Philadelphia Shipyard executives plan to eliminate 275 jobs starting in July, as the company looks to cut costs amid a dramatic slowdown in orders for new vessels.
The latest round of cutbacks at the Navy Yard site was publicly revealed in a layoff notice filed to Pennsylvania’s Department of Labor.
With a significant dip in orders, the shipyard has been scaling back on its workforce for months; 250 other workers were let go even before the latest layoffs were announced to state officials.
Counting the new layoffs, the recent cutbacks represent a more than 40 percent workforce reduction since orders began slumping.
Lou Agre, president of the Philadelphia Metal Trades Council, said workers are feeling jittery.
“Of course they’re nervous and upset,” Agre said. “They don’t know what the future holds. It’s an impact on not only themselves, but on their families and their communities. It’s an unsure situation.”
The Philadelphia Shipyard’s booms and busts are tied to a 1920s law known as the Jones Act that requires that shipments by water between U.S. ports be carried on American-made vessels.
And when U.S. demand for ships nosedives, international buyers tend to go to China and Korea for massive commercial ships, which can sometimes be made at a quarter the cost of the ones made at the Navy Yard.
The worker woes follow other bad news for the company: After sinking $16.5 million into design work on four container ships for Hawaii trade, the deal collapsed.
The cancellation cost is expected to be just below $20 million, Steinar Nerbovik, Philadelphia Shipyard chief executive, wrote in a report this month to shareholders of the company, which is publicly traded on the Oslo Stock Exchange in Norway.
If the company cannot obtain new orders or additional financing for vessels, that could spell more bad news for the 675 workers who will be left at the shipyard after the latest round of layoffs is completed.
In such a scenario, Nerbovik wrote shareholders, “it would be challenging for Philly Shipyard to continue shipbuilding operations.”
Amid the demand slump, Nerbovik told shareholders that the shipyard is looking for new ways of expanding its business throughout the marine industry. That could include making fishing trawlers and tapping into the growing offshore wind industry.