Todd Withdraws Bid to Build Destroyer; Lack of Credit Cited
In yet another blow to the West Coast shipbuilding industry, Todd Shipyards said Wednesday that it has withdrawn its bid to build a Navy destroyer because it could not get start-up financing.
Todd, which operates a shipyard in San Pedro where the destroyer would have been built, pulled its $159-million bid to construct a DDG-51 Arleigh Burke-class destroyer after lenders balked at providing the company with the funds and, later, the Navy declined to alter its contract procedures so the money would be available, Todd spokesman Steve Stanford said.
“We tried to create a financing package, but the lenders felt the risks were too inherently high,” Stanford said in a telephone interview from the company’s Jersey City, N.J., headquarters.
“We told the Navy we are not in the position to finance some of the preliminary funding requirements to get into the program, some of the start-up costs,” Stanford said. “And we asked them to make some commitment to support us.”
Shortly after Todd withdrew its bid late Tuesday, the Navy chose the $162.1-million bid of Ingalls Shipbuilding in Pascagoula, Miss., a division of Beverly Hills-based Litton Industries.
Stanford said no layoffs are planned immediately at Todd as a result of the company’s action, but Todd officials privately have said that the long-term survival of the San Pedro yard hinges on the company’s winning a share of the Arleigh Burke destroyer work, which is likely to be the Navy’s last non-nuclear ship program this century. The Navy hopes to have 29 of the warships by the mid-1990s at a cost of $25 billion.
About 2,400 workers are employed at the San Pedro yard, down from a peak four years ago of about 5,200. Todd estimated that 700 jobs would have been created at the shipyard if it had won the destroyer contract.
Tom O’Toole, Todd’s spokesman in San Pedro, predicted that unless the company finds customers for new ships, the San Pedro work force could dwindle even further within two years. Todd expects to deliver a Navy frigate it is building there by late next year, and the only other major project under way is the enlargement of a cargo ship for Matson Navigation Co.
“Eventually, I can see us getting down to 1,500 people primarily doing conversion and repair work,” O’Toole said.
John Simon, aerospace and defense analyst for Seidler Amdec Securities of Los Angeles, labeled Todd’s situation as “bleak. . . . There are no other significant Naval production programs on the horizon for which they can compete in the foreseeable future. The Navy just is not worried about keeping commercial shipyards open on the West Coast.”
Todd did not disclose how much money it had sought from banks for retooling and other start-up costs, or what contract changes it wanted from the Navy.
