Philly Shipyard makes a play for its future in polar icebreakers

On one of those warm afternoons in early October, with temperatures above 80, Philly Shipyard workers in sunglasses, hard hats, and vests dotted the deck of the Daniel K. Inouye – the largest container ship ever constructed in the United States. The gray-and-white vessel stretches more than 850-feet long, dwarfing the headquarters building it was parked next to.

From inside a sunny, glassed-in conference room, Norwegian-born chief executive Steinar Nerbovik peered out the window at the hulking creation that was almost complete.

"When she leaves, " he said, "it's like a part of us is actually leaving."

A second container ship, the Kaimana Hila, will be finished next year. The shipyard hasn't firmed up its next project, yet, but Nerbovik knows the shipyard can't depend solely on commercial projects, such as the Inouye and the Hila, anymore. That's why the CEO has his sights set on a kind of ship that hasn't been made in the U.S. in decades: a heavy polar icebreaker for the Coast Guard.

Those ships have to plow through ice that's six feet thick, at about 3 mph. The U.S. built two in the 1970s and is down to just one in working order, the Polar Star.

Fincantieri Marine Group, the U.S. subsidiary of an Italian shipbuilder, worked with Philly Shipyard for a year and a half to come up with design recommendations and performance requirements for the government. The contract for the project, with an estimated value of $750 million, is expected to be awarded next summer.

"We could be building a prototype for the U.S. Coast Guard – that's a dream come true," Nerbovik said.

It's the type of project that both Nerbovik – whose first job in shipbuilding was as a welder in Norway – and his board of directors view as vital to the company's future. The shipyard has relied on the Jones Act, which requires that ships carrying goods between U.S. ports be made in the U.S., for orders, but there's no longer enough of that business to go around. Over the next decade, Nerbovik envisions that within a mix of government and commercial work, government contracts will predominate.

"We have too little work today," Nerbovik acknowledged. The company had a $5.6 million loss in the first half of the year, and has reduced its workforce by 50 percent, from 1,200 people to 600. "We have said to some of our people, 'I'm sorry, I have to lay you off for some months, but I hope to get you in again in a very short time.'"

His workforce's deft touch with steel was a big draw for Fincantieri. Philly "is probably the only shipyard in the U.S. … that has current experience bending and welding the thickness of steel that these ships require," said Bruce Baffer, who directs the heavy icebreaker program for Fincantieri's American arm.

If the Coast Guard orders more icebreakers — it could order up to three on this contract, and as many as six in total — that could result in a workforce of 1,500 to 1,800 at the shipyard, Baffer estimated. There's good reason to think that's possible, and while it might seem counterintuitive, it has to do with climate change, he said. As ice melts, northern sea routes are becoming easier to access — and busier.

"The Coast Guard has realized they need to be present up there," said Baffer, a retired Coast Guard admiral, who was chief engineer for the service and was responsible for maintaining the Polar Star. If a cruise ship crashed, for example, or if there were an oil spill in waters near the north pole, the Coast Guard "would be very hard-pressed to have any asset capable of reaching it," he said.

That sense of urgency, though, hasn't translated to the appropriations process. Questions over which government agency would pay to bolster the icebreaker fleet have stalled those efforts "literally for the last decade," Baffer said. The president's 2019 budget request for the Department of Homeland Security includes $750 million for the design and construction of the ship. (Last month, the Coast Guard rebranded the icebreaker program as the "polar security cutter.") But the Department of Homeland Security hasn't received its appropriation for the next fiscal year yet and is operating on a continuing resolution that expires Dec. 7.

Rep. Bob Brady, a Philadelphia Democrat, said the shipyard is "uniquely qualified" to build the icebreakers, and he's "confident that the Coast Guard's requested funding will be provided."

"Our international competitors are moving full speed to exploit the Arctic by building up their icebreaker fleets," Brady said in a statement.  Adding three more vessels, as proposed, "would still leave us behind where we need to be."

Nerbovik is busy making other plans in the meantime. He said a deal on the commercial side — to build two product tankers — could come through "any day now," and that it would provide two years' worth of work. (The shipyard and the unnamed potential buyer signed a nonbinding term sheet in July.) Later this fall, he's planning for the shipyard to bid on a contract for a cadet training ship for the U.S. Maritime Administration.

His long-term goal for his company nods at the Navy Yard's past: to bring Navy shipbuilding back to the terrain that Philly Shipyard occupies, which he calls "sacred ground."

"I don't see any reason why we shouldn't be a part of that," he said. "We should absolutely be able to offer Navy ships in the future."