POLITICS

Davie Yards targets Coast Guard contracts as employment expected to double

10/16/2013 01:28 EDT | Updated 01/23/2014 06:58 EST
MONTREAL - After decades of uncertainty and several ownership changes, the new owners of Canada's oldest shipyard say the company has diversified and is in a strong position to win coast guard shipbuilding and maintenance contracts.

The once mothballed Davie operation, in Levi, Que., is humming these days with 750 workers as it prepares to launch its first ship later this month since restarting operations last year.

The 130-metre offshore construction vessel, for a Norwegian client, is the largest built in Canada in more than three decades. Davie has five ships under construction and more to come over the next year, including two ferries.

Chairman Alex Vicefield said Davie is a different company from two years ago when, in financial and ownership disarray, it lost a mammoth federal shipbuilding contract. Now under new management, the firm has diversified its customer base to include ferries, naval ships, oil and gas, and industrial fabrication.

"A lot of the previous owners of the yard have just fixated on one particular side or one part industry, whereas what we've done is created a team and a system to back it up in the shipyard so we can actually go after different industries and different opportunities," he said.

Last month, Davie submitted $1.2 billion worth of proposals and expects to bid in the coming months for the first of several federal contracts for vessels of less than 1,000 tonnes.

British-Monaco company Zafiro Marine acquired Davie in 2012 from a partnership led by Ontario's Upper Lakes. Upper Lakes said its ownership became too risky after Irving Shipbuilding in Halifax and Vancouver Shipyards were selected over Davie to build Canada's next generation of warships and coast guard vessels.

In its heyday, the 188-year-old company built wooden sailing vessels, steamers and modern war ships. Its fortunes waned after the 1970s when Canada Steamship Lines, then a division of Power Corp., sold the company in the first of a succession of transactions, some of which received bailouts by both the Quebec and federal governments.

A merger of Quebec yards in the late 1980s resulted in the loss of 1,700 jobs. However, the yard went into receivership in the 1990s once a federal shipbuilding contract ended.

Several sales and restructurings later, the shipyard is back in full production.

Vicefield said losing out on the $35 billion national shipbuilding contract was "a massive shock and surprise" for supporters of Davie which was "incapacitated" because it was trying to exit creditor protection.

With Irving and Vancouver excluded from bidding on smaller vessels, Davie says it has few competitors, especially for the largest of the ships.

It has signed a five-year agreement with British engineering services firm Babcock International. Davie will provide its facilities while Babcock Canada will contribute marine engineering expertise and experience in managing federal contracts.

The Canadian government plans to spend $2 billion for smaller ship construction over 11 years and about $360 million during the next decade to extend the life of the Canadian Coast Guard fleet. In June, Ottawa announced funding of up to $488 million to buy 18 to 21 new vessels for the Coast Guard fleet.

Andrzej Marasinski, the company's director of federal government programs, says Davie won't bid on all of the contracts that will be announced.

"Some of the ships, which are really smaller...it probably won't be very economic to us and we won't be able probably to provide an attractive offer," he said. "But most of it we believe we will be pursuing and bidding on."

The company's prospects are strong because wages in Quebec are among the lowest in Canada and up to half what they are in Europe. Canadian companies also have a competitive advantage for domestic contracts because of tariffs on imported vessels.

During a recent recruitment campaign, Davie attracted 2,600 applications. The applicants included shipbuilders on both coasts, despite the linguistic challenges for non-francophones that come with living in Quebec.

Vicefield expects the workforce will increase to 1,500 next year and could increase by another 500 if it wins the federal contracts. However, Davie is cautious about hiring, wanting to avoid the previous problems of layoffs during slow periods.