Bath's Fighting Company

By John S. DeMott

Yankee craftsmanship is still shipshape at the Iron Works

At a time when foreign competitors have forced U.S. manufacturers to change their management styles and worry about the quality of everything from cameras to automobiles, the Bath Iron Works in Maine is doing business as usual. With abundant quantities of Yankee pride and craftsmanship, BIW's more than 6,700 employees continue to build ships under budget and ahead of schedule. That is normal for the Bath Iron Works, but it is a rarity in the defense industry, which is plagued with cost overruns.

In 1978 BIW delivered a cargo ship, the Maui, to the Matson Navigation Co. in San Francisco. It was one of four Matson had built at three different yards from identical plans. The BIW ship was unquestionably the best. Says AJ. Haskell, Matson's senior vice president and a former Navy officer: "It may sound like I work for them. But look at the fairness of the hull, its smoothness, which is determined by the quality of the welding. You can walk down the pier and compare the Maui with the Kauai, the ship another company built for us. You can immediately tell which is the better ship. The Bath-built hull is fairer." The Maui was also delivered five weeks before it was due, and BIW brought the ship in $3.2 million under budget.

More than Yankee craftsmanship is involved in BIW's success. The yard is the only one in the U.S. that combines modular construction with extensive "pre-outfitting." That means that whole sections of ships are built as near-complete units, fitted with piping and electrical equipment. Then, with a giant crane, the sections are joined to make the vessel. The system, now used by the Swedes and Japanese, is faster and less expensive than the conventional one of building entire hulls first, then stuffing them with their innards.

Founded in 1884 on the Kennebec River, a dozen miles from Popham, where in 1607 the first ship was built by European settlers in the New World, the Iron Works constructed steamers, tugs, trawlers, J.P. Morgan's famous yacht (the one no one could afford if he had to ask how much it cost) and destroyers for the Navy in both world wars. From Pearl Harbor to V-J day, BIW turned out 82 destroyers, vs. 63 for Japan's entire shipbuilding industry. Only eight vessels were lost in combat, and among Navy men "Bath-built" came to mean lucky as well as seaworthy.

The company has almost been torpedoed out of the water several times in the boom-or-bust shipbuilding industry. In 1925, BIW actually closed its doors, and there were plans for turning the yard into a factory for making paper pie plates. In 1927, William S. ("Pete") Newell, a graduate of the Massachusetts Institute of Technology and an old-stock Yankee, bought BIW at auction and began building any kind of ship he could: yachts, Coast Guard cutters, fishing boats, then Navy vessels as World War II approached. Employment swelled to more than 12,000 during the war, but then plunged after the American victory at sea, falling to 350 in 1947. It picked up, though, as the company again turned to yacht building and more defense work.

But by the late 1960s, BIW began running into two enemies that were worse than anything its warships had encountered on the open seas: poor management and inflation. A holding company called Bath Industries was formed, and in 196 it merged with Congoleum-Nairn, a firm that makes tiles, wall decorations an other surface coverings. Inflation began taking a severe toll in the recession year of 1974. BIW's fixed-price contracts did not allow for rapidly rising costs, and losses mounted sharply. On top of a $10 mllion run of red ink, BIW lost major defense contracts in the early 1970s. I 1975 new management took over the company and brought in John F. Sullivan Jr., a former building-materials executive to head BIW.

The team moved swiftly The Bath Industries name waw changed to Congoleum, reflecting that company's contribution to its survival. Smaller, unprofitable companies like Coronet Manufacturing Co. and Howard Parlor Furniture Co. that had been acquired by Bath Industries were sold off. BIW aggressively went after and won a big chunk of the Navy's guided-missile frigate program, and began writing contracts with markups for increased costs.

With its cash position improved and its stock underpriced, Congoleum decided to invest in itself. In early 1980, the conglomerate, with several blue-chip insurance companies, bought up all its outstanding publicly held stock for $450 million and went private. Prudential now has 29% of the company, with smaller pieces held by Aetna, Travelers and Connecticut General. In addition, Eddy G. Nicholson, chief operating officer of Congoleum, and Byron C. Radaker, its chairman, are shareholders.

Though Nicholson will not reveal profit figures, he says that BIW is doing much better than it was at the time of its last public accounting in 1979, when it earned $28.2 million during the first nine months of the year. The firm has a defense order backlog of $800 million.

BIW has plans to build another yard at Portland, about 40 miles down the Maine coast. With its frigate project 99 weeks ahead of schedule and $44 million under budget, the Iron Works is eyeing the Navy's new destroyer program. That could be its biggest contract ever. Congoleum, the proud parent company, has now moved its headquarters from Milwaukee to nearby Portsmouth, N.H. Construction of its new building, though, is slightly over budge and three months behind schedule. Maybe Congoleum should have had the Bath Iron Works build it. --By John S. DeMott Reported by Barry Hillenbrand/Bath

With reporting by Barry Hillenbrand

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