Hanwha wants to build a lot more ships in Philly as U.S. seeks to stimulate domestic industry

Born and raised in Orange, Texas, David Kim is still a Cowboys fan. But he’s now the key man in reviving a signature Philadelphia industry.

As the CEO of Hanwha Philly Shipyard, the South Korean industrial giant that bought the South Philly shipyard for $100 million last winter, Kim is charged with bold expansion that could bring thousands of new jobs, and many robots, to the 118 acres of high-ceiling sheds and cranes where the Schuylkill meets the Delaware, and new sites nearby.

With global seas dominated by low-cost, China-built container and tanker ships and increasingly patrolled by China’s growing Navy, that future depends in large part on U.S. government subsidies, orders, and rules, which — despite President Donald Trump’s plans and bipartisan support — are still evolving. The yard’s future also hinges on finding reliable U.S. employees to train and earn up to $40 an hour, plus overtime, working in all weather, with sophisticated heating, hauling, and cutting tools and robots.

The yard is 60% owned by Hanwha’s Systems division, which builds military equipment for South Korea and the U.S., and 40% by Hanwha’s Ocean division, which makes commercial ships. South Korea is China’s main shipbuilding rival; other nations are far behind.

The mix reflects the company’s ambition to build both civilian U.S. ships, required for cargoes between U.S. ports under the federal Jones Act, as well as ships for the U.S. Navy, which shut the former Philadelphia Naval Shipyard on the site in 1996, but still employs thousands of civilian engineers and technicians in nearby offices.

Under Aker, the Philly shipyard’s previous owner, employment fell nearly to zero and the yard prepared for bankruptcy in 2019. But in the last years of Aker’s ownership, new hiring was fueled by a contract to build five ships for the U.S. Maritime Administration, as well as contracts to build a rock-lifting ship, and a string of liquefied natural gas (LNG)-powered ships. The yard now employs 1,800, workers and contractors. Kim says Hanwha wants to add 3,000 over the next 10 years, even with all the new robots.

Kim says Hanwha now has $1.7 billion in pending orders for the yard, enough to keep busy for at least the next few years. Kim’s team, bolstered by veterans from its South Korean yards who scrutinize Philly operations, is ramping up to build a lot faster.

Kim is a former McKinsey & Co. partner who worked at Hewlett Packard and South Korea-based LG before joining Hanwha in 2017.

Following a tour of the shipyard, Kim summed up ambitious growth plans and took questions from reporters. Questions and comments have been edited for clarity and brevity.

Philly has delivered 32 ships since 2004, half the total Jones Act ships built in the U.S. That is an average of 1 to 1.5 ships a year. We plan to go to 10 a year, with intensive capital investments. For example, we want to construct modern LNG carriers through expedited technology transfer from Hanwha’s [South Korean yards]. That capacity does not exist in the U.S., but we can send people to learn to do that here, and build a whole new industry.

In our Korean yard we build almost one ship a week. We have four Goliath cranes, and a team that keeps them running.

It’s automation. It’s more robots. Immediately-available welding automation technology can increase productivity up to 30%. We are adding robots to carry the steel plates [some from the Cleveland-Cliffs plant in Coatesville].

The yard is laid out pretty well. Within the different shops, some areas can be laid out more efficiently. We have increased speeds [for some processes] already, in some cases by five times.

We need to replace that crane right outside this office, it probably dates back to World War II. We want to use drones and input data by mobile devices. We want AI and virtual-reality training for vehicles and painting.

We are using [the Navy’s former] Dry Dock 4. [Dry docks are used to assemble modular sections into ships.] With improvements we can handle more ships from that dry dock. And we are prepared to spend $300 million to $400 million just to bring back Dry Dock 5, which is currently [a wharf] for outfitting ships. The money will go for a [sea gate and pumps], and mostly for cranes and supporting shops.

We plan to spend much more this decade on capital expenses than was spent in the last 10 years.

We are working on government subsidies, incentives, and grants. We have updated the Grand Block [the eight-story-high shop where ship sections are built, to be lifted by the big cranes, and joined to keels in the dry dock.] We may add a new manufacturing facility, at the submarine or surface level.

We are in discussions with the Navy. Navy shipbuilding is in crisis. It is falling behind the Chinese Navy, falling behind schedule, and over budget.

We want to build combat vessels. There can be different ways we get there. Auxiliary vessels, tankers, supply and support vessels, are close to what we do now. It’s all part of our 10-year plan. Unmanned watercraft are possible.

We are in discussions with PIDC [Philadelphia Industrial Development Corp., the joint venture between the city and Philly Chamber of Commerce that recruits users for public land] for other spaces in the Navy Yard outside our fence. And we are looking at places outside the Navy Yard for supporting warehouses and facilities.

The Navy’s main need is for submarine work. There are modules [Rhoads] is not doing, that we could build.

We started our investment before that existed. The fundamental [bipartisan support for shipbuilding subsidies] still exist. The rest is padding. There continues to be a need and desire to grow capacity. The Navy needs ships, and [commercial shippers] have to replace their own ships. The demand is there.