Newport News Shipbuilding and Dry Dock Co.

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Newport News Shipbuilding and Dry Dock Co.

4101 Washington Avenue
Newport News, Virginia 23607
(804) 380-2000
Fax: (804) 380-3114

Wholly Owned Subsidiary of Tenneco Inc.
1886 as Chesapeake Dry Dock & Construction
Employees: 19,950
Sales: $1.8 billion
SICs: 3731 Ship Building & Repairing

Newport News Shipbuilding and Dry Dock Co., a subsidiary of Tenneco Inc., is the nations largest privately owned shipyard and the only one in the United States capable of building and servicing a full range of nuclear-powered and conventional ships for both defense and commercial service. The largest employer in Virginia, the company has expanded nationwide, building, over its more than 100-year history, more than 700 vessels, including many that have taken part in the great historical events of 20th-century American history, from the days of President Theodore Roosevelts Great White Fleet to the battles of World War II and on into the nuclear age. The companys other products have ranged from traffic signals to giant turbines.

Newport News Shipbuilding was founded in 1886 at one of the most favorable shipping locations in the United States. The yard owes its existence to Collis P. Huntington, one of the business partners who founded the Central Pacific Railroad and drove it eastward through the Sierras to form the nations first transcontinental rail line. After his successes in California, Huntington returned east and was instrumental in building the Chesapeake & Ohio Railroad from Richmond to the town named for him in West Virginia. Then he turned his sights to develop Newport News as the carriers eastern terminus. He was president of the Old Dominion Land Co. which laid out lots to start the development of the town. Coal and grain facilities were built and Huntington then sought to found a dry dock there.

Commenting on the yards location, Huntington later noted that It was my original intention to start a shipyard plant in the best location in the world, and I succeeded in my purpose. It is right at the gateway of the sea. There is never any ice in the winter, and it is never so cold but you can hammer metal out of doors.

The drydock was opened April 29, 1889, and the maritime press hailed it as the wonder of the age. The first shipbuilding job was a reconstruction project, but the contract for Hull No. 1, the tug Dorothy, was signed in 1890. After many years of service that tug would eventuall return to the yard in 1974 and be dedicated as a permanent exhibit in 1976.

According to the official history, William Tazewells Newport News Shipbuilding The First Century, Huntington protested to the Secretary of the Navy in 1890 about competition from the Norfolk Navy Yard, a harbinger of many such disputes over government versus private shipbuilding in the future. Newports first successful bids for construction of naval vessels, three gunboats, followed in 1893. The navy was pleased with the work and the yard was awarded more contracts for battleship construction. In this period the yard was also doing considerable commercial work, including the construction of cargo ships, passenger vessels, bay and river steamers and tugs. In 1899, contracts for new vessels exceeded $10.5 million and 4,500 men were employed at the yard. Dry Dock No. 2 opened in 1901, the first of several expansions that continued into the 1990s.

Newport News was a company town in all respects, and Huntington personally underwrote financial losses in the early days. Huntington was said to be one of the largest, if not the largest, landholders in the country, and ran his vast interests from his New York office until his death in 1900. Ownership of the Newport News company then passed to Colliss son Archer Milton Huntington, a scholar, poet, and philanthropist with little interest in the shipyard.

Thus, after Huntingtons death, the man most instrumental in guiding the shipyard was Homer L. Ferguson, a former navy officer and student of naval architecture and marine engineering, who came on board at the yard in 1905 and was made assistant superintendent of hull contruction. Ferguson would become president of the company in 1915, serving in that capacity until 1946, when he was named chairman of the board. During his tenure at Newport News, he successfully steered the company through a long period that included two wars and the Great Depression.

In 1907 President Roosevelt dispatched the Great White Fleet on a round-the-world voyage to demonstrate American sea power. Seven of the fleets 16 battleships had been built at Newport News. The shipyard was also soon to demonstrate its adaptability, and when all-big-gun ships became the standard for naval warfare, built six of these dreadnought ships, most of which saw service as late as World War II. The yards adaptability was recognized frequently in later years. It built its first five submarines in 1905, and in 1934 the navy turned to the yard for the first aircraft carrier designed for such service. Most construction, however, continued to be for merchant shipping, among which were barges used in construction of the Panama Canal.

There were boom conditions at the yard during World War I, when the company built 25 destroyers and the last battleship launched until World War II. Moreover Newport News reconditioned the liner Leviathan for use as a troopship. After wartime projects were completed, there was a period in which no more naval work and few commercial contracts were available. The company took whatever work it could find and diverged into other manufacturing.

The disarmament treaties of the 1920s resulted in scrapping a number of warships, but the gathering war clouds of World War II saw a revival of shipbuilding. According to a Fortune magazine article of 1936, although 49 U.S. shipyards had been closed since 1920, Newport News became stronger due to the ablest management in the business under Ferguson.

In addition to its shipbuilding in this period, the company repaired locomotives, built an aqueduct, a bridge, and an office building, manufactured traffic lights and transmission towers and 9,000 freight cars, as well as producing a variety of other equipment. Perhaps the most spectacular of all non-shipbuilding work was the fabrication of the largest turbines in the world for the Dnieprostroi Dam in the Soviet Union. After World War II, the company entered the atomic energy field, fabricating assemblies for nuclear reactors.

In 1940, Archer Huntington sold the shipyard to a syndicate of underwriters. Rumors of a sale had been circulating for years, and once the company was again thriving after the Great Depression, Archer regarded the time as right for a sale. The book value of the plant and property was reported at $17.79 million and its replacement value was around $29 million. The group of investors reportedly purchased Newport News for $18 million and the company went public, trading shares on the New York stock exchange.

Also during this time, the navy ordered seven carriers and four cruisers from Newport News, the beginning of a string of orders as a world war again seemed imminent. Newport News set up a subsidiary, North Carolina Shipbuilding Co. in Wilmington, North Carolina, to help handle the crush of wartime business. Vessels built there included 126 Liberty cargo ships before it was closed at the end of the war. Employment at Newport News rose to a high of 31,000 in 1943, with more than 50,000 at the Wilmington subsidiary.

However, the exultation felt by management and employees at the close of the war they helped win was tempered by uncertainty of the future. In the lean days that followed, the yard performed ship conversions and repair work. But with the development of jet aircraft, existing carriers were inadequate and the navy began planning supercarriers. After the outbreak of the Korean War the yard was awarded a contract for the first of several new supercarriers, the Forrestal

A memorable day in the yards history came on February 8, 1950, when the keel assembly for the United States, the largest passenger ship ever built in the nation, was laid. Launched in the summer of 1951, it was the worlds fastest passenger ship and the first built at the yard in ten years. Also, in the fall of 1950, the yard fabricated the last turbines for the Grand Coulee Dam in the state of Washington.

In 1951 William E. Blewett, Jr., became the shipyards eighth president. A forceful leader, Blewett decided to shift the companys focus into the field of nuclear power, a move praised more than 30 years later by another company president, Edward J. Campbell, as easily the most significant of the last 45 years. By 1956, the companys Atomic Power Division had more than 200 employees, and a new subsidiary, the Eastern Idaho Construction Co., was formed to set up a reactor test station near Arco, Idaho. Engineers worked there with the navys Bureau of Ships, planning for atomic-powered supercarriers. The age of the supertankers had also arrived, and on August 7, 1958, the largest tanker yet built in the United States, the Sansinena, was launched at the yard.

The advent of nuclear power brought numerous changes to Newport News Shipbuilding, with new sections devoted to quality inspection, health physics, controlled material handling, and lead shielding. Since its earliest days the yard had an active apprenticeship program, and now it added classes and lectures about the new science of atomic propulsion.

In 1959 the yard launched its first nuclear powered submarine, the Shark, the first submarine built by Newport News in more than 50 years. The Enterprise, the worlds first nuclear-powered carrier, was launched on September 24, 1960. The Robert E. Lee, christened December 18, 1959, was the first of 14 Polaris-class subs built at the yard. A new subsidiary, Newport News Industrial Corp., was set up to engage in specialized work on land-based nuclear power plants.

The 1960s brought several challenges to Newport News. The Equal Employment Opportunity Commission charged in 1966 that the company was discriminating against its African American employees. Although the company denied the charge, it entered into an agreement to accelerate promotions of African Americans and also began hiring greater numbers of women for jobs previously held only by men.

Moreover, by the fall of 1967, Newport News faced serious financial problems, as aerospace giants were moving into shipbuilding, leaving Newport News dangerously undercapitalized to compete. The yard reported a loss of nearly $3.5 million in the first half of 1968, a decisive factor in merger negotiations that the company began pursuing. In September 1968, Tenneco Inc., of Houston, Texas, acquired Newport News Shipbuilding for approximately $123 million.

In the course of restructuring Newport News, Tenneco encountered strong opposition from organized labor and the Occupational Health and Safety Administration (OSHA). Eventually, the employees gained representation by the United Steelwork-ers Union. OSHA levied a fine of $766,190 on the shipyard, citing 617 cases of deficient medical care, unsafe working conditions, and excessive noise. It was reportedly the largest fine OSHA had ever imposed on any company.

In the wake of such problems, Wall Street analysts advised Tenneco to sell Newport News, warning that the division would require costly modernization and reorganization. But Tenneco officials recognized the shipyards potential, especially after plans for a 600-ship navy were announced in 1981. Indeed, the navy depended on the yard for all kinds of ships; it was chosen as the lead yard in designing the Los Angeles class of attack subs, launched on April 6, 1974. Moreover, the company continued to overhaul and refuel Polaris subs on a regular schedule and converted several into improved Poseidon missile systems. Conversion and repairs remained a staple and the companys manufacturing operations were steady. In fact, the business backlog at Newport News had reached $1.4 billion by the end of 1971, and employment had risen to 27,500 by 1972.

However, while revenues rose year to year, profits failed to keep pace, as the company was faced with a profit squeeze due largely to the costs of plant expansions and labor. Indeed, the building of more modern ships, particularly the nuclear-powered vessels, proved a necessarily time-consuming process, as designs were changed mid-construction, and workers often found themselves idle while their co-workers completed other aspects of construction.

Also a major dispute between the yard and the U.S. Navy developed over the costs of building nuclear ships. The navys Admiral Rickover continuously disputed costs, accusing Newport News of being unable to do its job properly. Newport News, in turn, accused the navy of being unable to properly finance its fleet. This dispute reached a climax in 1975, when the shipyard temporarily halted work on a cruiser. The yard threatened to get out of the business, but its claims against the navy were finally settled out of court when Deputy Defense Secretary William P. Clements Jr., realizing that the situation had gotten out of hand, sought negotiations. A settlement was reached, and the relationship between shipbuilder and the navy was mended.

During this time, with the navy representing a 93 percent share of the companys operating revenues, Newport News decided to attract more commercial business. The company constructed the new North Yard, where the liquefied natural gas carrier El Paso Southern was launched in 1977, followed by other supertankers. While the company enjoyed record revenues in 1975 through 1977, the commercial market for oil tankers declined dramatically in the face of a worldwide oil crisis, and eventually Newport Newss revenues declined similarly.

During this time, a new Newport News president, Edward J. Campbell, was named, and he promptly set about turning the company around. Faced with declining profits, outmoded facilities, pending lawsuits, and even a substantial strike by ship designers and production workers, Campbell had his work cut out for him. Lawsuits and strikes were eventually settled, and Campbell focused on a program for improving conditions at the yards.

His efforts paid off; for the first time, company revenues topped the billion dollar mark in 1981 and profits rose to $82 million. In 1983 the company posted record sales and income for the fourth straight year, with profits of $150 million and employment at 29,000. At the end of 1982, the navy awarded Newport News a $3.1 billion contract for the fifth and sixth Nimitz-class carriers, reportedly the biggest contract ever awarded a shipbuilder, and guaranteeing work into the 1990s. Moreover, an improved modular construction method was developed, employing computer technology that cut man hours and eliminated errors. In fact, the Tenneco annual report for 1984 reported that Improvements in earnings over the last five years are a direct result of innovative engineering concepts in modular construction and incentive-based contracts with the U.S. Navy.

Newport News reentered the commercial cargo ship market in a big way in October 1994 when it signed a $150 million tanker contract with Eletson Corp., a major Greek shipping company. Newport News said the contract was the first commercial construction contract from an international ship owner won by an American yard since 1957. After almost 40 years of eating the dust of low-cost Korean, Japanese and West German yards, U.S. shipbuilders are suddenly back in world markets with a bang, a Forbes magazine reporter noted, adding that work rule changes, greatly improved modular construction techniques, and a remorseless attack on overhead costs have helped builders like Newport News, long dependent on big navy contracts for their living capitalize on ... wage differentials.

Other commercial construction contracts brought so much business that Newport News abandoned a bid to build tankers for a Canadian consortium, citing time and space constraints. At the end of 1994, the company had work under contract extending into 2002. Moreover, a letter of intent between Newport News and the United Arab Emirates was signed in December 1994 to establish a new shipbuilding and repair company in Abu Dhabi. The shipyard was to be an equity investor and manage the Abu Dhabi Ship Building Co., which would construct and repair military and commercial vessels. During this time, W. R. (Pat) Phillips was named chairman and chief executive officer of the shipyard and William P. Pricks was promoted to executive vice-president and chief operating officer.

Navy work still comprised the majority of the yards business in 1994, when the company was awarded a $3 billion contract to build the Nimitz-class aircraft carrier Ronald Reagan. The christening of the last Los Angeles-class vessel Cheyenne came in April 1995. Due to cutbacks in the defense budget, however, the yard entered into a bitter contest with Electric Boat Division of General Dynamics Corporation, of Groton, Connnecticut, for the contract to design and build the navys new attack submarines.

Tenneco approved a $68 million World-Class Shipbuilding Project in December 1994, to upgrade the yards steel fabrication facilities, a step the company expected would dramatically reduce costs for future ship construction. Newport News also began a $29 million project to extend the yards largest dry dock, allowing for simultaneous construction of carriers and large commercial ships.

Still, operating income for 1994 was $200 million, compared with $225 million in 1993, and revenues also decreased slightly from $1.9 billion to $1.8 billion. While the New York Times reported that several analysts were predicting that Tenneco would divest itself of Newport News, Tenneco chairman and chief executive officer Dana G. Mead maintained that the corporation had no such plans. In its 1994 annual report, company officials stated that the shipyard would continue to pursue additional U.S. Navy contracts in its core business of new ship construction, refueling and overhaul, and nuclear engineering. However, they said the yard also would continue working to diversify through commercial shipbuilding and foreign military sales, and by increasing sales of technological expertise.

Further Reading

Jones, Kathryn, Tennecos Plan May Reap $1 Billion, New York Times, December 14, 1994, p. D4.

Phalon, Richard, Back in the Game, Forbes, December 5. 1994, pp. 58-60.

Schmitt, Eric, Two Submarine Makers Vie for a $60 Billion Project, New York Times, May 17, 1995, p. Al.

Shorrock, Tim, Virginia Yard Homes in on Five-Ship Contract, Journal of Commerce, May 17, 1995, p. B8.

Tazewell, William L., Newport News Shipbuilding The First Century, Newport News, Va.: The Mariners Museum, 1986.

Va. Yard Wins Federal Aid to Design LNG Tanker, Journal of Commerce, June 2, 1995, p. B8.

William O. Craig

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Newport News Shipbuilding and Dry Dock Co.

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