Ship Shape: A Boatbuilding Revival

On the first day of spring, Lynn Peterson, secretary of the Washington State Department of Transportation, broke a bottle on the rail of a boat. As 200 or so elected officials, guests, workers and executives of Vigor Industrials shipyard on Harbor Island in Seattle watched, Peterson christened the 363-foot MV Tokitae, a new Olympic-class ferry destined to serve the Clinton-Mukilteo run starting in June. Tokitae is the first delivery of a $261 million state contract for two 144-car, 1,500-passenger ferries meant to replace smaller, aging Evergreen-class boats. Delivery of the second ferry, the Samish, is due later this year; it will operate in the San Juan Islands. In its most recent session, the state Legislature approved funding for a third ferry to be built by Vigor for the Seattle-Bremerton route.

[Tokitae] is more than just a ferry, says Vigor Industrial President and CEO Frank Foti. The vessel is a vital economic, social and transportation link to the ferry communities across Puget Sound. Its launch also demonstrates the improving health and heft of the shipbuilding and repair industry on Puget Sound six years after the Great Recession put a severe strain on the sector.

The industry encompasses all kinds of large vessels, including warships and support ships, boats operated by local, state and federal agencies, fishing boats, tugs, barges and recreational vessels ranging from handmade canoes to huge yachts. A 2013 study by the Economic Development Council of Seattle and King County found 160 ship- and boatbuilding/repair companies operating in the state in 2007. By 2011, the number had fallen to 140. It ticked up to 150 the following year. Revenue went from $1.8 billion in 2007 to $1.4 billion in 2010 before swinging up to $1.5 billion in 2012.

Employment followed a similar trend, falling from 17,200 in 2008 to 15,800 in 2010 before recovering to 16,500 in 2012. Employment is about back to 2007 levels, says Jeff Robinson, an economist with the states Employment Security Department. I think well see a gradual return of employment to above prerecession levels. (Nationally, private shipbuilding and repair added $36 billion to the gross domestic product in 2011.)

Car ferries are among the biggest vessels built on Puget Sound these days, although the history of local shipbuilding includes one battleship, the 435-foot USS Nebraska, launched in 1904 near the site of todays Safeco Field. In fact, federal spending is a consistent mainstay of shipbuilding in the region. The Puget Sound Naval Shipyard (PSNS) in Bremerton, established in 1901 and run by the U.S. Navy, covers 179 acres and employs 11,000 people. Much of the work at PSNS focuses on repairing and, in some cases, recycling the reactors of the nations nuclear submarines and aircraft carriers.

The government also contracts with private builders for specialized vessels and these deals likely played a role in keeping some shipbuilders busy during the recession. One example is the 238-foot research vessel Neil Armstrong, launched for the Navy in February by Anacortes-based Dakota Creek Industries. Dakota Creek is also building a sister ship, the Sally Ride. Designed to withstand rough North Pacific winters for up to 40 days at a time, the two ships were the first Navy contracts for Dakota Creek, says Mike Nelson, the firms vice president. When things get slow, he observes, its only the government spending money. He adds that government work often has a steep learning curve. Its a different way of doing business, he notes.

Of the areas private shipbuilders, Vigor is the biggest and among the newest local marine companies. Even during the recession, the Portland, Oregon-based firm aggressively grew through acquisitions. In 2011, it bought 95-year-old Todd Pacific Shipyards (now Vigor Industrial), a longtime fixture on the Seattle waterfront where Vigor employs 2,000 people. A year later, Vigor acquired Alaska Ship & Drydock of Ketchikan, Alaska.

That expansion doesnt mean the past years have been easy, especially for commercial contracts, says Vigor COO Dave Whitcomb. The bottom essentially fell out [during the recession], he notes, and there just werent projects out there to bid on. Vigor coped by ramping up its repair work. The state ferry contracts, as well as federal contracts for repairs to Navy and Coast Guard vessels, have helped. As the recessions effects wane, new commercial construction is supplanting some of the government work. With increasing demand from sectors like fishing and the oil and gas sector in the region, we expect to see more growth in new build [projects] in the coming years, Whitcomb says. Privately held Vigors revenues in 2012 were reported to be $500 million.

Like other maritime sectors, the fishing industry took a hit during the recession and faced added pressure from regulators that affect fleet maintenance. The federal government imposed a major change in 2005 when it forced Alaska crab boats to switch from a derby-style season to a quota system termed rationalization. Prior to the quotas, crabbers raced to catch the most crab within a brief time window, as little as two or three days, which cut safety margins razor thin. Crew deaths were often blamed on the Wild West conditions of this derby.
Today, established firms are given quotas, which slow the season down and improve safety. One effect of the system was the reduction of the crab fleet most of which is based in Seattle from about 250 boats to around 70, says Doug Dixon, general manager of Ballards Pacific Fishermen Shipyard and Electric, founded in 1946.

Fewer crab boats didnt mean less business, Dixon says. Surviving owners worked their boats harder, which meant more repairs and upgrades. For example, the shipyard developed a bulbous bow retrofit for large, older boats. The bow has an internal thruster that aids maneuverability.

In addition to higher maintenance demands by the Coast Guard for factory fishing vessels in the wake of the deadly sinking of the Alaska Ranger in 2008, the Galaxy in 2002 and the Arctic Rose in 2001, rationalization helped cushion the blow of the economic pullback, Dixon says. In 2010, our sales dropped to $7.3 million. Now were on a straight course to $14 million this year, though I expect it will level out to about $10 million to $12 million annually over the next couple of years. He says the amount of work at his shipyard often reflects the overall conditions of shipbuilding. Im a microcosm of the general market, he explains.

Fishermen are also ordering new boats as older vessels become too expensive to maintain. New construction in the long run is more efficient and a better use of capital, says Jonathan Platt, vice president of J.M. Martinac Shipbuilding of Tacoma. Founded in 1924, the family-owned company builds new boats exclusively, including tugs, military vessels, fishing boats and even a research sailing ship. The highlight of 2013 at Martinac was the launch of the $25 million, 184-foot long-liner Northern Leader, described by Northwest fisher and blogger Jen Karuza Schile as the most technologically advanced and eco-friendly fishing vessel ever built in the United States.

One of its innovations is an updated version of tried-and-true diesel-electric propulsion, similar to railroad locomotives. On Northern Leader, diesel engines power a set of generators that can be brought online individually when power is required. This saves fuel by limiting power consumption to only whats needed. Northern Leader is also the first long-liner to use a Z-drive type of swiveling stern thruster that propels a boat in almost any direction without a rudder.

The recovery of the Puget Sound regions shipbuilding sector also extends to luxury yachts. The term shipyard conjures images of workers in Carhartt work clothes joining steel plates with arc welders, but skilled men and women are also turning out award-winning, high-tech yachts at Delta Marine on the Duwamish River and at yards operated in Port Angeles, Hoquiam and Westport by Westport Shipyards. The latter company specializes in building hulls with low-maintenance, lightweight composites; it took first and second place in the Exotic Retreat category of the 15th annual Northwest Design Awards sponsored by the Seattle Design Center.

The company marks its 50th year in 2014. Mark Masciarotte, Westports director of sales, says the recession slowed work at all of Westports facilities and caused executives to rethink its product line, such as reducing production of its 85-foot yacht model and introducing a new 143-foot global response cutter targeted at foreign navies and coast guard services. Masciarotte says his yard has yet to see much return on investment in the cutter, launched in 2010. Its a very slow process, he says. Sales are just being developed now. In the meantime, sales of the companys yacht lines are improving. I think in a couple of years, well be back at full strength again, he says.

Maritime trade has always been central to the Seattle economy, accounting for $30 billion in direct and indirect business revenue in 2012. Shipbuilding is a maritime component whose history goes back to the first 19th-century Anglo-American settlements, even further if you count the unparalleled works of industrial art fashioned by the native peoples of the Salish Sea. Like any business, shipbuilding is often buffeted by contrary economic winds, but as long as sailors and fishers want to trade, they will need boats. Its a fact that comforts Platt of J.M. Martinac, which has survived myriad economic downturns during its 90 years. Says Platt: We supply a product that the industry needs.