Nassco Operating Loss May Hit $20 Million for Its 2nd Quarter

Blaming cost overruns on Navy repair contracts at its San Diego shipyard, National Steel and Shipbuilding Co. expects to report a pretax operating loss that could reach $20 million for the second quarter ending June 30, according to Boise, Ida.-based Morrison-Knudsen Corp., Nassco’s parent company.

The expected operating loss is linked to overruns on contracts to overhaul three destroyers at Nassco’s San Diego shipyard, according to Nassco spokesman Fred Hallett. Each of the contracts is valued at about $30 million, he said. The three destroyers are the only large ships now being repaired at the yard.

Nassco is “filing substantial claims seeking recovery related to these repair projects,” according to Morrison-Knudsen’s press release.

However, the parent company said Thursday that labor problems at the shipyard could make it “difficult” for Nassco to procure more repair business.

Labor contracts with Nassco’s seven unions expired Oct. 1, Hallett said. The company is negotiating with the unions, and a federal mediator has been appointed.

However, Morrison-Knudsen claimed that “procurement of additional repair business for the current year remains difficult . . . (because of the) unsettled environment” created by the labor dispute.

“Despite ongoing reductions of operating costs and overhead, the low level of work at the yard is likely to produce operating losses until additional repair work and new ship construction contracts are obtained,” according to the release.

About 1,500 of Nassco’s 2,100 employees are represented by unions. Nassco has asked its union-represented employees to accept sharply reduced pay rates. The cuts are required to make the yard competitive with facilities elsewhere in the country, according to Hallett.

A union spokesman was not available for comment Thursday night.