Register 0^ 8 December, that confirmed the existed of many restrictive practices in Taiwa(1j including the requirement that U. S. other foreign shippers invest as much a $10 million in an inland container term1 nal “in order to be eligible to apply f°r ration, a bank holding company.
China State Shipbuilding, now with Taiwan as the third-ranking sa'j._ building nation, employs 300,000 W° ^ ers and operates 26 shipyards, 60 mar ^ equipment plants, and 30 research-3^ development facilities. In the last decu the company built 61 commercial s ^ and during the first six months of 1 received export orders for ten large c tainerships and oil tankers. ^
► On 16 July, the Japanese TransPj Ministry’s report on that nation’s s ping urged modernization, lower c size, and increased scrapping of 0 ^ moded vessels as ways to increase e ciency. Atsuo Nozaki, director of in ^ national shipping at the tranSfttie ministry, said the increasing value o* „ yen, high operating costs, and Sr°" jji competition had put the Japanese flee j a precarious situation. Nozaki announ^j a “pioneer ship” experiment that W ^ “achieve the smallest crew size 111 ^ world.” Crew size on modem Japan ships is between 14 and 16 seamen-
ew -
i
fom k°tb handling about 3.4 million 201 equivalent units (TEUs). But by the die'*, Hong Kong will grow to han- darn-0-"5-1 3 m'd‘on TEUs, while Rotter
■pgy' Container traffic was 28 million
Other
►
Alth
10ugh he received no radio mes-
Sages
Claudio, and set out for the
accidem
°n or, SCene. At about 2315 local time n tJec
ecember, the crew of the Don was
“tOueva .. • ------------------------------- ; • -
'he ^ ’ 'he board’s legal officer, told “We h!°Clated Press on 30 December: t'on 0aVc no reliable personal informa- sels nrie relative positions of the ves- S0.Pri°rt F
In July, Ocean Shipping Consultants of Cendon Predicted that by the turn of the tern,Ur^’ Hong Kong would surpass Rot- CQnat^ as world’s biggest port. The
and H tamS Said that by 1990’ Rotterdam
win, i°n® Ron§ would be neck and neck, y ar 2000, Hong Kong will grow to han- 5 million TEUs, while Rotter- _ "'[H handle about 4.4 million TEUs. TElP ' Wodd trade will rise to 57 million
fillion^TP??0*' UP,n™m f P^Cted world T" " '"°C * '
Highlights ^Cc‘dents ranCo ° d'stress, Captain Melecio Bar- e‘"ht C°U*d see the fire and smoke about Tabemdes out from his own ship, in the a disa.S Stra‘ts off Mindoro Island. From hint tbe caPtain’s view gave little fortae horror he was soon to witness, "°Verloaded ferry, the 2,215-ton lid6(j az' hound for Manila, had col- the lhc 629-ton Philippine tanker,
Aft '
tain pr sP°tting the distant blaze, Cap- ship ,Larranco altered the course of his
CIq^cJ.
sea. pi° Was Pulling survivors from the any sj ten stories high obliterated dctect^ 11 °* tbe two vessels- Radar could 0fth°nly one mangled mass.
Only ye,6 *’600 people on the two ships, the ]/eSUrvived. Of these, just two from only lived. Searchers recovered
cue f|j , bodies. Subsequent aerial res- ^here ^ )!S °Ver a 100-square-mile area Only a1 c accident occurred detected Was tbeHccasional piece of driftwood. It Centurv W°rst Peacetime accident of the . The p
>nqui °ast Guard’s Board of Marine nesses ■Was hampered by a lack of wit- lann0,. and Physical evidence. Rudy Vil- o h0vvr to and up to the point of impact. ^^ion'.Mu We arrive at a credible con- "'•ll hn ”e are not losing hope, but it The laVe|.ry hard-”
s'op (l ac* °f evidence, however, did not chargin > °,'Vners °f the two ships from ^eanwh'| at lbe °ther was responsible, ^ttino ' 6’ Pb'hppine president Corazon ^°vernSaid on 29 December that her ent would compensate the families of the victims. But she specified no amount.
► On 6 March, another ferry, the Herald of Free Enterprise, capsized as she left the English Channel port of Zeebrugge, Belgium. Of the 541 passengers and crew on board the 7,951-ton vessel, 189 perished. Most were trapped inside the ferry, which was bound for Dover, England.
In a 29-day inquiry that ended in June, investigators found that the ferry’s loading doors were not closed and seawater swamped the vessel, causing her to shift and then capsize. A lawyer for Townsend Thoresen, the owner, admitted that the accident was caused by “avoidable human error both afloat and ashore.”
An $800 warning device, later installed by Townsend Thoresen on its other ferries, could have prevented the disaster, investigators found. On 9 September, a coroner's inquest was opened to determine if criminal charges should be filed over the deaths of the passengers.
While the two ferry accidents were the year’s most devastating mishaps, the life- and-death struggle with the sea continued unabated throughout 1987.
► On 13 March, the Soviet Supreme Court’s Criminal Chamber opened the trial of the captains of the two ships that collided in the Black Sea on 31 August 1986, killing 398 persons. The two seamen, Vadim Markov, 56, and Viktor Tkachenko, 44, had been stripped of their commands after the accident. The passenger liner, the Admiral Nakhimov, commanded by Markov, sank just eight minutes after she was rammed by the cargo ship, the Pyotr Vasyev, commanded by Tkachenko. The Tass news agency reported that the two men were charged with “numerous violations of sea transport rules.” Later that month, Markov and Tkachenko were sentenced to 15 years in prison after Soviet prosecutors described their misdeeds as “irresponsibility, sloth and slovenliness in their extreme manifestations.”
Finally, Lloyd’s Register of Shipping developed a marine accident recorder, similar to the black boxes in airliners. Lloyd’s is asking the United Nations’s International Maritime Organization to recommend that it be installed on all merchant ships. The free-floating device would measure and record data about the ship’s equipment and navigation as well as its radio transmissions and the stresses on the ship that might contribute to its foundering.
Piracy and Mutiny
The Strait of Malacca, that dangerous haunt of modern-day pirates, is getting some competition. During a several-day period in the spring, pirates boarded three ships in the Singapore Strait, a passage between Singapore and the Indonesian island of Batam.
The incidents prompted the Hong Kong Shipowners’ Association to telex authorities in Singapore asking for increased patrols of the area. The Singapore marine police and navy responded that they would beef up enforcement.
Conclusion
So then, 1987 was a year of change and turmoil. For some, like the men and women who worked for the bankrupt Todd Shipyards, it marked an ending. For others, like those at the much scaled-back Tacoma Boatbuilding Company, 1987 offered some promise for renewal.
But on the whole, bad news far outweighed the good.
Mr. Asher has been a reporter at the Philadelphia Inquirer for six years and has covered the maritime beat since 1986. He started his journalism career in Utica, New York, in 1970. and has worked in Connecticut, New Jersey, and Pennsylvania. Mr. Asher received his bachelor’s and master’s degrees in journalism from Syracuse University and did postgraduate work in economics and finance at Temple University in Philadelphia.
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