Revival of U.S. Shipbuilding Is Set Back

Jason · January 30, 2004

By LESLIE WAYNE

Published: January 29, 2004

An ambitious plan by Congress to revive the American commercial shipbuilding industry is under water - quite literally.

In a German shipyard, submerged in 36 feet of water and lying on its side, is Pride of America, a 15-story, 77,000-ton vessel that was to be the first new oceangoing cruise ship in nearly 50 years to be registered in the United States. For four years, Congress has encouraged the project with loan guarantees and special-interest legislation that critics called pork, but backers said would make America competitive in an industry dominated by foreigners.

At the moment, however, Pride of America - the centerpiece of a two-ship project that started out in a Mississippi shipyard - is listing at 15 degrees in the Lloyd Werft shipyard in Bremerhaven, Germany, where it was taken last year to be completed. A winter storm with winds over 100 miles an hour hit the shipyard two weeks ago, flooding 3 of the ship's 15 decks with water.

"This is a case of where the sunk costs are really sunk," said Stephen Moore, president of Club for Growth, a Washington nonprofit group that advocates limited government. "Here the taxpayer ended up paying $180 million for a ship that may never sail and may not create jobs."

Until the accident, Pride of America had been scheduled to begin Hawaiian cruises on the Fourth of July in what was to be a patriotic kickoff. Norwegian Cruise Line acquired the ship last year when it was a half-finished hull - picking it up for $24 million after a shipyard in Pascagoula, Miss., fell behind schedule and over budget. The cruise ship company originally involved in the project, American Classic Voyages, had gone bankrupt and the federal government had to pay $180 million to make good on its loan guarantees.

When it was first conceived, the effort, called Project America, was championed by Senator Trent Lott, a Mississippi Republican, as a way to rebuild a dormant American shipbuilding industry in the Pascagoula shipyard where his father once worked. Original plans called for the construction of two ships, with $1 billion in federal loan guarantees. Besides the half-finished hull that Norwegian Cruise purchased, the company also took possession of 400 containers of parts for a second cruise ship that were also sent to Bremerhaven.

"It's almost like this project is jinxed," said Allen Walker, president of the Shipbuilders Council of America, a trade organization. "It's really unfortunate, and no one knows what's going to happen."

For Norwegian Cruise, the world's No. 3 cruise ship company, its Hawaiian gamble now depends on the extent of damage and whether the ship can be refloated and repaired. If the damage is extensive enough - there are already reports of serious problems with the ship's diesel-electric propulsion system - it is possible that Pride of America might be scrapped entirely. Divers are currently examining leaks in the hull, while the ship's insurers wait for a damage report.

"The shipyard right now is pumping out the water," said Susan Robison, a Norwegian Cruise spokeswoman. "Once we're able to refloat the ship, we will be able to assess the damage."

The cruise line had planned to spend $340 million to turn the half-finished hull into a modern cruise ship for 2,200 passengers with patriotic dÃƒÂ©cor. A bald eagle and waving flag were to have decorated the hull.

How Norwegian Cruise came to acquire Pride of America is a tale of both business and politics. The bankruptcy of the original company making the ship left the United States government with a half-finished vessel that no one was interested in buying - except for Norwegian Cruise and a few scrap companies. To make the deal more attractive to Norwegian Cruise, Congress had to become involved.

Through special-interest legislation pushed through by the Hawaiian Congressional delegation, Pride of America was allowed to qualify under United States law for a special privilege - the ability to sail solely between American ports, without having to touch base on foreign soil as foreign vessels must, wasting valuable sailing days. This provision was included in the fine print of the 2003 appropriations bill and came about even though Norwegian Cruise is a subsidiary of the Malaysian-based Star Cruises and the ship would no longer be American-made.

A second Norwegian Cruise ship, the Norwegian Sky, will, meanwhile, be renamed Pride of Aloha and will begin Hawaiian cruises on July 4. While all foreign vessels sailing to Hawaii must touch base in either Mexico or Canada, thousands of miles away, Congress - as part of the special-interest legislation - also allowed Norwegian Sky to be registered as a United States vessel, allowing it to sail from the American mainland directly to Hawaii or to go straight from one Hawaiian port to another.

While passengers who bought tickets on Pride of America will be transferred to Pride of Aloha, Americans who sought jobs on the stricken vessel - which is required by law to have a United States crew - may be out of luck.

Initial plans called for Pride of America and Pride of Aloha to each have about 1,000 employees. So far, Norwegian Cruise has offered jobs to 1,100 people on Pride of Aloha, but has suspended its hiring plans for Pride of America. Hawaii's Congressional delegation, which has strongly backed Norwegian Cruise's plans in the hopes of gaining up to 10,000 new jobs in Hawaii, is disappointed.

"Obviously I'm very, very sorry to hear about this, " said Representative Neil Abercrombie, Democrat of Hawaii, who pushed the special-interest bill late last year. "It's not exactly what we wanted."

Senator Daniel K. Inouye of Hawaii, another Democrat, called the accident "disheartening."

Mr. Walker of the Shipbuilders Council, which represents American shipyards, said he took some comfort in the fact that the program, which was meant to rebuild American commercial shipbuilding skills, did not fall apart at an American shipyard.

"For my perspective," he said, "it's nice to see something that's not the fault of a U.S. shipyard. There are many who think foreign shipyards are Mecca and U.S. shipyards are not what they should be. This shows problems can occur to anyone."