PASCAGOULA — Friede Goldman Halter (FGH) has laid off 800 workers at its Greenwood Island and West Bank shipyards due to a contract dispute with customers, and “plans to aggressively evaluate all non-strategic assets and operations for divestiture opportunities.”
John Hastings, vice president of investor relations for FGH, said the company hopes the layoffs are temporary, but that there is no way to determine when the workers might be rehired.
“It depends on status of the negotiations in trying to resolve these contract disputes with the customers,” Hastings said.
The contract disputes involve two offshore drilling rig contracts with Ocean Rig ASA and two rig contracts for Petrodrill. Friede Goldman blamed the problems with Ocean Rig ASA on “deficiencies in the owner’s design and late deliveries of owner-furnished equipment and owner-furnished information (that) have caused FGH additional delays and cost overruns.” FGH said problems with the Petrodrill contract were caused by delays, deficiencies and other material defects in work by engineering subcontractors chosen by Petrodrill.
FGH said both companies should have granted extensions in delivery dates of the rigs due to the problems. FGH is seeking $95 million from Ocean Rig in compensation for additional costs and delays in arbitration. Unspecified compensation is also being sought from Petrodrill.
The layoffs reduce the company’s workforce on the Mississippi Gulf Coast from 4,800 to 4,000.
The Mississippi Employment Security Commission (MESC) was caught off guard by the large layoffs at Friede Goldman, and didn’t know about the layoffs until workers started flooding their offices.
“Our office has been flooded with unemployment applications,” said Roger Mack, Pascagoula office manager for the MESC. “We weren’t notified. It caught everyone off guard. Normally we are notified so we can prepare. We found out when people came in. We have our office full of people right now.”
Mack said they came to work the second week in January expecting a light load, and had two people off on vacation.
The workers had to be called back in to deal with the crush of people applying for unemployment benefits.
FGH put key properties up for sale in Jackson County including a shipyard on Highway 613 in Moss Point, its West Bank office building on Litton Drive in Pascagoula, and Halter’s training facility on Highway 63 in Moss Point.
FGH also announced that vice chairman, president and chief operating officer John Dane III has resigned his management position with the company. Dane headed Halter Marine prior to the merger.
J.L. Holloway will assume the additional title of president of the company, and the company said it does not currently anticipate filling the office of chief operating officer.
Due to the contract disputes combined with a continued sluggish market and merger-related costs, FGH said it expects to report a loss for the quarter ended Dec. 31, 1999.
“The amount of the loss has not been determined and is dependent, in large part, on the results of the Ocean Rig arbitration proceedings,” a press release from FGH states.
“The results of those proceedings could materially impact the company’s financial results for the fourth quarter. However, any costs incurred by the company in excess of the original contract price on the Petrodrill contracts will not materially affect the company’s income statement because such amounts will be reflected in the purchase accounting treatment of the acquisition by Friede Goldman of Halter Marine Group, Inc. Under such accounting treatment, any such excess amount will have the impact of increasing goodwill, which will be amortized over a 25-year period.”
FGH said the board has approved the retention of an investment banking firm to facilitate divestiture opportunities. FGH announced its merger with Halter Marine in June, and the merger only became official Nov. 3, 1999.
At the time of the merger company chairman and chief operating officer J.L. Holloway said company officials did not expect layoffs and that they had had problems in recent years hiring enough skilled workers to operate the yards.
FGH’s Greenwood Island yard was built in 1998, funded with a $4-million loan and a $2- million grant from the Mississippi Department of Economic and Community Development, as well as other incentives. State funds were also used to help construct the Halter training facility.
Contact MBJ staff writer Becky Gillette at email@example.com.