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Originally published Saturday, February 20, 2010 at 10:03 PM

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Seattle's Todd Pacific Shipyards stays afloat in a sinking industry

Despite challenges in the near century since its founding in 1916, Seattle's Todd Pacific Shipyards is surviving in a shrinking industry that has seen shipbuilding and repair work decline or be lost to cheaper labor and materials in Asia. Todd continues to pay good wages for blue-collar work that can be dangerous and dirty. But worker pride and government contracts have kept it afloat.

THERE SHE WAS: one of the state's most influential legislators, a 69-year-old grandmother fitted with a hard hat and goggles and climbing a narrow, icy ladder while dodging sparks from a welding torch on a cold December afternoon.

Why do that?

For state Sen. Mary Margaret Haugen, who chairs the powerful Senate Transportation Committee, the answer was simple. It was her chance to get a good, close look at a Seattle institution, Todd Pacific Shipyards, and the work it's doing now on the contract to build the next state ferry. "It's extraordinary, what's going on," said an impressed Haugen during a tour with colleagues. "This is a shipyard that produces family-wage jobs. I'm very pleased."

The tour was just the latest volley in a publicity blitz staged by Steve Welch, the soft-spoken yet high-energy CEO who's become the biggest cheerleader for the new ferry and for the company that's building it.

Three months earlier he'd escorted Gov. Chris Gregoire on a similar tour, trailed by dozens of reporters who were handed flash drives depicting Todd's ferry success.

"For the next 50 years you'll be able to tell friends and family, I had something to do with it. You'll get bragging rights," he told Haugen and the crowd.

Its burly piers jutting into the chill waters off Seattle's Harbor Island, the 28-acre Todd Pacific Shipyards offers plenty for locals to be proud of. With nearly a hundred years of history on the waterfront, it's part of our maritime culture. And while shipyards around the country are closing as the shipbuilding and repair industry dwindles, Todd is an anomaly. It continues to thrive.

Busy building the new state ferry and holding a contract to build at least two more, it's also working full steam repairing ships for the Navy and the Coast Guard. The Coast Guard icebreaker Healy, the length of 1 ½ football fields, is at Todd now for major repairs — a contract worth $12.5 million. There is so much work on Navy ships from the Bremerton and Everett naval shipyards — half of Todd's income comes from repairing Navy ships — that Todd has satellite operations there.

In large part because of its government contracts, Todd posted first-quarter revenue in 2009 of $34.6 million — a 90 percent increase from the same period the year before.

Numbers like that have gotten the attention not only of state officials like Haugen but of others who praise the company's ability to continue paying good wages to blue-collar workers who've steadily lost jobs to the American Gulf Coast, where labor is cheap, and to Asian yards, where it's even cheaper.

"It's an important success story for Seattle's waterfront," says David Olson, a political scientist at the University of Washington.

Good wages and plenty of work stand out at a time when the local economy at large is anything but secure. But Todd veterans know only too well that their boats float largely thanks to government contracts. And those come and go on the tides of global economics, practical realities and political priorities.

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Still, the story of how Todd has managed to chart a course through labor contracts and shareholder expectations, creditors, competitors and a pile of demands from both government and private customers is a lesson in survival worth telling.

WALKING THROUGH the shipyards at Todd invites an assault on the senses. Bright flashes from welding machines slice the air, trucks clatter over asphalt delivering tons of steel to the berths where workers in steel-shanked boots crawl over ships in various states of construction or repair. Cranes strut up to the sky. One immense dry dock stretches more than 800 feet into Puget Sound. Huge pieces of metal, many parts of the ferry project, lay scattered in the sheds where workers can stay out of the rain. It's so noisy inside, workers must wear ear protection.

But always, work stops at 11 for lunch, and there is quiet for a time.

Inside the main office, the walls are a kind of shrine to the array of boats that Todd has either built or repaired. Alaska ferries and Washington ferries. Fishing and tug supply boats. Submarines. Navy ships. There's a picture of the USS Shoup, a Navy destroyer commissioned in Seattle in 2002 and homeported in Everett. There's the Pacific Glacier, a fishing boat built at Todd in 1974 and the state ferry Coho.

It's an infinitely more complex place than it was when William H. Todd, a Brooklyn boilermaker, founded the company in 1916. With a group of colleagues, he bought New York's largest ship-repair facility, then expanded it to the West Coast, purchasing Seattle Construction and Dry Dock Co. By 1920, the rapid growth of automobile traffic from the Olympic Peninsula had put a strain on the "mosquito fleet" of small steamboats. Todd made the strategic decision to develop a new specialty: converting the steamboats to large, seaworthy ferries.

Todd continued to grow and diversify, particularly during the two world wars, when shipbuilding was at a premium and Todd, as a key player, expanded around the country, running yards from the East Coast to the South and up the West Coast from Los Angeles. It started hiring skilled workers, many who spent their entire working lives at Todd and passed on the passion to children and grandchildren.

During World War II, Todd's ranks reached their zenith at 57,000 workers when the shipyard built, converted or repaired 23,450 ships — mostly for the U.S. government. But when the war ended, so did demand for much of Todd's work, and the next few decades would be as full of ups and downs as a stormy sea.

In the 1970s, the company got a boost from state contracts to build two big, double-ended ferries and from Navy contracts for frigates and destroyers. But then came the '80s. The frigate contracts dried up, other Navy contracts failed to turn a profit, and some ships Todd had counted on fixing were scrapped instead.

Todd was forced into bankruptcy court and filed for protection under Chapter 11; the corporation ended up closing all its shipyards, sparing only Seattle's.

State lawmakers gave Todd an advantage by passing a law requiring that all new ferries be built in the state, but it was no guarantee of survival.

The company's biggest challenge came when dissident shareholders nearly took over. Patrick W.E. Hodgson, who was CEO of Todd Pacific at the time, said his allies formed the so-called Todd Shareholders Protection Committee and won a proxy fight against the dissidents, keeping control of the company.

"It was just putting all your fingers in the leaks and bringing common sense," says Hodgson, who lives in Toronto and is chairman of the Todd parent corporation's board of directors.

If the shareholders' committee hadn't stepped up, "this would be real estate," current CEO Welch says. "What was more remarkable is that afterward, most creditors were paid 100 cents on the dollar."

Welch, 52, came to Todd in 1994 from King Broadcasting, where he worked as a financial officer. A Missouri boy, he had no maritime background but says he was drawn to Todd because the investors, many out of Seattle, were trying to resurrect the shipyard. "That led me to an industry where the focus was on good management and not on escaping the debt monster," he says.

The next few years were a mix. Todd won a $182 million contract to build three Jumbo Class ferries — the Tacoma, Wenatchee and Puyallup — in the late 1990s. At the same time it won a five-year, $79 million maintenance contract with the Navy. And five years ago it won a contract worth up to $133 million to repair and maintain the Navy's Puget Sound-based aircraft carriers. The announcement of that victory came, though, after word that Todd was laying off 500 workers because the Navy canceled a plan to overhaul a large supply ship.

Today, Todd employs about 800 workers, many of whose fathers and grandfathers worked here, too. "We want to become the best shipyard on the West Coast," Welch says. "It's an unusual business. You can see our project. It's right there. How many businesses can you touch your project?"

JEFF TITUS is a machinist and shop steward at Todd. Before him was his grandfather, a pipe fitter, and then his dad, who worked for Todd until he died of Lou Gehrig's disease. Titus wears his father's name on his hard hat, and the company helps the ALS walk he takes every year in memory of his dad. "Todd is a great family," Titus says.

It's a common theme from the men and women who scurry around the new 64-car state ferry Chetzemoka.

Brandon Corkum, 33, has been working at Todd for five years. His father and grandfather worked for Todd, too, and he hopes his 16-year-old son will join the company in two years, making theirs a four-generation Todd family. "Todd is my home," he says.

Teresa De La Rosa, on the other hand, didn't know anything about Todd — much less shipbuilding — when she left work as a train conductor in France, returned to Seattle and signed up for a welding class at Seattle Central Community College. She put herself on an apprentice list and was sent to Todd. Now she's an apprentice boilermaker learning how to weld and working on the new ferry, one of the few women in the yard. "I'm working with people who have over 35 years' experience, and it's an honor to work with such talented people," she says.

De La Rosa, 38, is part of an apprentice program that Welch says will help replenish the ranks of his company's graying workforce, whose average age is 49. It's also true that the state contract for the new ferry required Todd to have 12 percent of its workers in the apprenticeship program; the number goes up to 15 percent for the next two ferries.

The job can be scary: Workers climb tall cranes and go down deep holes. They're constantly around cold, murky water, handling tools and materials that can burn, stab, cut or crush. You can get filthy fast.

"It's romantic in a really gritty way," says Welch. "People who work here, they work hard."

But the pay is good. Journeymen can make $21 to $24 an hour, and with benefits it's up to $30 an hour. With overtime, Todd workers can make $50,000 a year. Apprentices can make up to 90 percent of the same wages.

With 10 labor unions, there are plenty of rules and plenty of opportunities for strife. But in 2008, Todd struck a new five-year wage agreement calling for an average increase of 4.5 percent each year at a time when many Puget Sound workers were facing pay cuts.

While such a deal is huge in keeping the labor peace, it's more than that.

George Robertson — who worked as a "frigate baby" back in the day — retired at the end of 2007, then came back to help build the new ferry as a machinist boss. The work, Robertson explains, is "in my blood. It's what I was put on earth to do."

On the water surrounding the shipyards, workers can watch the state ferries travel between Seattle and the Kitsap Peninsula. "I can recall things I did to them," he says. "You can take pride in what you do."

TODD WILL need more than worker pride and labor peace to keep going. It is, after all, an anomaly. And the business faces many challenges — not only competition from other shipyards but also uncertainty about future contracts from government departments looking to tighten budgets.

There is, too, the remaining cleanup of contaminated Harbor Island. Todd has said it spent $30 million on the effort and has won several environmental awards for its work. Heather Trim, with People for Puget Sound, an environmental group focused on protecting the Sound, says "there's no big red flags" on the yard.

The biggest issue is finding work.

Economist Dick Conway says the shipyard industry continues to shrink, so much so that the state Department of Employment Security no longer identifies shipbuilding as a separate category of manufacturing.

Todd has some local competition from Dakota Creek Shipyards in Anacortes, J.M. Martinac Shipbuilding of Tacoma and Nichols Brothers Boat Builders on Whidbey Island. But Todd was the only one to bid for the three new 64-car ferries; Nichols Brothers just emerged from bankruptcy protection.

And while the build-in-Washington law helps, it's not a slam dunk. The state rejected Todd's first bid on a smaller, 50-car version of the new ferry for Port Townsend, for instance, saying it was too high.

And questions remain about whether such an arrangement gives the state the best deal they could make. Todd is "competent and economically sensible," says Bob Distler with the state Transportation Commission. "But when you know you're the only game in town you might not sharpen your pencils as much as if you have competition."

Others say the state could get better prices if it opened bidding to companies in, say, the Gulf Coast, where not only labor but essential materials like steel are far cheaper.

In the Port Townsend ferry case, Welch countered that the state estimates were not detailed enough to have a fix on the true cost, and that the state created a tall order with demands for quick completion while employing a high number of apprentices who could not work as fast as experienced tradespeople.

For now, the most challenging problem facing Todd is finishing the Port Townsend ferry by the June deadline. The financial incentive is huge: For every day Todd is late, it will have to pay a $6,000 penalty. For every day the boat comes in early, the shipyard could earn $10,000.

But even if it brings the ship in on time, the larger question looms. Two years from now, will there be work for Brandon Corkum's son and the next generation of boatbuilders here?

Susan Gilmore is a Seattle Times staff reporter. Alan Berner is a Times staff photographer.

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