Post by ferryfast admin on Dec 5, 2007 16:58:22 GMT -5
Browning sails from high drama to the high seas
Cathy Bolt, Perth
The Age-Western Australia
business.theage.com.au/browning-sails-from-high-drama-to-the-high-seas/20071202-1ee9.html#
December 3, 2007
THIS time last year, Bob Browning was busily but discreetly working on a management buy-out plan at Perth energy giant Alinta that would force his resignation as chief executive amid enormous controversy.
One year on, he is home in the US, grappling with a fresh unexpected challenge, extracting his new employer, West Australian shipbuilder Austal, out of a looming ugly hole in its order book.
"One of the things I have learned in this industry is it's a constant battle to balance the order book with the workforce you have got," Mr Browning said. "It seems like either we don't have enough bodies or too many."
Just four months into his job as chief executive of Austal USA — the division regarded as most critical to Austal's future growth — Mr Browning was confronted three weeks ago with the news that one of the biggest contracts on the books of its Alabama shipyard had been cancelled.
The order was for a second Littoral Combat Ship, a new generation, fast, agile warship of which the US Navy has flagged it eventually wants 50 or more.
Austal, in partnership with US defence giant General Dynamics, was one of two consortiums given contracts to each build two of their rival LCS designs. But amid huge cost blow-outs on both models, partly caused by the client's changing specifications, both groups have had the orders for the second ship cancelled by the US Navy.
The implications for Austal could be serious. Revenue from the second ship, and the huge potential of the program, had been built into its share price, which slumped 14 per cent after the announcement to $2.72.
At an operational level, it means the big workforce it has rapidly recruited and trained in the US in anticipation of the ongoing workload — 1176 people at last count — could be looking expensively underemployed by the third quarter of next year.
By then, two of its current big orders, the first LCS ship and a second big car-passenger carrier for Hawaii Superferry, will be completed. That leaves a gap of some months before the LCS program gets back on track, as Austal strongly believes it will, or before any major work starts to flow from another big US defence project it has just bid on and is confident of winning, the Joint High Speed Vessel program.
Speaking from Austal's shipyard in Mobile, Alabama, Mr Browning agreed he had endured a baptism of fire, but one made easier by the reaction of the workforce when he informed them of the LCS blow.
"What really surprised me was most of these guys and ladies have been working in the shipbuilding industry most of their career and they just kind of shrugged their shoulders and said that's what this business is all about, it's quite volatile," he said.
Mr Browning said he was also well advanced on a strategy to fill the impending hole. Central to that was a drive to get more commercial work to complement the defence work with which Austal USA has been preoccupied. "We are going to work pretty aggressively, in fact we started two weeks ago, in doing something we hadn't really spent a lot of time doing, and that is pursuing commercial work up here to fill that void until the LCS program gets back on track," he said.
"I think what we will find is that there's actually quite a bit of pent-up demand in things like offshore vessels that support the oil industry, crew boats, those sorts of things.
"I have had a number of conversations with shipbuilders that are significantly backlogged and are sort of excited that we have a bit of capacity. It just goes to the importance of diversifying your income streams."
He said the US Navy was also actively pursuing other special project work to help Austal avoid having to shed any workers.
Mr Browning, previously a director of Austal, joined executive chairman John Rothwell in viewing the current problems as an interruption rather than an end to LCS.
"It doesn't matter who I have spoken with up here, whether it's the politicians or the uniformed military, they are very committed to the program," he said. "We have just got a little bit of a short-term storm here to weather but it will be fine."
With that exception, Mr Browning said his new post was proving a "perfect fit" after six years in Perth with Alinta.
As has since been disclosed, he took a big pay cut to join Austal, where he earns a maximum of $US400,000 ($A452,000) a year including bonuses, compared with $A2.3 million in his last full year at Alinta. But, at his request, Austal shareholders have approved the issue of 3 million shares or around 1.5% of the company via a non-recourse interest-free loan.
"I recognised that Austal was a smaller company than Alinta and I also see Austal as having a lot of upside," he said.
"If we put in a program that was more equity-based, my remuneration could grow as shareholders won out. If the share price doesn't do anything I really don't make much out of the deal either."
Mr Browning, who left Alinta with relatively few shares and a $343,000 termination payment, said he bore no resentment about the $5.5 million exit payment recently given to Paul Anthony, the former boss of AGL, with whom he fought a bitter takeover dispute last year and who was sacked after a profit downgrade.
"One thing I learned a long time ago is you just can't look over the fence and worry about the other guy because you will drive yourself crazy," he said.
"What really surprised me was most of these guys and ladies have been working in the shipbuilding industry most of their career and they just kind of shrugged their shoulders and said that's what this business is all about, it's quite volatile," he said.
Mr Browning said he was also well advanced on a strategy to fill the impending hole. Central to that was a drive to get more commercial work to complement the defence work with which Austal USA has been preoccupied. "We are going to work pretty aggressively, in fact we started two weeks ago, in doing something we hadn't really spent a lot of time doing, and that is pursuing commercial work up here to fill that void until the LCS program gets back on track," he said.
"I think what we will find is that there's actually quite a bit of pent-up demand in things like offshore vessels that support the oil industry, crew boats, those sorts of things.
"I have had a number of conversations with shipbuilders that are significantly backlogged and are sort of excited that we have a bit of capacity. It just goes to the importance of diversifying your income streams."
He said the US Navy was also actively pursuing other special project work to help Austal avoid having to shed any workers.
Mr Browning, previously a director of Austal, joined executive chairman John Rothwell in viewing the current problems as an interruption rather than an end to LCS.
"It doesn't matter who I have spoken with up here, whether it's the politicians or the uniformed military, they are very committed to the program," he said. "We have just got a little bit of a short-term storm here to weather but it will be fine."
With that exception, Mr Browning said his new post was proving a "perfect fit" after six years in Perth with Alinta.
As has since been disclosed, he took a big pay cut to join Austal, where he earns a maximum of $US400,000 ($A452,000) a year including bonuses, compared with $A2.3 million in his last full year at Alinta. But, at his request, Austal shareholders have approved the issue of 3 million shares or around 1.5% of the company via a non-recourse interest-free loan.
"I recognised that Austal was a smaller company than Alinta and I also see Austal as having a lot of upside," he said.
"If we put in a program that was more equity-based, my remuneration could grow as shareholders won out. If the share price doesn't do anything I really don't make much out of the deal either."
Mr Browning, who left Alinta with relatively few shares and a $343,000 termination payment, said he bore no resentment about the $5.5 million exit payment recently given to Paul Anthony, the former boss of AGL, with whom he fought a bitter takeover dispute last year and who was sacked after a profit downgrade.
"One thing I learned a long time ago is you just can't look over the fence and worry about the other guy because you will drive yourself crazy," he said.
WEST AUSTRALIAN