Post-Katrina labour shortages cripple Gulf shipbuilders

Last November, Bollinger Shipyards did something completely out of character. The shipbuilder backed out of a $700 million contract it had worked for years to land and passed on another worth $150 million because high wages and scarce employees threatened the company’s ability to make a profit.

The move was a clear example of the severe labour shortage local businesses have been coping with in the wake of Hurricane Katrina and the crippling effect it has had on the shipbuilding industry, which was struggling to find enough pipe fitters and engineers even before the storm. “It doesn’t feel good,” said Donald Bollinger Jr., the company’s chief executive. “We’re turning down work daily. Those were two huge projects we were working on for multiple years to land.”

Other shipbuilders in the region are also struggling with labour shortages though they haven’t all had to turn down major contracts. Most of the yards experienced only minimal physical damage as a result of the hurricanes last year, but they’re falling behind on production schedules because they are so short-staffed. The yards are also spending more money luring and retaining workers. Those problems raise questions about the future viability of shipbuilding on the Gulf Coast, both in the near and the long term. In order to bid on work that is still years down the road, shipbuilders must have adequate staff now.

Bollinger said the Gulf shipyards will have to demonstrate that they can complete jobs on time and at cost in order to remain competitive with companies that are not facing the same crisis, particularly those in the Northeast. Right now, that task seems easier said than done.

The labour shortage has already forced the Navy to make one adjustment to its contract with Northrop Grumman, which builds the LPD 17, an amphibious assault ship, at its yards in Avondale and Pascagoula, Miss. In its five-year plan unveiled earlier this year, the Navy deferred an order for an LPD 17 scheduled to be built at Northrop’s Avondale yard from fiscal year 2007 to fiscal year 2008 because the Navy’s thinking on that is that the shipyard is unable to handle the work.

The shipyards spanning the Gulf region from Texas to Alabama hold million-dollar contracts with the Navy, Coast Guard and commercial contractors. Business today remains brisk, but labour shortages are pushing projects way behind schedule.

In the case of Bollinger, the firm is short about 500 workers throughout its 13 yards in Louisiana and Texas despite recruitment drives and other attempts at attracting workers. The situation is similar at major Navy contractor Northrop Grumman, the state’s largest manufacturer. The contractor has returned to about 90% of its pre-Katrina staffing but will incur some delays on its programs and is working with its customers to redefine delivery schedules.