Coraopolis' American Bridge Co. crossing into new business fields
By John D. Oravecz
Published: Thursday, Oct. 31, 2013, 12:01 a.m.
What will be the world's tallest Ferris wheel has been rising near the Flamingo Hotel in Las Vegas, and legendary builder American Bridge Co. has a big piece of the $550 million project — the supply and erection of the 469-foot-diameter wheel.
The Vegas High Roller and other projects built from scratch are what the 113-year-old Coraopolis-based American Bridge is banking on. A backlog of projects, along with business won this year, are at highs, says CEO Mike Flowers.
But a segment of the privately owned company that does fabrication work for the rehabilitation of bridges and other structures has been losing money for years, forcing the closing of plants in Coraopolis and Oregon, Flowers said.
Layoffs at the company's American Bridge Manufacturing Co. subsidiary will begin in early December and will continue for several weeks here and in Reedsport, Ore., where 148 employees worked.
“The product the plants make no longer matched the products needed by the construction company,” Flowers said. “We're trying to do the best we can for the employees.”
Most of its construction work these days is on big projects, such as the Vegas High Roller, a $70 million project for American Bridge, and as a partner in the $6 billion San Francisco-Oakland Bay Bridge that opened recently, and the replacement Tappan Zee Bridge over the Hudson River in New York, a $3.9 billion project that began this month.
“There has been a lot of investment in new, major business in the U.S.,” Flowers said. “Then there's less money to invest in the rehabilitation of existing structures.”
American Bridge's biggest recent project was the Bay Bridge, for which it and joint venture partner Fluor Corp. split about $1.9 billion in revenue since work began in 2006. That brought about a boost in American Bridge's revenue, because as the majority partner, it recorded revenue for both. After hitting a high of nearly $600 million in 2010, revenue fell to $414.4 million in 2012, as Bay Bridge revenue ended.
“The company has been making money even with revenue falling,” Flowers said.
American Bridge's net worth, which he used as a proxy for net income, has increased 17 percent in the past two years, hitting a high of $166.36 million in 2012.
“We're going to be near a record year,” he said. “The backlog this year is the highest in our history, and we've booked more new business than at any time in our history. ... The corporation is in good shape.”
The company that built the Chrysler Building in New York and the San Francisco Bay Bridge among its famous projects was ranked the No. 5 bridge builder by revenue in the United States this year by Engineering News Record, a magazine that covers the construction industry. It ranked 138th on the list of the nation's top 400 contractors.
William Ibbs, a professor of civil engineering at the University of California at Berkeley and a consultant on construction projects such as the new Panama Canal, said American Bridge's ups and downs make sense in the face of global competition and pricing pressures, especially from China. American Bridge and Fluor performed well on the Bay Bridge project and earned a bonus from CalTrans, California's state transportation agency, for their work.
“The general feeling is the contractors did a good job,” Ibbs said. “American Bridge has done projects all over the world and is a respected, premier steel bridge builder.”
As a steel bridge builder, it faces obstacles from the global economy and construction trends. One is that fewer steel bridges are being built in the United States. Concrete became the preferred, less-expensive alternative beginning in the 1970s.
“The bridges that are aging today are concrete,” so there is less work for a company like American Bridge, which specializes in steel, Ibbs said.
In addition, the big projects built with steel are using steel fabricated offshore where labor is cheaper.
“Steel used in the Bay Bridge was fabricated in China and barged to the U.S.,” Ibbs said. “In fact, a lot of the steel plate was made by U.S. Steel and barged to China.” It was made into girders for the bridge and shipped back to the United States for installation.
“Even considering the extra shipping costs, it cost American Bridge and Fluor one-third less than to use American fabricators,” Ibbs said.
Flowers said, “The only unit of American Bridge that is unhealthy is the (fabricating) company, and it has been unhealthy for years.”
The two plants in recent years have scrounged for business in the face of competition for the structural steel it fabricated for rehabilitation projects. About 85 percent of their recent work was done for small contractors in the Northeast working on small construction projects such as schools. A decade ago, the plants supplied fabricated steel to American Bridge for rehabilitation projects that now are few and far between.
“The market flipped,” Flowers said, driven by a decline in government spending on road and bridge rehabilitation projects. For example, there are 1,000 bridges across Pennsylvania with weight limits imposed by PennDOT because of the Legislature's failure to approve a transportation funding package, he said.
“There has been no strategic investment by government since 2009. The infrastructure is falling down around our ears,” Flowers said. “Throw the economy into the mix, the fact that anybody can get into the rehabilitation business, and competition is heavy now.”
John D. Oravecz is a staff writer for Trib Total Media.
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