BethShip Division

New opportunities
in the commercial and government ship repair markets should help bring BethShip back to profitability in 1996 after a disappointing 1995. With fewer ships available for repair last year and additional yards going after the work, BethShip's volume was down. The yard completed 35 vessels in 1995, compared to 45 in 1994.

The yard's prospects are brighter for this year because we entered 1996 with a $20-million contract for the conversion of two cargo ships - the EL PASO and MOBILE - for the Military Sealift Command (MSC). This provides stability for our workforce and a major base upon which the yard can build throughout the year with additional projects.

Favorable trends include government funding in 1996 for additional standby military transport capability, a need that became apparent during Desert Storm. With many years of experience in activating and deactivating ships for the Maritime Administration, we will be optimistically seeking this work. Another favorable trend is that the upheaval of the last several years caused by the downsizing of the U.S. Navy to a 300-ship level seems to have ended. There has been a return to stability.

The yard's prospects improved markedly in December with the ratification of a new, competitive labor contract, allowing us to move forward with bids, or bid preparation, on five major new projects totaling more than $400-million. The current labor contract will expire in July. Shortly after the new agreement was reached with the union, we bid on the overhaul of two ships, but have not yet received notice of the award. We also submitted a joint proposal for the design phase of a ship conversion for the MSC Maritime Prepositioning Ship Program. This endeavor is particularly encouraging because our partner in the proposal is the ships' owner - American President Lines.

The yard is also bidding on double-hull tank barge construction and double-hull tanker conversion projects scheduled for this year. In addition, the yard's industrial products business continues to contribute revenue from the fabrication and sale of high-quality steel products such as refrigeration cooling elements for Carrier Corporation and railroad car parts.

Another market in which we are making headway is cruise ship repair. We have been gradually increasing our presence in this market over the past three years. BethShip is still new to this field, however, and we are working to develop a reputation for superior work at the right price. Backed by successful projects and extensive international marketing and customer relations work, we are now earning recognition among cruise lines.

We are making progress in other areas as well. Union and management employees are working together to improve safety, and the results of their joint efforts to date are most encouraging. Employee teams are working in every area to improve production. This has been a positive experience for everyone involved and will lead to increased competitiveness. We also added new computerized equipment for pipe and plate cutting to speed the work and boost capacity.

At BethShip, everyone is working to improve our operation and our future. We have reason to be optimistic that we will achieve our two simple but paramount goals for 1996: to become the safest ship repair yard in the United States and to make a profit.