One of America's leading shipbuilders has a new lease on life.
In late October Vision Technologies Systems, Inc. (VTS) announced it had completed its asset purchase of Halter Marine, through its subsidiary, VT Halter Marine, Inc. VTS is an integrated engineering group specializing in the fields of marine, aerospace, land systems and electronics. This acquisition constitutes VTS' marine business in the United States.
VTS says "the new company, VT Halter Marine, Inc. (VTHM), well-supported financially by its parent company, will continue to provide the quality products that made Halter vessels known worldwide by utilizing its comprehensive design capabilities and library as well as its pool of shipbuilding industry experts."
"We have every confidence in the team we have selected to lead VTHM. We believe that these are effective and capable managers. Their commitment and tenaciousness are evidenced by the fact that they have been successful in resolving extreme challenges, which the company went through. These challenges did not originate from the Friede Goldman Halter shipbuilding segment acquired by VTS." stated John Coburn, Chairman & CEO, VTS, based in Alexandria, Virginia.
VTHM will headquarter its corporate operations in Gulfport, MS., with seven facilities located in Pascagoula, Moss Point, Port Bienville, Lockport and Gulfport, which are strategically located along the U.S. Gulf Coast.
"We're ready to move on to the next challenge of selecting the
projects the new company will undertake. VTHM plans to continue the existing design and construction projects for the U.S. Government. VTHM will also be geared to offer ship-repair services for both naval and commercial vessels. The staff and management of the Company are excited by this transition. It opens new horizons and opportunities." stated Anil Raj, President and Chief Operating Officer, VT Halter Marine, Inc.
VT Halter Marine's new parent, VTS, is a U.S. company incorporated in Delaware specializing in the areas of Marine, Aerospace, Electronics and Land Systems. In addition to VT Halter Marine’s newbuilding facilities, it has three commercial aircraft MRO facilities in Mobile, Alabama; Dallas and San Antonio, Texas. It is a subsidiary of Singapore Technologies Engineering Ltd (ST Engg), an integrated engineering group specializing in the fields of aerospace, electronics, land systems and marine.ST Marine, the marine sector of ST Engg, provides turnkey shipbuilding, shipconversion and shiprepair services for a wide spectrum of naval and commercial vessels. In shipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition to detail design, construction, on-board system installation and integration, testing, commissioning to through-life support. It has also established an impeccable track record in providing high engineering content ship repair and ship conversion services for a worldwide clientele.
"VTHM will serve as a strategic gateway for ST Engg's marine sector to penetrate the newbuilding and ship repair markets in the Americas and beyond. With the acquisition now completed, ST Engg is now poised to play a prominent role in the global naval and commercial newbuilding and shiprepair markets. I am very confident that with its commitment to excellence, VTHM will distinguish itself by adding value to the products and services it offers to its customers and make its mark in the global newbuilding and shiprepair markets." says Tan Pheng Hock, President & CEO, ST Engg.
Marine Log asked VT Haltermarine's President and COO, Anil Raj for some insights into what lies ahead for the reborn Halter Marine.
The Halter name is a legend in Gulf Coast shipbuilding. Was it important that “Halter” be incorporated into the new company’s name?
The Halter Marine name is about 50 years old and not only a legend on the Gulf Coast but is known around the world. Halter had enjoyed a significant export market. It built commercial vessels for France, Canada, and many South American and Middle Eastern Countries. Halter also provided patrol vessels to many other countries. It is interesting to note that when executives of Vision Technology first came to look at purchasing Halter’s assets one mentioned that he had heard of the company when he was in engineering school in the U.K. over 30 years ago. It is because of this renown that the new owners decided to acquire the right to use “Halter” in the new company’s name— which is VT Halter Marine, Inc.
How long have you yourself been with the company in its various incarnations?
I was associated with Halter for the last 15 years. When I joined as Director of Engineering, Production Controls and Procurement it was owned by Trinity Industries.
What lessons have you learned from the difficulties the company has gone through in the past few years?
If the saying that “adversity makes you stronger and more graceful” is true, then VT Halter employees have emerged as a very strong and graceful team. Adversity has a way of teaching many lessons and I have personally learned a lot. In the maritime industry it is said that shipbuilders are a resilient bunch. But the recent challenges showed me how resilient, strong, and committed the previous Halter’s group of shipbuilders is. The commitment with which this group held together, stayed the course and tackled the issues just as if it were another very complex shipbuilding program was heart warming.
It is important to recognize that the root cause of the difficulties into which the vessel division of Friede Goldman Halter (FGH) was thrust was not associated with the vessel division. Rather, the primary reason for the difficulties was two bad contracts unrelated to the vessel division of FGH, which depleted FGH’s liquidity. Whereas the vessel division of FGH involuntarily got wrapped up in the filing, by being associated with the process many lessons were learned by the employees.
The first and foremost message is that it is impossible for U.S. shipbuilders to compete on many types of non U.S.-Flag vessels with the highly competitive labor rates of Far Eastern shipyards and with countries that have subsidies. The next lesson is that whereas growth in an organization is important, this growth has to be implemented in measured steps with correct planning and timing.
Another important lesson, which was inculcated in the employees by necessity and makes them more valuable to VT Halter is the discipline of cash management in all aspects of the business. Immediately after the filing Friede Goldman Halter did not have a line of credit and a bare amount of cash. Additionally the supplier base was reluctant to extend credit. Despite this Halter successfully finished over $250 million worth of shipbuilding programs. This success was possible by the application of good cash-management principles, as well as the faith of suppliers and customers.
Now that VT Halter Marine is officially up and running, what are your first priorities?
VT Halter acquired all the facilities, equipment and technical assets—including valuable personnel—of Halter. Now that VT Halter Marine is running and with a strong balance sheet, a decent credit line and the faith and support of its substantial parent, our first priorities are to restore the business to its previous eminence.
It is easy to understand why customers were reluctant to give new vessel construction business to Halter in Chapter 11.
A new vessel order which can take between one and three years to execute can leave significant concerns with a customer. They do not want to tie up a major new capital asset construction program, which is always a vital part of their business plan, in an environment where it could get wrapped up in litigation. Despite this, several customers had confidence in the team and did give Halter new orders. During this 18 month period Halter secured and started new orders which, including options, could reach in excess $275 million. It is this type of trust and confidence in the management and the Halter Team that’s helped the company continue to do business. It became the people’s determination that these loyal customers who had placed their faith and trust not be disappointed.
With this determination the company successfully completed all its obligations and delivered vessels worth over $250 million. However the company, which was used to booking between $300 million to $400 million worth of new business a year continued to see a dwindling order book. VT Halter has assumed all of Halter’s on-going programs. Our first priority is to look at all the new work that is bid and the many new inquiries which are coming in, and work with our customers to see how we can start implementing them. We are also working with existing customers on the contracts assumed from the estate to convert optional vessels into contracts. More than 60% of Halter’s work traditionally came from repeat customers. We aim to ensure that this trend will continue at VT Halter marine.
How big a backlog is there at the yards right now?
The company has a current bookings of contracts which, including options, are valued at about $250 million. We are negotiating some new contracts, which when concluded should increase our workload. Our current bookings are about 70% government work and 30% commercial. With President Bush signing the Defense bill we expect to see an optional Army LSV start and hope that one of the optional NOAA Fisheries Research Vessels will also start soon. I expect to see the government to commercial work ratio to go to 50:50.
Going forward, what markets do you see as being potentially most promising for VT Halter.
With the acquisition of Halter’s assets VT Halter continues to enjoy the strengths that Halter had. One of those is flexibility. This flexibility includes the capability to design and build a variety of vessels ranging from small patrol craft to large 40,000 ton ATBs. VT Halter also enjoys a large capacity to undertake work. It has the versatility to perform government work, energy-related work, commercial work and international work. We will continue to evaluate all these market sectors to determine the best direction for the company. We all know that our marine shipbuilding markets are cyclical. The fact that VT Halter has the capability to perform in any or all of these markets will allow the company to provide stability to our work force. Having said that, VT Halter’s focus is on the technically complex small- to medium-size ship market. VT Halter has a very strong engineering department. More vessels have been built from designs that were developed by this engineering department than any other shipbuilder or naval architecture company in the U.S. or many of them combined. Hence, we intend to focus on the type of vessels where we can provide advanced technical solutions that will give our customers a competitive advantage. ML
