The case against BethShip Inc.'s return to shipbuilding appears overwhelming.
U.S. shipyards, which delivered 23 merchant ships in 1980 alone, completed one in 1995 . Over the same period, the yards' employment dropped from 178,000 to 106,000.
The Sparrows Point yard can find the forbidding signs in the last two ships it built, in the 1980s. Although both were intended to be Navy survey ships, one serves as a training ship and the other is in the Navy's reserve fleet. It turns out the Navy didn't need them.
Still, Peter Angelos says he wants to buy Bethlehem Steel Corp.'s shipyard and modernize it to build ships -- a shift from its repair-only business that would easily double its work force of 700.
"I'm 100 percent committed," said Angelos, whose investment group is the only publicly known prospective buyer of BethShip. "I don't consider it a headache. I consider it a challenge."
Angelos' group is betting that government programs, millions of dollars for improvements and the remnants of Baltimore's shipbuilding labor can revive BethShip as a competitive shipbuilder. The motive for Angelos, who grew up in East Baltimore, is jobs, associates said.
The Sparrows Point yard, which will be closed if it isn't sold, was once part of Bethlehem Steel's sprawling shipbuilding operation, which, during World War II, included 15 yards and 180,000 people.
"They had quite a little empire," said Tim Colton, a shipbuilding consultant in Arlington, Va.
The Sparrows Point yard employed 8,000 at its peak in 1943. After the war, the yard excelled as a builder of tankers. By the mid-1970s, employment had dropped to 4,000 workers and the yard built five supertankers.
The U.S. commercial shipbuilding industry all but disappeared in the early 1980s, after President Reagan eliminated a subsidy program that helped U.S. yards compete with lower-cost, foreign yards, Colton said.
The Navy gave BethShip the last of its shipbuilding work in the 1980s. Sparrows Point built Navy cargo ships that included the CPL Louis J. Hauge Jr. and the PFC James Anderson Jr., and the two Navy survey ships, Maury and Tanner.
As shipbuilding vanished, Sparrows Point diversified into tunnel construction and ship repair work. The ship repair work includes building deckhouses, modifying Navy ships and reburbishing cruise ships.
Now, Bethlehem Steel plans to close BethShip unless the company finds a qualified buyer shortly after Jan. 1. The company said the division has performed poorly because of a weak ship repair market.
The asking price for BethShip is believed to be about $30 million.
The steel giant would not release financial details about BethShip. But Murphy Thornton, president of Local Lodge S33 of the Industrial Union of Marine & Shipbuilding Workers of America, said BethShip's finances are not dire.
He said the yard earned money in 1993 and 1994. He said BethShip reported a loss of about $3 million in 1995 and will report a smaller loss this year. "We're the most profitable of the four divisions they want to get rid of," Thornton said.
Richard Singer, an Owings Mills real estate developer and a member of Angelos' group, would say only that the yard has had profits in all but one of the last five years, and that it had positive cash flow in every year.
"The experience of the past five years strongly suggests that it's a profitable operation," Angelos said. "It could survive as a repair yard, without a doubt."
But his focus is returning BethShip to shipbuilding, which would likely add at least 1,000 jobs.
"It could be transformed from a repair yard into an employment center with hundreds of additional jobs," Angelos said.
Angelos, a lawyer and the Baltimore Orioles' chief executive, got his start working for a steelworkers union local at Bethlehem Steel Corp. and won $1 billion in liability payments for thousands of clients injured by asbestos.
His interest in BethShip began as a rant over lunch against the disappearance of American jobs, Singer said.
"Well, you're in a position to do something about it," Singer said he told him.
"Yeah sure, like buy BethShip?" Angelos joked.
A few weeks later, Angelos came back and said, "Let's buy BethShip."
Singer said Angelos, who was about 10 at BethShip's peak, believes strongly in blue-collar workers. "Those were always the people he fought for," he said. "They're the people he grew up with. Pete remembers where he came from. There's one thing he always quotes: 'If the little guy's got money, everybody's got money.' "
Singer said that while the motivation was borne of sentiment, the financial analysis is sound. "If we buy this thing, it will make a profit," he said.
If Angelos buys the yard and tries to convert it, he would get help from 1993 federal legislation aimed at helping U.S. shipyards.
One federal program guarantees 87.5 percent of the financing for ships built in U.S. yards for foreign shipowners. That program helped Newport News Shipbuilding land a contract to build four tankers for Eletson Corp., a Greek shipowner.
The program also applies to the financing of improvements at shipyards. That's important because BethShip likely requires tens of millions of dollars in improvements to get back into building.
If Angelos' group borrowed $30 million to improve BethShip and then the business collapsed, the group would have to repay only $3.75 million.
"What we are attempting to do is enhanced by those opportunities," said Angelos, who hired naval experts from the University of Michigan and former Rep. Helen Delich Bentley to help put together his proposal.
Angelos said he met recently with a shipowner whom he wouldn't identify to discuss a possible joint venture at BethShip. Under one scenario, BethShip would use the shipowner's designs to build tankers, cargo ships and container ships.
"The ships would be sold to them as well as a multitude of buyers throughout the world," Angelos said.
He said the shipowner would have a minority interest in BethShip. Ultimate control would remain in Baltimore. "The key thing is that the ships would be built here," he said.
Colton, the consultant, said such a partnership would be a good idea for BethShip. He said the yard should find a niche that avoids direct competition with low-cost, huge builders like Korean shipyards.
"The bigger and simpler the ship, the greater the advantage of the Far East yards," he said.
He said BethShip should try to build chemical tankers and small container ships -- both of which require sophistication and specialized labor. BethShip should also try to capture the tanker business for which it was so well-known, he said.
No company has pulled off a return to shipbuilding after a long absence. A Greek businessman is trying to revive a Quincy, Mass. yard that had been shut down.
BethShip's advantages are its huge graving dock and its recent shipbuilding experience. Still, the yard needs a work force, which could pose a challenge because repairing and building ships require different skills.
"It's a little like the difference between General Motors and your friendly neighborhood garage," Colton said. "The only thing they have in common is that they're dealing with ships."
He said skilled shipbuilding workers tend to get other jobs. "Unions are always say people are waiting to be called back," Colton said. "But some would have to be dragged back kicking and screaming."
Singer, Angelos' partner, said that shouldn't be a problem. Between the yard's existing work force and its former workers, plenty of skilled people are available, he said.
Thornton, the local union president, said BethShip could likely summon at least 1,000 workers who once worked at BethShip or Baltimore's other yards. If that doesn't work, the company could look in places like Philadelphia and Newport News, Va., which have lost thousands of jobs with the demise of U.S. shipbuilding.
"It would be a future," he said. "That alone would attract a lot of people."
Pub Date: 12/29/96