More Layoffs Seen for ’86 and ’87 if Firm Doesn’t Get Navy Pacts : Todd Shipyards to Furlough 1,200 Employees
A day after failing to win a major Navy contract, Todd Shipyards Corp. said Wednesday that it will lay off 1,200 workers from its San Pedro facility by January--a 40% cut that will leave the New York company with 1,800 employees at Los Angeles harbor.
Todd warned that, unless the company wins other Navy business by year-end, the lost contract could force layoffs of 800 more workers at San Pedro in 1986 and 1987.
Workers at the yard, many of whom accepted a wage freeze three years ago to help Todd compete for the contract, reacted angrily, accusing the company of overbidding in the competition for the first ship in the Navy’s Arleigh Burke destroyer program.
Many local businesses, already hurt by the shutdown of the Star-Kist tuna plant nearby, were more resigned, saying their sales have been sliding for several months.
Todd said in a terse statement Wednesday that it will meet with the Navy today to learn details of the $322-million winning bid submitted by Bath Iron Works, a subsidiary of Congoleum Corp. in Bath, Me.
Officials at Todd, which bid $413.5 million, said they want to see if Bath “underbid” the Navy job, electing to lose money on the first contract in the hope of being in a better position to win more lucrative, full-scale production contracts later. Underbidding is legal as long as a company absorbs overruns and does not pass costs on by overcharging for spare parts or billing unrelated defense jobs.
Privately, Todd officials said they believe Bath can build the first Arleigh Burke ship for less because Bath has more work than Todd and can spread the overhead costs over more contracts.
“See that crane out there?” said one Todd employee, pointing to a piece of idle machinery in the shipyard outside his office window. “If Bath can use it for several contracts and we have to use it on one, Bath can charge less for each contract.”
Arleigh Burke, known as DDG-51, is a $25-billion program to build 29 destroyers by the mid-1990s. The program is likely to be the Navy’s last non-nuclear ship program in this century, and winning a slice of it is vital to the long-term survival of many of the handful of companies in the nation’s depressed shipbuilding industry.
Although Todd officials stressed publicly that the San Pedro facility will stay open, they admitted privately that its long-term survival--as well as that of the overall company--will depend on winning a “fair share” of the Arleigh Burke program. “There are more shipyards than Navy contracts,” said Earl Walker, assistant general manager of the San Pedro yard.
Todd’s stock closed at $30.625 a share Wednesday, down $5.375 on New York Stock Exchange trading volume of 219,800.
Walker said the San Pedro yard will operate at low speed overhauling and repairing Navy and commercial ships and by completing Navy contracts for the last of several dozen guided missile frigates, known as FFGs, through 1988. But to avert a major economic squeeze after January--and the additional 800 layoffs--Todd must win by midsummer a Pentagon contract to build two oceanographic survey ships, he said.
Those two ships would give San Pedro employees enough work to last until the fall of 1986, when Todd hopes to win bids to build the second and third vessels in the Arleigh Burke program. The Navy has hinted that Todd will win several of those production contracts.
Still, some Todd workers on Wednesday were blaming company officials for losing the first destroyer contract by submitting too high a bid. Mike Rivera, 32, a machinist at the shipyard for about five years, said he was especially upset because he and other workers had agreed to freeze their wages for three years beginning in 1983 to help Todd win the contract.
“We freeze our wages to help the company get the business, and they go and overbid,” Rivera said. “We help them and then they throw us out of work. There’s a lot of people here who are going to be hurt.”
Added another worker: “To overbid by $91 million--the company didn’t even try.”
George Samanc, who has worked at Todd for 11 years and is president of Local 9 of the Industrial Union of Marine and Shipbuilding Workers of America, AFL-CIO, said Todd has been laying off about 250 workers a month at the San Pedro yard in recent months as its workload has decreased. About 2,000, or 50%, of the local’s members are now unemployed, he said.
Second Major Blow
The local economy has felt the pinch for several months. Bob Mark, 52, for example, who for 20 years has owned and operated The Hatch luncheonette across the street from the shipyard, said: “Sure (the layoffs) will hurt, but I’ve been hurting for a while. They’ve been laying off people for months. I used to make 100 hamburgers at lunch. Today, I made 10.”
The expected layoffs will be the second major blow to San Pedro’s work force and the harbor area economy in less than a year. Last October, Star-Kist Foods closed its Terminal Island tuna cannery, idling more than 1,100 workers, many of whom had worked at the cannery for decades.
Todd and Star-Kist have traditionally been San Pedro’s largest employers, employing more than 8,000 workers between them as late as 1982.
Several merchants interviewed Wednesday said that they were already experiencing a slowdown in trade and predicted severe hardships for some if Todd lays off large numbers of workers.
‘Only Solid Industry’
“I tell you, it’s going to be a disaster because San Pedro is not booming right now,” said Norman Saul, who has operated Norman’s Jewelry in downtown San Pedro for the past 29 years. “Since Star-Kist closed its cannery, Todd is the only solid industry we have right now.”
Other merchants, however, disagreed. Leron Gubler, executive director of the San Pedro Peninsula Chamber of Commerce, said any Todd layoffs could be offset by the Los Angeles harbor’s prosperity in recent years, which has spilled over into the community.
The port’s increase in cargo volume has created new jobs, he said, and the harbor department’s development of a new marina and cruise ship center in the community should create additional jobs and attract more money.
“Generally speaking, there is so much going on in the harbor (that) we have a healthy economy,” Gubler said.
