Cascade General, Inc.

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Cascade General, Inc.

Portland Shipyard
5555 North Channel Avenue, Building 71
Portland, Oregon 97217
U.S.A.
Telephone: (503) 285-1111
Fax: (503) 285-0361
Web site: http://www.casgen.com

Wholly Owned Subsidiary of Shipyard America
Incorporated: 1987
Employees: 425
Sales: $113.7 million (2003 est.)
NAIC: 336611 Ship Building and Repairing; 332710 Machine Shops

Cascade General, Inc. owns and operates Portland Shipyard, a 57-acre, integrated facility that is connected to the Pacific Ocean by the 40-foot, Columbia/Willamette shipping channel. Assets include two dry docks, 17 Whirley cranes, and 550,000 square feet of covered craft shops and state-of-the-art ship repair equipment. Regular customers include the cruise ship industry, North Pacific factory trawlers, VLCCs engaged in the Alaska oil run, ferries from the Alaska Marine Highway Department, tugs and barges, cable-laying ships, and Corps of Engineers dredges. Cascade General also provides emergency top-side repairs at any location on the West Coast and operates two permanent voyage repair stations at Port Angeles, Washington, and in Astoria, Oregon.

1987–95: The Early Years in the Portland Shipyard

In 1987, Cascade General, Inc., a small operation based in Vancouver, Washington, moved to the Portland Shipyard, along with West State Inc., to begin operations there as one of several ship repair contractors to lease space from the Port of Portland. At the time, business in the yard was booming, and the yard's more than 3,000 employees handled about 40 percent of all West Coast commercial ship repair.

The Portland Shipyard was the largest publicly run commercial yard in the country and had been in business since installing its first dry dock in 1903. Located in the Swan Island section of Portland, it had been purchased and developed by businessman Henry Kaiser in 1940. During World War II, it was the site for the construction of Liberty ships. In 1953, the Port of Portland repurchased the then dormant Kaiser yard and installed two dry docks at the facility. Three contractors opened up shop in the Portland shipyard: Dillingham Ship Repair, Willamette Iron and Steel Corp., and Northwest Marine Iron Inc.

Throughout the 1960s and 1970s, the yard expanded aggressively. In 1963, the Port built Dry Dock 3, then the largest floating dry dock in the Americas. In 1976, tri-county voters opted to build another dry dock capable of handling Alaskan oil tankers and liquefied natural gas carriers. Dry Dock 4, the new largest floating dock in the Western Hemisphere, was financed with an $84 million bond offering. Construction on Dry Dock 4 began in 1976 along with an array of support facilities, including piers and outfitting berths, heavy-lift cranes, and a water treatment plant. By 1979, the new dry dock and other improvements were complete.

However, throughout the 1980s, the shipyard consistently lost money. An oil crisis led to a worldwide slump in shipbuilding and repair, and military spending cutbacks created an over-supply of ship repair companies. The market for liquefied gas never developed, while Far East shipbuilders increased competition in the domestic market. Dillingham was bought out by Cascade; Willamette moved to San Diego. Bankrupt Northwest Marine was bought out by Southwest Marine.

Another slump in the world ship repair market depressed the Portland shipyard's business still further in the early 1990s. American shipyards had to cope with the effects of the Asian economic crisis. Currency exchange rates led more businesses than usual to take their repairs to foreign shipyards. Falling oil prices put a damper on Alaskan oil tanker repairs and the Navy initiated further cutbacks. In 1993, Southwest Marine left the yard, and the Port initiated another unsuccessful search for a financially sound operator to move in and bolster business. In 1994, West State went bankrupt, leaving Cascade General as the sole contractor in the Portland Shipyard.

In 1994, an investment company headed by Tore Steen, former chief executive of defunct West State, purchased Cascade General. The next year, Frank Foti and Andrew Rowe purchased Cascade General from Steen. Rowe had a background in international business, exporting American goods and services to the offshore industry, as well as experience in the sphere of robotics. Foti, a native of Seattle, was the former president of Global Marine Services and a former Cleveland construction executive.

Mid- to Late 1990s: Acquisition of Portland Shipyard by Cascade General

At the time of the purchase, the port commissioners, concerned about the shipyard's dwindling business and failed ship repair companies, had voted to go to a single operator system and were soliciting bids from companies interested in managing the yard. Cascade General had no ship repair contracts, and there was no assurance that it would continue its operations at Portland Shipyard. However, Foti and Rowe's first move together was to enter the public bidding process to win the contract to run the Portland Shipyard. They put together a detailed proposal and won the contract in the face of competition from National Steel and Shipbuilding and Todd Pacific. Cascade General gained charge of the yard for an initial five years at $5.8 million per year with a further 25 years covered by options. Before turning over stewardship of the yard, the port built a river water system allowing use of river water, rather than potable water, for washing ships and a water containment system for the dry docks.

Under Foti and Rowe, the company pursued new kinds of business and worked to improve its productivity. The Portland Shipyard had the largest dry dock in the Americas, but was in direct and tough competition with several other shipyards on the West Coast. Foti and Rowe set their sights on the market for foreign ships, which was twice the size of the home market. They also targeted the commercial as opposed to government market in ship repair. "I want to redefine the way we work with the owner. We wish to develop strategic partnerships with owners to bring us work," said Rowe in a 1995 Lloyd's List article. Although the yard still had shortfalls in 1995, by May the company was working on six ships—three fishing vessels, a Navy fuel oil tanker, a privately owned crude oil tanker, and a passenger cruise ship. In May, it picked up another contract to repair two crude oil tankers owned by SeaRiver Maritime, Inc., a company for which it had worked since 1993. More contracts followed and by June, according to Foti, the company had a backlog of about $18 million in pending business and was employing 1,200 workers a day.

Immediately following the transfer of the shipyard to Cascade General in 1996, the company enjoyed a string of successes. Throughout 1996 and 1997, Cascade General made strides to establish its international reputation as a shipyard on the comeback. The yard upgraded its electrical systems to handle larger cruise ships and purchased new automated welding equipment for work on large-size bulkhead and deck structure projects. It successfully built its presence in the floating production, storage, and offloading and drillship conversion sectors. By 1997, a year of record turnover of more than $130 million for the company, about 45 percent of the yard's business involved the maintenance of tankers operating in the Alaskan trade. Cascade General was also part of a consortium of shipyards that had a ten-year contract with VSE-Corporation of Washington, D.C., to carry out reactivation work aboard naval ships destined for sale to friendly countries under the military sales program.

In 1997, Cascade General had sales of $132 million and employed 1,200 workers. Its bread and butter business involved the repair of super oil tankers. But in 1998, those numbers dropped to $80 million and 650 workers. Foti and Rowe made a proposal to buy the Portland Shipyard from the Port of Portland in an effort to keep the yard competitive.

In 1998, after a year of negotiations, the Port of Portland's commissioners voted to sell the Portland Shipyard to Cascade General; however, the company did not assume ownership of the yard until 2001.

In 1998, the company generated revenues of slightly more then $80 million as it performed repair and conversion work on 135 vessels. Of these 117 were commercial vessels with 24 from the international market. Unfortunately, the ship repair market of the late 1990s went soft as depressed freight rates and competition in the containership and bulk carrier markets headed it for a prolonged downturn. Lower oil prices in 1999 began to have a negative effect on Cascade General as oil companies deferred their regularly scheduled maintenance programs and the tanker trade along the West Coast weakened. Only the Alaska cruiseship market seemed destined for good times. However, the growth in the Asian ship repair market meant increased competition for the industry internationally. In 1999, Cascade General's sales increased only slightly to around $90 million.

As a result, Cascade General reemphasized diversification and long-term partnerships, in keeping with the trend towards link-ups between shipowners and repairers. At the end of 1999, it entered into an agreement with the Alaska Tanker Company of Beaverton, Oregon, the largest operator of American-flagged ships, to repair its ships. Also in 1999, it made a bid to dismantle nearly 200 decommissioned naval ships in an attempt to offset the slump in its main business of ship repair. The Port ordered Cascade General to conduct public outreach to inform its neighbors and other interested parties about ways in which it would protect the Willamette River and the health of its workers should it win the bid.

Company Perspectives:

Cascade General, Inc. is in business to provide the highest quality ship repair in a timely and profitable manner. We intend to be thought of as the best possible choice for ship repair in terms of both quality and cost in the markets we serve.

The ship dismantling business was typically one in which workers were maimed and the environment contaminated. Cascade General proposed that, rather than hacking ships down to the waterline with cutting torches and hauling them ashore, it would float them into dry dock and then remove all hazardous materials before dismantling them. This would ensure that no asbestos, lead-based paint, or other toxic material would find its way into the environment. Cascade General's proposal won the support of an important environmental group, and the Navy awarded the company its contract.

The company's system of environmental precautions proved successful. In 2000, less than a week after arriving for dismantling and salvaging, a fishing vessel in the shipyard caught fire and burned for more than 24 hours. Significantly, there were no releases into the Willamette River from the runoff, although Cascade General lost thousands of dollars in dismantling equipment and $200,000 in furnishings and fixtures that would have been salvaged from the ship.

Portland Shipyard LLC, an affiliate of Cascade General, officially took control of 57 acres of the Portland Shipyard for $30.8 million in 2001 along with Cammell Laird Holdings, Britain's largest ship repair and conversion company, which had become a partner in the investment in 2000. The arrangement included all of the port-owned cranes, related ship repair equipment, and Dry Dock 4. Dry Dock 1 remained the property of the U.S. government, although Cascade General managed the facility. The whole property had to remain a shipyard for at least five years, after which time, if Cascade General opted to get out of the ship repair business, it had to offer the Port of Portland the chance to repurchase the yard before selling it to another buyer. The Port of Portland assumed the responsibility for $2.5 million in environmental cleanup costs at the time of the purchase.

Even as Foti and Rowe set about implementing plans for expanding the company into specialty shipbuilding markets and Navy ship dismantling, another hardship hit Cascade General in 2001. Cammell Laird went bankrupt as lenders began to seek repayments from Cascade General. "If we don't find a way to do that, the lenders could take over our entire business." To ease its cash crisis, the company decided to sell Dry Dock 4. Amid local concern that this move would lead to the loss of jobs, Foti announced in an April 2001 Oregonian article, "The jobs that are primarily associated with that large dock left when two-thirds of the tanker companies that carry oil out of Alaska decided it was much more economically viable to do their business in Asia." He also commented that "[t]he lenders have a right to demand that we pay back all of the money we owe them" in a written statement printed in the Oregonian. Dry Dock 4, which was large enough to hold three football fields, was bought for $25 million by a Bahamian company which planned to use it to repair cruise ships.

Still experiencing hard times in 2003, Cascade General decided to turn the shipyard's underutilized space into a leasing opportunity, marketing its unused manufacturing, warehouse, office, and yard space to manufacturing, industrial, and other potential commercial users. Dubbed the Shipyard Commerce Center, the rental areas had truck, rail, and barge access and offered crane power and compressed air capacity as well as an in-house environmental consulting team and first aid staff. The Center would do both short- and long-term leases. By April 2003, Cascade General had several prospective tenants and was optimistic about the future of its newest endeavor.

Key Dates:

1987:: Cascade General begins operations in the Portland Shipyard.
1994:: Cascade General becomes the sole contractor in the Portland Shipyard; Tore Steen purchases Cascade General.
1995:: Frank Foti and Andrew Rowe purchase Cascade General.
1999:: The company enters into an agreement with Alaska Tanker Company.
2001:: Portland Shipyard LLC and Cammell Laird Holdings purchase the Portland Shipyard.