Southwest Loses Cruise Ship Repair Contract

SAN DIEGO —  Miami-based Royal Caribbean Cruises Ltd. on Tuesday terminated Southwest Marine’s $75-million, still uncompleted contract to refurbish the Viking Serenade, one of largest cruise ships to make regular calls at Southern California ports.

The contract termination was prompted by “disagreements on times included in the contract,” according to Royal Caribbean spokesman Lloyd Axelrod. Southwest President Arthur Engle did not return telephone calls Tuesday.

The extensive renovation, which includes the addition of nearly 300 cabins, a new bow, a huge disco and expanded galley and dining facilities, is the largest commercial cruise ship repair contract won by a U.S.-based shipyard in 30 years. Southwest began work on the ship in mid-January, but a good part of the refurbishing has yet to be completed.

The termination notice was delivered just days after Southwest crews and subcontractors stopped working on the cruise ship. Maritime industry sources said the work stoppage occurred after Southwest and Royal Caribbean became involved in a bitter contract dispute.

The contract termination cast doubt on whether the ship, which arrived at Southwest’s bayfront yard in January, will be ready for a scheduled return to service June 17. It also sparked speculation that the cruise ship refurbishing would be completed at National Steel & Shipbuilding, a nearby shipbuilding and repair yard on San Diego Bay.

A spokesman for Nassco, which last year completed repairs on the Exxon Valdez oil tanker that ran aground in Alaskan waters, declined to comment on its possible role in the cruise ship refurbishing.

However, Axelrod said his company “hopes to find a location that is very close” to Southwest’s yard. Although Axelrod declined to comment on whether Nassco would take over for Southwest, he said that Royal Caribbean intends to retain subcontractors who have been working at Southwest.

Maritime industry sources said that Royal Caribbean and Southwest have been bickering for some time about the timetable that governs the complex refurbishing job. Southwest, the sources said, believes that its crews have been forced to do additional work that was not specified in the contract.

The Viking Serenade contract is important to Southwest because it has helped to replace work that is being lost as the Navy reduces the size of its fleet. In recent years, Southwest and other U.S. yards have grown almost totally dependent upon government repair contracts, with most commercial work being lost to foreign yards.

Engle recently said that Southwest, by successfully completing the $75-million contract, could prove to the world that its yard is competitive with European and Asian yards that now dominate the commercial shipyard business.

Southwest won the Viking Serenade contract in a heated competition with heavily subsidized shipyards in Germany and the Far East.