Bath Iron Works Corporation

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Bath Iron Works Corporation

700 Washington Street
Bath, Maine 04530-2574
U.S.A.
(207) 443-3311
Fax: (207) 442-1009

Private Company
Incorporated: 1884 as Bath Iron Works, Ltd.
Sales: $800 million
Employees: 9,000
SICs: 3731 Ship Building and Repairing; 8711 Engineering
Services

For more than a century, Bath Iron Works Corporation (BIW) has been building ships, chiefly for the U.S. Navy. From its mile-long stretch of waterfront along the Kennebec River have come more oceangoing vessels than from any area of similar size in the world. In its busiest period, BIW built a quarter of the Navy’s destroyers launched during World War II. The fourth largest shipyard in the United States and the largest private employer in Maine, BIW has not built a commercial vessel since 1984 and, with the end of the cold war and diminishing naval contracts, has sought to supplement its business, investigating, for example, the prospect of building large carriers to transport automobiles and trucks.

The history of Bath Iron Works is a vital chapter in Maine’s seafaring history. Not more than a dozen miles away from the town of Bath, settlers established the first colony in New England—13 years before the landing of the Mayflower —and built the first oceangoing vessel made by Englishmen in America in order to take themselves home. But curiously, the company owes its origin to a soldier rather than a sailor. The scion of a prosperous Bath merchant family, Thomas Worcester Hyde was a Civil War army officer who rose to the rank of brigadier general in the Union Army at the age of 23. Hyde leased a local iron foundry after returning home and opened Bath Iron Works, Ltd. in 1884 as a family enterprise.

Starting with capital of just a little over $40,000, Hyde raised another $60,000, purchased a defunct iron works along the Bath riverfront, and equipped it to make steel ships, which were rarities at the time. Producing a wooden steamer in 1890, before obtaining his first naval contract, Hyde delivered to the Navy the first steel vessels built in Maine—two gunboats with auxiliary sails—in 1893. Two years later the Navy ordered two more such gunboats. During this time, BIW built other wooden steamers, lightships for the U.S. Bureau of Lighthouses, and private yachts as well. In 1894 Bath built the largest and most luxurious American-built yacht of its time, the Eleanor, for William A. Slater, at a cost of $300,000. The ship immediately embarked on a two-year, around-the-world voyage with a crew of 30. The company also built the 302-foot-long Aphrodite in 1898 for Colonel Oliver Payne.

But the Navy remained Bath’s primary customer. Between 1899 and 1901 the company delivered five very light and high-speed torpedo boats to the Navy. These pioneering craft were the Navy’s first of this type until World War II’s PT boats. A cruiser, the Cleveland, was built in 1904, and BIW’s only battleship, the Georgia, was completed in 1904.

However, the hull of the Georgia was barely able to clear the riverbed in Bath, and as battleships graduated into the larger Dreadnought class, it became clear that Bath would have to confine itself to building smaller ships. BIW’s scout cruiser Chester, completed in 1908, was the first turbine-propelled ship in the Navy and its fastest vessel, except for torpedo boats. In a race against two other ships of this type, it averaged 25.8 knots over 24 hours.

In 1909 BIW built its first two torpedo boat destroyers. This new type of craft was designed to counter the smaller torpedo boat, yet carry its basic weapon. The name was soon shortened to simply “destroyer,” and by 1912 BIW was the Navy’s chief specialist for this kind of light, fast warship, which would become the most versatile of modern naval vessels. The destroyer has served as an escort ship on convoy duty and performed many other essential functions, but its chief mandate— especially since World War II—has been to detect, hunt down, and destroy submarines.

BIW briefly came under the control of Charles Schwab’s U.S. Shipbuilding Trust between 1902 and 1905, and when this enterprise failed it was sold to John S. Hyde, the late general’s younger son, for $275,000. Hyde died in 1917 while the shipyard was awash in World War I orders, and his heirs promptly sold out to a banking syndicate for $3 million. However, the investors awarded themselves big dividends during the fat war years, leaving BIW no margin for coping with the inevitable postwar bust. The naval disarmament treaty of 1921 sealed the company’s doom. BIW went into receivership in 1924 and shut down operations the following year. In 1927 the idle facilities were slated for conversion to the task of turning out paper pie plates.

Nevertheless, the shipyard was saved from this fate by its former works manager, William S. “Pete” Newell. He leased it for $17,000 a year, established the Bath Iron Works Corp. with $125,000 in borrowed capital, successfully bid on three fishing trawlers, and won an order for a 240-foot yacht. Between 1928 and 1937 BIW built and delivered 18 trawlers. The company also constructed seven Coast Guard cutters designated for combating rumrunners during the Prohibition years. And in 1931 BIW won the contract for the Dewey and Farragut, the first destroyers authorized by the Navy since 1918.

Building yachts for captains of industry proved a profitable sideline. For J.P. Morgan II, BIW built the 343-foot-long Corsair IV, which was launched in 1930. Although the Great Depression largely ended Bath’s yachtbuilding operations, in 1936 Harold S. Vanderbilt commissioned the company to build a racer to defend the America’s Cup. The resulting Ranger was the last of the J class sloops to defend the cup, defeating the Endeavor II in four straight 1937 races.

In 1936 BIW offered stock to the public, for the first time, on the New York Curb Exchange (later the American Stock Exchange). This action placed the company on a sounder financial basis, enabling Newell to pay off the company’s outstanding first mortgage bonds and to augment its working capital. By the time BIW was registered on the New York Stock Exchange in 1940, it had paid off all its bank loans.

During World War II, BIW employment peaked at 12,000 (1,600 of whom were women) in 1943, compared to 300 a decade earlier. Between Pearl Harbor and the war’s end, BIW built 82 destroyers—one-fourth of the total ordered by the Navy—launching one on an average of every 17 days. Only eight of the ships were sunk during the war. Bath also established, jointly with Todd Shipyard Corp., a facility in South Portland to build 30 British cargo ships. This yard, which turned out Liberty ships for the U.S. Maritime Commission, was closed after the war.

Following a familiar pattern, employment sank to 350 in 1947. But BIW had already begun work on the first of 32 trawlers commissioned by the French government. Moreover, the company soon received new orders for destroyers from the Navy as well as contracts for frigates, ocean escorts, and LST’s (landing ships, tank). Yachtbuilding also resumed. John R. Newell succeeded his father as the company’s president in 1950.

By 1968, however, the company was beset by managerial and economic problems. That year the parent holding company, Bath Industries Inc., merged with Congoleum-Nairn Inc., a manufacturer of flooring materials. Troubles continued, with BIW losing out on major naval contracts and incurring losses on others because its fixed prices did not allow for the rapidly rising inflation of the early 1970s. In 1974 the shipyard lost $10 million.

The following year the parent company (now called Congoleum Corp.) brought in John R. Sullivan, Jr., a chemical engineer, to run the yard. Although Sullivan had never seen a shipyard, he set about putting Bath construction on a sounder basis. Sullivan made the yard’s modular construction system, which had been adopted from Japanese practice, effective at BIW for the first time. Bath was the first U.S. shipyard to employ this technique, which involved building a hull out of modules constructed indoors and fitted there with electrical wiring, plumbing, ventilation, and hydraulic equipment. These modules were then hauled outdoors by crane and welded together. By 1981, Bath’s safety record, once one of the worst in the industry, had become one of the best.

By this time BIW had built 13 of 24 FFG 7-class guided-missile frigates for the Navy, completing each in less than two years. The project was 99 weeks ahead of schedule and $44 million under budget. Bath’s operations were comfortably profitable, and there was a backlog of $800 million in military orders. In early 1980 Congoleum went private in a leveraged buyout. Several insurance companies joined the company’s management in borrowing heavily to buy all the outstanding publicly held stock for about $450 million. Prudential secured 29 percent of the company, with Aetna, Travelers, and Connecticut General investing as well.

A Forbes article published in September 1984 indicated that this move was paying off. BIW’s frigates were still coming in ahead of schedule and under budget, and the company’s earnings for the past five years were estimated at about 15 percent on sales of about $400 million annually. In 1982 Bath won a contract to build the Thomas S. Gates, the first of eight Ticonde-roga-class Aegis cruisers it was to build through 1991. More good news came on April 2, 1985, when Bath won an order worth about $322 million to build the Arleigh Burke, first of the DDG 51 Aegis destroyer class. By mid-1986, BIW had a $1.4 billion backlog in naval orders, including these Aegis-class cruisers and destroyers.

On this prosperous note, Congoleum’s investors were ready to cash in, but before doing so management determined to make BIW even more attractive by putting a lid on labor costs. However, this initiative met with protest, as BIW workers walked out for 14 weeks in 1985. Labor and management eventually agreed to a wage freeze, with bonuses equivalent to an increase of three percent over three years.

In another leveraged buyout, announced August 21, 1986, the closely held New York investment firm of Gibbons, Green, Van Amerongen Ltd. bought BIW for an estimated $500 million. BIW then became a subsidiary of the new Bath Holding Corp., which itself became a subsidiary of the Fulcrum II Limited Partnership, the managing partners of which were Edward Gibbons, Todd Goodwin, and Louis van Amerongen.

By late 1992 BIW had a backlog of $2 billion worth of orders carried through 1997; in 1994, the backlog of 14 Burke-class destroyers extended through the year 2000. Aware, however, of impending defense cuts in the wake of the cold war, company managers began looking for ways to solicit civilian work. Bath had not built a civilian craft since 1985 and had “no contingency plan whatsoever,” according to its president, Duane D. “Buzz” Fitzgerald, who sent a four-man team to Holland to “benchmark” ten shipyards there.

Fitzgerald replaced William Haggett as BIW’s chief executive officer in September 1991, when Haggett opted to resign his posts as CEO and chairperson. A BIW official for 23 years, Haggett announced at a news conference that year that he had violated business ethics, admitting that he had ordered the photocopying of a government document, inadvertently left behind at the BIW shipyard by Navy officials. Although the document, which had included cost reviews of work performed by Bath and its chief competitor, Ingalls Shipbuilding of Pascagoula, Mississippi, had reportedly not been used to BIW’s advantage, Haggett and two BIW vice-presidents involved in the photocopying resigned in 1991.

Under the leadership of Buzz Fitzgerald, BIW continued to be a major supplier to the Pentagon. The company was asked to build three $850 million Burke-class Aegis destroyers for the Navy in June 1994. Moreover, in an effort to diversify, BIW joined with American Automar Inc. and Great American Lines Inc. in 1993 to develop carriers of automobiles and other vehicles that could also meet military needs. Also participating in the $14 million project were a giant Japanese shipbuilder and the Canadian ship-designing subsidiary of a Finnish group. This program received a $5 million federal grant and was being coordinated by a special Pentagon agency intended to foster ties between shipyards, carriers, university research centers, and the federal government. According to a 1994 Bath press release, the company was “on course to be competitive in the world commercial shipbuilding market by 1997.”