Thunder Bay shipyard workers were awaiting news in late January of a potential sale of their parent company which was placed under receivership last summer.
The January 15 deadline for bids by buyers interested in purchasing the assets of Canadian Shipbuilding & Engineering (CSE) and its Thunder Bay ship repair business, Pascol Engineering, passed without word from its court-appointed monitor.
CSE, based in St. Catharines, filed for CCAA (Companies’ Creditor Arrangement Act) protection in August.
RSM Richter Inc.of Toronto was selected as the monitor of the CSE group of companies including Pascol Engineering and Port Weller Dry Docks in St. Catharines.
An order was issued November 17 authorizing Richter to begin a sale process for the business and assets of both companies.
Charles Payne, business relations manager at Port Weller Dry Docks, could provide no details on how many bids were submitted nor the level of interest in the two shipyards. “That’s handled by the receiver.”
CSE handles more than 90 per cent of Canadian dry dockings on the Great Lakes with their Pascol division responsible for two-thirds of that business.
“They are reviewing the bids right now and are hoping to go back to the court with a recommendation within 10 days, says Payne. Pascol staff should know their future once that period has expired.
Payne couldn’t comment whether a transaction would involve selling the entire group of companies or parceling off individual assets.
“It’s up to the bidders and how they made those offers.”
Calls to RSM Richter were not returned prior to Northern Ontario Business deadline.
In a Nov. 23 document to prospective purchasers filed by Richter, CSE blames the decline in business at Port Weller to the softening of the ship conversion and refit market, as well as issues concerning shipbuilding contracts.
Port Weller’s revenues for its 2005 fiscal year were listed at $32.4 million, but dropped to $8.4 million for the first nine months of their 2006 fiscal year ending Sept. 30.
While Port Weller’s shipyard remains inactive, Payne says Pascol remains “fully operational” at this time.
Pascol Engineering general manager Steve Allen was not available for comment.
The Thunder Bay ship repairer does heavy custom fabrication work, machining and mechanical contracting for shipping companies and the forestry industry. The facility is also equipped with a dry dock capable of handling some of the largest Great Lakes vessels.
Herb Daniher, staff representative for Local 5055 United Steelworkers of America, says there’s a degree of uncertainty among their 120 full-time and mostly seasonal workforce of welders, fabricators and machinists, some of whom have 30 years of service.
Pascol’s workforce fluctuates due to the seasonality of the business, but Daniher says it’s business as usual based on this winter’s callbacks and the repair work scheduled with four freighters expected at Pascol for winter layup.
Daniher says since restructuring 12 years ago streamlined the workforce, Pascol is an efficient operation providing specialty work not offered at Port Weller. But he fears some business has been jeopardized because of the uncertainty.
“We’re a viable entity but only time will tell.”
Despite CSE’s financial woes, Richter’s notes to prospective buyers and investors states there are opportunities for revenue growth because of Pascol’s ship repair expertise, the forecasted growth in the European market, government programs for which CSE is on short list of qualified bidders and the ability to capture more domestic ship repair business.
“We’re keeping our fingers crossed if we can get the right player and we can build on the success of the past,” says Daniher.
Peter Cairns, president of the Shipbuilding Association of Canada, says the industry is in distress despite a pent up demand for new ships. Many orders for ships are government contracts for new naval and coast guard patrol vessels.
On the Great Lakes, there’s been no orders from Canadian ship operators since the last laker was launched in 1985. Many shipowners are operating 30-40-year old vessels.
“The situation is becoming difficult for the shipbuilder and the ship owner (alike),” says Cairns, with many marine operators wanting to build overseas if they could skirt a 25 per cent federal import tax on foreign-built ships.
He blames it on the lack of a coherent federal shipbuilding policy. “We had a policy up until the Liberals got power and everything to do with that policy has been stopped. Shipbuilders don’t know what is available to them, what they can offer and what assistance is there.”
The U.S. Jones Act requires ships operating between American Great Lakes ports to be U.S.-built, -crewed and -owned. The Canadian Coastal Trading Act is far more lenient, he says, requiring Canadian flagged vessels on the Great Lakes to be Canadian crewed.
As well, U.S. states will subsidize shipbuilding yards as an economic stimulus.
“States will pony up money to assist these yards, when we in Canada don’t do that. Your grandfather might be able to tell you the last time the Ontario government gave some money as a stimulus to a shipbuilding yard.”
