Technical, Work Innovations
Revolutionize Kvaerner's Govan Yard
by Marcus Gibson,
contributing editor
Queen Elizabeth visited the now-profitable Kvaerner Govan yard to name the bright orange chemical
carrier Jo Selje, pictured above.
Five years ago it seemed impos-
sible. Yet a British shipyard, losing
nearly $60 million a year and com-
mitted to restrictive practices, has
turned a profit using a series of new
working methods and technological
enhancements.
Finally, said Kjell Mikalsen,
managing director of Kvaerner's
shipyard in Glasgow, Scotland,
Govan is in the black.
After pumping $26.6 million in
investment and absorbing nearly $40
million in cumulative losses into the
historic yard since 1988, Norwegian
shipbuilder Kvaerner triumphantly
expects to make a tiny profit of just
$370,000 this year to December on a
turnover of $118.4 million.
To coincide with the news, Queen
Elizabeth visited the yard to name
a bright orange, 35,000-ton, envi-
ronmentally-friendly chemical
tanker at a ceremony in early Octo-
ber. The orange-painted Jo Selje is
the first of its type to be built with a
full 6.5-foot double skin around the
hull. It will comply with OPA 90 and
any new IMO/Marpol regulations
introduced in the wake of the Valdez
disaster. The Jo Selje's 29 fully
segmented tanks provide flexibility
over cargoes because it can load or
discharge a large variety of different
cargoes for a multiplicity of locations
simultaneously.
The ship is one of nine newbuilds
over the past three years for
Norway's Jo Tankers line, the fourth
largest chemical tanker operator.
Two are to be constructed at
Kvaerner's Floro yard in Norway for
delivery this November and next
May.
Productivity = Profit
The key to Govan's turnaround
has been vastly improved productiv-
ity. Staff levels have fallen to around
1,500, but new working practices
and technology have worked
miracles. Instead of the old system
in which 70-ton sections were con-
structed out on the open berths —
prone to all weathers — a series of
indoor "tank assembly" sheds have
been built, costing around $16.3 mil-
lion. Huge block units up to 1,500
tons can now be welded together
without interruption. The nine or
more blocks can then be wheeled
out to the berth on bogie machines
and welded, sausage-like, into place.
The regular working makes forward
planning infinitely more accurate.
The percentage of tasks utilizing
automatic or semi-automatic weld-
ing has increased from two percent,
when the yard was taken over by
Kvaerner, to 80 percent today. Fur-
thermore, says personnel director
Bobby Gordon, "We are designing
ships that are easier to build."
The main improvement up to 1996
will be mainly achieved through
more efficient working methods.
"We want them to work smarter, not
harder," said one manager.
All restrictive labor practices have
been abolished. The fullest flexibil-
ity between craftsmen has been in-
troduced, office staff cut by 30 per-
cent and union shop stewards re-
duced from 90 to 30. Bell-to-bell
working has helped cut absentee-
ism to a minimum.
Skilled workers now service them-
selves rather than being dependent
on assistants. Employees have been
trained in the classroom in how to
work more efficiently in teams, and
almost every worker has attended
some type of training course. Weld-
ers have been taught how to handle
stainless steel, a common material
used in chemical carriers.
From lessons learned when build-
ing the first of the new chemical
carriers, managers expect a 10 to 20
percent reduction in man-hours be-
tween the first and the last vessel in
each series.
Kvaerner's Govan is buoyant
about the future. "Third-quarter
growth in newbuild contracts are
the highest since the mid-80s, at
nearly 400," says Mr. Mikalsen.
Three more ships of similar size —
for Norway's Storli group and Saudi
Arabia's National Chemical Carri-
ers — will be built following the Jo
Selje at Govan. A $296 million or-
der, it is the largest single merchant
shipbuilding contract to be placed in
Britain.
In 1996 the Govan yard will also
build the hull and fit out the British
Royal Navy's new helicopter carrier
as a sub-contractor to the U.K. mili-
tary submarine group VSEL. "Now
there's a real need for new ships,"
Mr. Mikalsen added. New envi-
ronmental rules may cut short the
working lives of much existing ship-
ping, he suggested, and rates of
scrapping and trade volumes in the
Far East will rise, boosting demand.
"Since the early 80s, ships have been
replaced at a rate of only four per-
cent each year," said Mr. Mikalsen.
"We believe this may rise to five or
six percent."
Kvaerner is the largest ship-
builder in Europe and the fourth
largest in the world in terms of com-
pensated gross tonnage. Its world-
wide orderbook — 40 ships totalling
2.5 billion tons — is second only to
Hyundai of Korea. With a $1.48
billion turnover and 9,500 staff in its
shipping group, the company is spe-
cializing in niche markets. Com-
plex, high-quality chemical or LPG
carriers are constructed in huge
chunks using Govan's new block-
unit technology capabilities.
Kvaerner's managers in Scotland
believe the Govan yard will be the
lowest cost shipyard in the group,
outranking counterparts in Norway,
Finland, Sweden and Germany. The
managers hope to squeeze a further
40 percent cut in manhours at the
site in productivity improvements
over the three years to 1996. Lower
materials costs — a substantial por-
tion of total costs — are also a prior-
ity. Kvaerner was angered when
British Steel demanded 10 percent
more for Jo Selje's sheet steel if she
was to be built at Govan rather than
Norway.
"British Steel claimed Norway
was a virgin market that merited a
lower price," said one of Govan's
finance team. But there were other
difficulties on the horizon. Russia,
Brazil and Taiwan may renew their
efforts to grab a bigger slice of the
world market. Korea may have
taken a big chunk from Japan, which
still held 39 percent of the newbuild
market last year. In Japan,
newbuild prices are fractionally be-
low the break-even point, whereas
in Korea, prices have tripled in the
local currency, the won.
Kvaerner still has some grumbles
over the U.K.'s clawback rules over
profits made from subsidized con-
tracts, but the company seems de-
lighted by the accelerated efficiency
at Govan. The historic shipyard,
where the first ironclads were built
in the 1860s, and Scottish engineer
James Elder pioneered the com-
pound steam engine, brought an
end to the days of sail. Kvaerner
has made Govan, the last of 13 Up-
per Clyde shipbuilders that once
launched half the world's tonnage,
a modern shipyard that can com-
pete in the present.
"We will never regret the step we
took," Mr. Mikalsen said.
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