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CA Shipyard Shuttered Amid Dispute

Wednesday, May 31, 2017

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The Port of San Francisco is seeking new operators to assume the reins of a once-thriving business at the West Coast’s largest shipyard, as a squabble between two factions threatens to shutter San Francisco’s last ship repair outpost.

After 150 years of continuous operation, the shipyard at Pier 70 shut down Friday (May 26).

According to media reports, reopening the shipyard would allow 230 laid-off workers to return to their jobs.

“The Port is exploring all options for this yard,” Elaine Forbes, executive director of the Port, said in an interview with the San Francisco Examiner. “That includes potentially bringing to the (Port) Commission a request to do a (request for proposal) for a new operator.”

The shipyard at Pier 70 was the largest active shipyard on the West Coast until last year; the shipyard's Dry Dock No. 2 has the largest capacity of any dry dock on the West Coast, with a 66,000-ton lift.

In recent years, tourist attractions such as Pier 39 and the Exploratorium museum have sprouted as shipyard repair hubs struggled.

Contentious Sale

In February, the former and current operators of the shipyard—multinational defense contractor BAE Systems and Washington-based Puglia Engineering Inc.—each filed suit against the other in court.

Puglia finalized its purchase of the San Francisco shipyard repair business from BAE on Jan. 2. The business sits on two docks at Pier 70, which is owned by the Port of San Francisco. BAE Systems, which operated the shipyard repair facility for 12 years, sold the docks to Puglia for $1.

BAE Systems wanted to divest itself of the San Francisco docks to focus on its multibillion-dollar contracts with the U.S. Navy. The company operates facilities adjacent to Navy yards in the southern United States, Hawaii and Southern California.

Court documents revealed Puglia agreed to assume $38 million in pension liability from BAE, along with the cost of shipyard repair. Puglia says BAE didn’t fully disclose that cost; BAE denies that claim.

Puglia also alleged in court that BAE had erroneously said that the two dry docks were fully operational. Puglia countered that $9 million in repairs and another $12 million for dredging would be needed to get the shipyard-repair business operational.

In a cross complaint, BAE said Puglia reneged on the deal after spending more than a year researching the viability of the shipyard-repair business.

“We are disappointed that Puglia is attempting to walk away from its obligations, ultimately letting down the dedicated employees at the shipyard,” a spokesperson for BAE Systems wrote in a statement to the San Francisco Examiner.

Seeking a Solution

An interim operating agreement between Puglia and the Port of San Francisco attempted to keep the shipyard functioning until May 28.

“The mayor is determined to have a fully operational shipyard in San Francisco that will ensure good-paying union jobs for The City’s residents,” the office of Mayor Ed Lee wrote in a statement. “He has advised the Port to keep the shipyard operational to protect shipyard jobs and ship repair in San Francisco.”   

Pier 70 San Francisco

The shipyard at Pier 70 was the largest active shipyard on the West Coast until last year; Pier 70 docks Eureka and Dry Dock No. 2 housed facilities that were capable of fixing 54,000-ton ships.

Port officials said they are requesting Port Commission authorization to seek a new shipyard operator.

Heartbreak and Hope

Puglia warned about 180 shipyard workers in February they likely would be laid off; only 12 or 14 workers remained employed at the shipyard when it was shuttered on Friday. Some workers were told the layoffs were temporary. More than 220 workers have been laid off since the dispute started.

“It’s painful, and it’s frustrating,” said Gerry Roybal, maritime marketing manager for the port. “I’ve developed these relationships with these people. I worry about their future. These people were really harmed by what happened. The port was really harmed by what happened.”

The workers remain laid off, but Forbes hopes to give them good news soon. She said several shipyard operators have expressed interest in taking over the yard, and the port is preparing a new request for proposal to be issued before the end of July.

“It’s a sad situation, but I’m hoping it’s only temporarily sad,” Forbes said. “We are getting calls from operators who think there is a viable market for ship repair in San Francisco.”

   

Tagged categories: Acquisitions; Disputes; Lawsuits; Ports; Rehabilitation/Repair; Ships and vessels; Shipyards

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