Frank Foti : President & CEO, Vigor Industrial

It's not just about making money. It's about making a difference.

By Jack O'Connell 2013-08-26 13:59:00

You have been quoted as saying, “My roots are in running industrial companies with industrial workers.” What does that mean?
For me it’s about the American industrial worker. There are a huge number of people in this country who are never going to sit behind a desk, people who can make $60,000 to $100,000 a year using their hands and skills to build tangible things with real value. This is the work we do. These industrial jobs are worth preserving, and the people who do them deserve to thrive. It’s an honor to help make that happen.

There are two things that matter to me – making a difference and making money. If I’m only making money, it’s empty. And if I’m only making an immediate difference without making something economically viable in the long term, it’s just as empty.

Do you come from a maritime background?
I come from an industrial background. I was born and raised in Cleveland, Ohio, and I get seasick in an elevator! I might be the first one you’ve ever interviewed who is actually willing to say that, but it’s true. My father built a construction company from the ground up, so skilled industrial work was a big part of my life. Rather than follow in his footsteps, I decided to go into the telecommunications business. But when my father got cancer, he asked if I would leave my career and come back to Cleveland to save the family company, to keep it alive and make it right for the people who depended on the business for their livelihoods. I did, and that’s when I reconnected with true artisans, people who think visually and create with their hands. Working in the construction business, I learned that leading an industrial workforce was a lot more rewarding than life in an office cubicle.

That being said, I’ve learned a lot about the marine business over the past 18 years. Besides learning what it takes to survive and grow as a shipyard business in the U.S., I’ve learned how deep America’s maritime history goes, how much we all depend on American mariners and the industrial workers who support them. It’s an honor to be the steward of a growing shipyard business in a country that desperately needs the capabilities and jobs we provide.

So the Cascade General acquisition in 1995 marked your first foray into the maritime industry.  What attracted you?
I sold the construction company in Ohio and I was looking into businesses to buy when I moved out to Oregon. I drove onto Swan Island, where the shipyard is, and got that feeling you get in your stomach when something feels right. I drove through the gate and saw the same artisans I came to know and respect in the construction business. And the massive scale of the shipyard, it was like an industrial Disneyland. I saw an excellent opportunity to sustain and build a modern American industrial business.

How is the company structured?
We have three primary businesses that your readers will care about: commercial ship repair, government repair work, and fabrication. Commercial ship repair is our largest business unit. This includes repair and conversion work for customers ranging from barges and fishing vessels to Military Sealift Command, tankers and cruise ships. Our government repair business unit handles the U.S. Coast Guard icebreakers and U.S. Navy carriers, destroyers and frigates. Then we have our fabrication unit, which is the largest growth business for Vigor. We build barges, ferries, fishing vessels and other marine vessels, as well as components for non-marine related customers.

What is the breakdown between military and non-military?
We view our work from the perspective of “commercially driven” or “government programs-driven.” If you break it down that way we’re 85 percent commercial and 15 percent government programs. Commercially driven ship repair and fabrication work is fixed-price work, delivered and managed by commercial standards. It doesn’t matter whether the customer is private like a tanker company or government like the Military Sealift Command. The risks and pressure to deliver the most cost-effective product are the same, so both are commercial customers to us. In contrast, the work we perform on carriers, frigates, destroyers and icebreakers is performed under very different contract requirements, with more emphasis on meeting the customer’s increased need for security and following government protocol.

How big are the non-marine businesses?
Less than 10 percent of our total, but growing. They include Specialty Finishes, our coating business, and a machinery business called Vigor Machine that does a lot of steam turbine work. Our fabrication business also plays a role here because we build non-marine structures as well as ships.

The Todd Pacific Shipyards acquisition in 2011 transformed the company.  How did it come about?
The U.S. industrial base for shipbuilding and ship repair is not a growing sector overall. And the Northwest is a relatively small part of that sector compared to, say, the Gulf Coast. As a smaller, more isolated market, the flow of work coming into any one shipyard is more lumpy in the Pacific Northwest. In order to survive in these conditions, consolidation was inevitable. For years there were attempts by either side – Todd and Vigor – to acquire each other. It eventually became evident that Vigor was the more appropriate acquirer and that taking Todd private was the best course of action for the combined company.

Are there more big acquisitions on the horizon?

In the Pacific Northwest and Alaska, where you currently have operations?
Not necessarily. Vigor has long sought to expand outside the Pacific Northwest, and that continues. I see Vigor five years from now as a company in at least two countries and on more than one coast in the U.S. I’m very interested in Brazil. As in Alaska, there’s huge potential as Brazil develops its offshore oil and gas resources. And beyond geographic diversity, I see a company with a different balance of industrial fabrication and shipbuilding. That’s a big issue. Not only will diversifying allow us to better weather the ups and downs of the marine industry, it will also allow shipbuilding in the U.S. to benefit from incorporating good fabrication genetics. I think a real way to achieve world-class shipbuilding standards in the U.S. is through finding non-marine fabrication partners to help make us better.

Have you ever thought of taking the company public?
Sure I thought about it, but I love being a private company. If we’re doing well, I can share the good news with my employees. If things are not so rosy, I can share that too. It’s amazing, but you can be much more public with your people when you are private. I also spend far less time with attorneys than most people in my position do. No company should have to live by disclaimers and disclosure for legal reasons. It should be about the customer, about the people, and about the work.

You are currently Chairman of the Shipbuilders’ Council of America, which represents all the major shipyards in the U.S. What are some of the major issues facing the industry at this time?
Maritime infrastructure is a critical part of our economy and defense. Other countries are investing heavily in their companies and facilities, and the U.S can be doing a lot more to keep pace. These types of investments are critical to our national security because so much of our shipyard industrial base is tied to the government. If these facilities close or fall into disrepair, it’s not as if we could just create new capacity overnight if need arises to build new Navy vessels.

We make a concerted effort to ensure that the Jones Act stays in place to allow us to have a world-class marine infrastructure with skilled Americans employed in it. Overall, we’re trying to coordinate our efforts to make sure we mutually survive and thrive.

What do you do in your spare time?  Do you have any hobbies?
I like to play tennis when I don’t have to work all the time. I’m really a big collector of various kinds of music. That’s a passion for me. And I read a lot. My reading tends to be somewhat industry-specific but also about global economic trends.

What kind of trends?
I believe in the idea that successful countries are becoming more like companies, and large companies are becoming more like countries as the global economic system evolves. For instance, you could look at Singapore as a company and GE as a country. I think that frame gives you a different view of how business works, and how both companies and countries succeed over the long run.

The larger global companies get, the more their operations impact the social concerns of the people who work for them and the communities in which they operate. On the other side, the decisions that communities and countries make are entwined with the future of companies in those places. Large companies need to think beyond short-term profit and recognize their responsibility for the number of lives they impact. And our country needs to think like a successful business, making long-term investments in the businesses that matter and fighting for its economic survival against competing countries.

Is the company active in the communities where it operates?
Yes. We have an employee-directed giving program that allows people who live in each of our communities to decide where our annual charitable giving goes. Last year we donated more than $300,000 to local causes in the communities in which we operate. It’s how we distribute the money that I’m most proud of. Myself and all the government affairs people have absolutely no say about where that money goes. Employees who know their communities decide. Our employees hand-deliver checks to people around Christmas each year. I think the important part is the donations have nothing to do with what’s better for the business. It’s about being part of the community.

We’re also investing in local workforce development. Creating family-wage jobs is the most important thing companies can do to strengthen communities. At the same time, lack of qualified candidates is a big threat to American competitiveness. Industrial employers are having a hard time filling some of our $50,000, $60,000-a-year jobs because candidates don’t have the right skills. Rather than sit around and wait for the government or the unions to produce the right kind of candidates, we’ve partnered with these groups to train the people we need. We’re working with community colleges in Portland and Seattle to train welders. We’re working with the unions to improve training through their organizations. This is the kind of thing where we’re taking on a wider role in the community and improving our long-term competitiveness.

“Vigor Industrial” is an unusual name for a maritime company.  How did you choose it?
If you look up “vigor” in the dictionary it’s defined as the capacity for growth, survival and adaptation, physical and mental energy, enthusiasm and intensity. We do our best to exemplify that name here.

So it typifies you in a way?
Yes, it probably does. And it’s about bringing feeling into the workplace. There’s a lot of beauty in bringing your true emotions into a workplace because we all have them. It helps drive innovation and productivity in a lot of ways when people can bring their authentic selves to work. If I have to work somewhere, that’s how I want it to be.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.