McDermott closing yard -- About 350 permanent jobs to be lost

MORGAN CITY, La. — McDermott International announced Monday that it is closing its historic Morgan City fabrication facility and marine base once the facility’s backlog of projects is finished. An estimated 350 permanent jobs will be affected.

Rumors of the closing began to swirl about two months ago in light of the company’s plans to consolidate and restructure its Atlantic operations. The operations here will be moved to Altamira, Mexico.

“After many months of consideration, we have made these decisions which are driven by the evolving market demands of the offshore engineering and construction industry in the Gulf of Mexico,” said Stephen M. Johnson, McDermott chairman of the board, president and CEO.

The Morgan City yard’s location and a lack of deep water access are unable to support McDermott customers’ project needs today, the company stated in a news release.

The Morgan City yard originally was developed to serve an offshore industry that has changed significantly over the past 50 years.

McDermott spokeswoman Louise Denly said McDermott has fabrication facilities worldwide serving the energy industry.

“We started developing a deepwater fabrication yard in Altamira, Mexico, in 2007 to serve the local Mexican market as well as international clients. Since then we have been progressively expanding the capabilities, and personnel from Morgan City have been actively engaged in developing this facility. The deep water access is a key driver for where customers want to build their deep water projects,” Denly said.

The technical demands of deep water oil and gas developments in the Gulf of Mexico necessitate floating production systems whose size and scope exceed the specification capabilities of the company’s Morgan City facility, the release states.

“We have worked closely with local and corporate officials of McDermott for the last two years in an attempt to find a way to keep this yard open. Unfortunately, the water depth there has made it very difficult for the company to compete for heavy deep water projects,” Gov. Bobby Jindal said.

Louisiana Economic Development provided incentive proposals to try to help the company secure major new work for the yard, but unfortunately, the timing of those potential projects hasn’t worked out to enable the yard to stay open, Jindal said.

McDermott estimated that 350 employees are expected to be let go when the yard, on property that straddles the Assumption and St. Mary parish line, closes either last this year or in early 2014.

Some personnel from the Morgan City yard are being offered positions elsewhere in the company, including in Mexico and Houston, Denly said.

The company said it will provide assistance to employees over the next several months.

Upstream Media, a trade journal, reported McDermott said it will cost between $45 million to $60 million in severances, relocations and writedowns to close the yard, of which $15 million was already paid out in the second quarter.

As of 11 a.m. McDermott’s stock prices dropped about nearly 20 percent to $7 per share.

Jindal is scheduled to meet today at the Amelia facility with company officials, Louisiana Economic Development Secretary Stephen Moret, Louisiana Workforce Commission Executive Director Curt Eysink and representatives of other companies seeking to hire skilled workers.

“Fortunately, many employers in the Bayou Region are adding jobs right now, such as Bollinger Shipyards, Danos, Intermoor, Leevac Shipyards, Oceaneering, Gulf Island, and Edison Chouest Offshore, so LED FastStart and the Louisiana Workforce Commission will work with the company to help find good job opportunities for those workers in the Bayou Region over the next six to nine months as the yard’s work slows down,” Jindal said.

St. Mary Parish President Paul Naquin said in May that 50 to 60 percent of the McDermott work force comes from St. Mary Parish.

Denly said that, since the end of 2012, the workforce has reduced through natural attrition and reduction in force with respect to work in hand at the Morgan City yard.

“As we announced yesterday, approximately 350 employees are expected to be impacted through to the time of closure, which do not include subcontractors,” Denly said. “As our project requirements fluctuate, we do hire subcontractors to fill in short term needs. We currently have approximately 200 contract employees in the yard at this time. As the project work comes to a close, so will their contracts. What’s important here is that we help impacted employees transition through the closure period. We have some of the most highly trained, skilled and experienced employees in the industry, and we are actively speaking with other industry leaders in South Louisiana to let them know that our employees will be available in the market over the coming months. We are hopeful and confident that they will find opportunities within the marketplace.”

Johnson noted that McDermott has built a lengthy history of operation in, and service to, Morgan City and its community.

“Since the beginning, the talents and skills of people from Morgan City have significantly contributed to the success of the company,” said Johnson. “We are hopeful and confident that our highly trained, skilled and experienced employees affected by (Monday’s) announcement will find opportunities elsewhere in the marketplace.”

Jindal said McDermott is committed to renewing its lease at the Amelia site to preserve the opportunity to restart operations at the yard when and if market conditions improve.

Denly said that while McDermott intends to renew the leases and it is possible that at some point the company could reactivate the facility, “we have no current bidding activity that would indicate restarting the yard in the future. … McDermott will certainly welcome discussion with other companies that could make use of the facility with us and will work with interested parties to identify opportunities.”

Additionally, he said McDermott would entertain offers from other companies that could make use of the location in partnership with McDermott. Louisiana Economic Development also will be connecting McDermott with some of the large industrial companies that may have a need for modular fabrication work that could be performed at that facility in the future.

“No matter what happens with the future of McDermott’s fabrication yard, we will continue to exhaust every possible avenue before us to attract new jobs to this area,” Jindal said.

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