BUSINESS

Distress signals from the shipyards

James Fleming June 6 1983
BUSINESS

Distress signals from the shipyards

James Fleming June 6 1983

Distress signals from the shipyards

BUSINESS

James Fleming

It is a majestic sight for even the most urbanized observer familiar with the towering buildings that anchor Canada’s cities. Rising 33 m above its berth at the Collingwood Shipyards on Georgian Bay, an enormous 220-mlong vessel resembling a sprawling apartment building is nearing completion. Workers busily apply black, red and white paint—the colors of Canada Steamship Lines Inc.—on the hull in preparation for the vessel’s launching on July 14. But the stepped-up activity on the still-unnamed bulk carrier, destined to ply the Great Lakes, disguised the real prospects of the shipyard that dominates the small Ontario community’s waterfront. The reason: apart from one other questionable contract that may be cancelled, the yard does not have any other new ship orders. And if more work does not materialize soon, says the operation’s assistant manager, Joseph Sheffer, the yard could be idled by the end of the year, leaving perhaps 850 people jobless. Lamenting the state of the industry as a whole, Sheffer added, “Other people are starting to climb out of the recession; we’re just starting to go into it.”

Indeed, Canada’s shipbuilders are bracing for worsening conditions. Currently, according to Henry Walsh, president of the Canadian Shipbuilding and Ship Repairing Association, “the in-

dustry is at a 10-year low.” More than 14,000 people were employed in the sector in March, 1982, he says, but the current figure has dropped to 12,000, and by September it could drop to 8,000. By June, he warned, only six of 17 Canadian shipbuilding yards will have new orders on their books. For its part, the federal government recently announced new marine policies designed to boost the domestic industry. Those measures,

Faced with dwindling orders for new ships, Canadian yards are ftghting to survive on government contracts

as well as Ottawa’s decision in April to accelerate a $780-million replacement and repair program of Coast Guard vessels, have been welcomed by the business. But shipbuilders still have serious quarrels with Ottawa over what they see as major shortcomings in federal policy. And, as the beleaguered yards eagerly submit bids for life-sustaining federal contracts, they are still concerned that 1983 may be their worst year in postwar history.

The situation is not unique to Canada. Worldwide, the shipbuilding industry is in a severe slump after years in which

shipping capacity has increased much faster than international trade. Currently, there are an estimated 80 million tonnes of excess shipping capacity on a global basis. The poor outlook for the Canadian industry is underlined by Admiral Robert Timbrell, president of the Dominion Marine Association (DMA), which represents 19 companies owning 160 ships. Timbrell said that the last of 13 new ships ordered by DMA members will be delivered in 1984. And with 20 per cent of the existing fleet currently idle, he added, there are now no plans for more orders.

Ferguson Industries Ltd., the secondlargest shipbuilding firm in Nova Scotia, is another Canadian company that is under the gun. It now has about 200 employees on the job, down from a peak of 400. Said Jerry Prytule, Ferguson’s manager of finance and administration: “It’s a survival year for us.” He added, “The order book for new construction will be finished in two more months.”

At the same time, Halifax Shipyard is in poor shape. There are now only 75 men working in the yard, compared to more than 500 in 1981. Recently the firm’s bid for a $15-million federal contract to refit the frigate Nipigon erupted into a political dispute. The Halifax yard is competing for the work with two Quebec firms, Marine Industries Ltd. of Sorel and Davie Shipbuilding of Lauzon. Concerned that Halifax might lose the deal, Nova Sco-

tia Premier John Buchanan contended recently that Halifax Shipyard will go out of business if Ottawa continues to award lucrative contracts to Quebec for political reasons. “If Halifax loses the Nipigon contract, it is a giant travesty of justice,” he declared.

On the West Coast several firms are also hoping to improve their dismal situation by winning upcoming federal contracts. The B.C. industry is clearly in need of relief. According to the Shipyard General Workers’ Federation, 50 per cent of its membership is out of work. David Alsop, senior vice-president of Burrard Yarrows Corp., points out that only about 1,000 people are now employed in the firm’s two yards, compared with 3,000 last year, and says that this could drop to 600 this year if no new orders come in.

Alsop and other shipbuilders applaud new federal marine policies announced in January, which, however, have not yet become law. For one thing, the policies call for an extension of the offshore customs and duty boundary to the edge of the Continental Shelf from the current 12-mile limit and for a uniform 25per-cent duty on all foreign-built ships working in the area. That means that existing loopholes, which lowered duties for ships made in developing nations and waived them for Commonwealth-made ships, will be closed. As well, another proposal would reserve so-called coasting operations— routes between Canadian ports—for Canadian-built vessels when they are available.

Still, industry spokesmen are dismayed that Ottawa has not listened to their appeals for financing arrangements similar to those enjoyed by industries in competing nations—which also benefit from lower wage rates and hefty government subsidies. As Admiral Timbrell pointed out, foreign shipowners can obtain loans at roughly eight per cent from Canada’s Export Development Corp. if they buy Canadian-made ships. But Canadian shipowners must negotiate loans with their bankers at commercial rates if they wish to buy a Canadian-made vessel. By contrast, he said, most other nations provide cut-rate financing to all buyers.

But, in the short term, Canada’s shipbuilding firms have a more pressing issue to deal with: survival. If bankruptcies are avoided this year, it will be solely because of the financial stimulus provided by government contracts. As Alsop puts it, “Really, the only game in town these days is government fleet expansion.” And most builders see that as a short-term lifeline.

With Michael Clugston in Halifax, Diane Luckow in Vancouver and John Hay in Ottawa.