Matson wants out Matson Navigation Co. has told a Philadelphia shipyard it no longer wants the two $110 million ships the yard is building for Matson.
of deal to buy 2 ships
The firm still wants
to use the vessels but
only if they are owned
by somebody else
By Russ Lynch
rlynch@starbulletin.comMatson said it could still use the container ships if another buyer can be found who is willing to charter the vessels to the mainland-Hawaii line.
Matson said yesterday it has not canceled the purchase contract, but has asked the shipyard to find another buyer.
Matson blamed its oceangoing unions for not making concessions it claims are needed, and said chartering the ships would allow it to avoid dealing with the unions for those ships. Another owner-operator combination would do the hiring, said Jim Andrasick, Matson president and chief executive officer.
Andrasick said Matson exercised its option to step aside from the purchase and work with the shipyard to find another buyer.
"It was fully within our power to do that," Andrasick said.
He declined to detail what would happen if another buyer cannot be found for the ship. Andrasick would only say: "It is still Matson's intention to use the ship in the Hawaii trade. The only issue is ownership."
An executive of the shipyard said today there is still "a binding contract with Matson," but he believes there will be no difficulty finding a buyer to relieve Matson of its financial burden.
"Just as we are performing to the letter and spirit of that contract, we expect them to them to conform to the letter and spirit," said John Graykowski, senior vice president and general counsel of Kvaerner Philadelphia Shipyard Inc.
However, Matson is not likely to be forced to take the vessels. "The likelihood of that happening is about as likely as the temperature dropping below 32 degrees Fahrenheit in Honolulu," Graykowski said.
There is a demand for U.S.-built ships, with two or three operators looking for them. The cost is $30 million less than Matson paid for a similar ship 10 years ago, and bolstered by a Matson promise of a long-term charter, he said.
A memo issued to Matson employees Feb. 28, under the signatures of Andrasick and Brad Mulholland, Matson's vice chairman, said the company's operating costs have increased since it committed to buy the ships.
In the memo, Matson said "labor cost savings vital to the project were not achieved, and the investment no longer can be financially justified.
"Matson cannot afford to make investments that do not return its capital," the memo said.
Mainland-based union officials dealing with Matson could not be reached for comment.
The company said it began talking to its seagoing unions in 2001, discussing cost savings it would like to make, including reducing the number of crew, but could not reach an agreement.
"Clearly, the project to acquire and operate new ships is now even more uneconomic and can no longer be viewed as a reasonable investment," the memo said.
When it announced the plans last year, Matson said it would achieve efficiencies with the new ships, saving the company $6 million a year. That meant smaller crews, as well as lower fuel and maintenance costs.
Matson, the largest subsidiary of Honolulu-headquartered Alexander & Baldwin Inc., had planned to finance the purchase by using its existing capital construction fund of $170 million and borrowing $50 million.
Information on the Kvaerner Web site says the first ship, M.V. Manukai, is well on the way to completion. A blessing of the ship and a ceremonial delivery were planned for June 3.
Parts of the second vessel are already being made, and a keel-laying is set for this year, the Kvaerner Web site says.
Each 712-foot ship will carry the equivalent of 2,600 20-foot containers.
Kvaerner, part of a Norwegian-based company, had been attracted to Philadelphia through incentives to develop a U.S. commercial shipyard.
Matson Navigation