ML18025A681

Applicants Answer to Citizens Against Nuclear Dangers Supplemental Appeal Regarding Discovery Request Number 18

ML18025A681
Person / Time
Site:	Susquehanna
Issue date:	09/17/1979
From:	Silberg J, Yuspeh A Pennsylvania Power & Light Co, Shaw, Pittman, Potts & Trowbridge
To:	Atomic Safety and Licensing Board Panel
References
Download: ML18025A681 (16)

Text

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safet and Licensin Board In the Matter of

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PENNSYLVANIA POWER 6 LIGHT COMPANY

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and

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ALLEGHENY ELECTRIC COOPERATIVE, INC.

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)

(Susquehanna Steam Electric Station,

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Units 1 and 2)

)

Docket Nos.

50-387 50-388 APPLICANTS'NSWER TO CITIZENS AGAINST NUCLEAR DANGERS'SUPPLEMENTAL APPEAL" REGARDING DISCOVERY. REQUEST NUMBER 18 On May 22, 1979, intervenor Citizens Against Nuclear Dangers (CAND) filed interrogatories and requests for documents directed to Applicants and the Commonwealth of Pennsylvania.

On June'9, 1979, Applicants answered certain CAND discovery requests and ob-jected to other discovery requests.

On August 24,

1979, the Board issued a Memorandum and Order granting Applicants a protective order with regard to the discovery requests to which they had ob-jected.

See Memorandum and Order at 11.

This included CAND dis-covery request Number 18, dealing with the fabrication of the Susquehanna reactor pressure vessels.

However, the Board also indicated in its Order that CAND would be permitted to file a response to Applicants'bjections within five days of service og the August 24 order.

On September 1, 1979, CAND filed a "Supple-mental Appeal with Particular Objections, Before the Atomic 'Safety and Licensing Appeal Board Panel."

In this submission, CAND in-dicated the basis. for its prior discovery request Number 18, and

asked that the information described in that request be provided by the Applicants.

Although this submission was directed to the Appeal Board, Applicants treat it as the response called for by the Licensing Board's August 24 Order.

In discovery request Number 18, CAND has requested detailed information about the manufacture of the reactor pressure vessels fabricated for the Susquehanna plant.

In its September 1 filing, CAND indicates that this interrogatory was propounded in order to determine whether or not the reactor pressure vessels at Susquehanna could be among those mentioned in a November, 1969 article discussing the problems confronted by Babcock and Wilcox (BGW) in the start-up of a manufacturing facility in. Mt. Vernon, Indiana.

See Fortune, November 1969 at 123 et.

sect.

The article states that three pres sure vessels which were being fabricated for General Electric by B&W were transferred to Chicago Bridge 6 Iron (CBGI) for completion in 1969.

Id. at 172.

For the convenience of the Licensing Board, a copy of the Fortune article is attached.

The two reactor pressure vessels for the Susquehanna facility are not among those referred to in the Fortune article.

The Susquehanna pressure vessels were shop fabricated in sections, and the sections then field erected at the Susquehanna

site, by CBaI and CBGI Nuclear Co.

(a joint venture of CBGI and General Electric).

C BGW had no role in the design,

~ shop fabrication, or field erection of the Susquehanna pressure vessels.

See FSAR, 55.3.3.

Applicants believe that, this response provides the information which CAND seeks about the origin of reactor pressure vessels at Susquehanna.

To the extent that CAND would continue to request the information called for in its discovery request Number 18, Applicants would renew their objections to this interrogatory as stated in their June 29, 1979 filing with the Board.

Respectfully submitted, SHAN g P ITTMANg POTTS 6

TROWBRIDGE By Ja ilbe g Al n R. Yuspeh 1800 M Street, North West Washington, D. C.

20036 (202) 331-4100 Dated:

September

-17, 1979

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION Before the Atomic Safet and Licensing Board Xn the Matter of PENNSYLVANIA POWER 6'XGHT COMPANY and ALLEGHENY ELECTRIC COOPERATIVE, INC.

(Susquehanna Steam Electric Station, Units 1 and 2)

Docket Nos.

50-387 50-388 CERTIFICATE OF SERVICE This is to certify that copies of the foregoing "Applicants'nswer to Citizens Against Nuclear Dangers'Supplemental Appeal'egarding Discovery Request Number 18" were served by deposit in the U. S. Mail, first class, postage prepaid, this 17th day of

'eptember, 1979, to all those on the attached Service List.

'E.

ilberg Dated:

September 17, 1979

UNITED STATES OF AMERICA NUCLEAR REGUZATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD Zn the Matter of PENNSYLVANIA POWER 6 LIGHT COMPANY and ALLGEHENY ELECTRIC COOPERATIVE, ZNC (Susquehanna Steam Electric Station, Uni,ts 1 and 2)

Docket Nos.

50-387 50-388 SERVICE LIST Secretary of the Commission U. S. Nuclear Regulatory Commission Washington, D. C.

20555'harles Bechhoefer, Esquire Chairman Atomic Safety and Licensing Board Panel U. S. Nuclear Regulatory Commission Washington, D. C.

20555.

Mr. Glenn O. Bright Atomic Safety and Licensing Board Panel U. S. Nuclear Regulatory Commission Washington, D. C.

20555 I

Dr. Oscar H. Paris Atomic Safety and Licensing Board Panel U. S. Nuclear Regulatory Commission Washington, D. C.

20555 Atomic Safety and Licensing Board Panel U. S. Nuclear Regulatory Commission Washington, D. C.

20555 Atomic Safety and Licensing Appeal Board Panel U. S. Nuclear Regulatory Commission Washington, D. C.

20555 James M. Cutchin, ZV, Esquire.

Office of the Executive Legal Director U. S. Nuclear Regulatozy Commission Washington, D. C.

20555 Docketing and Service Section Office of ~ Secretary U. S. Nuclear Regulatory Commission Washington, D. C.

20555 Dr.:Judith H. Johnsrud Co-Director Environmental Coalition on Nuclear Power 433 Orlando Avenue State College, Pennsylvania 16801 Susquehanna Environmental Advocates c/o Gerald Schultz, Esquire 500 South River street Wilkes-Barre, Pennsylvania 18702

'I Mrs. Irene Lemanowicz, Chairman The Citizens Against Nuclear Danger Post Office Box 377 R.

D.

1 Bezwick, Pennsylvania 18603 Ms. Colleen Marsh 558 A, R. D.

04 Mt. Top, Pennsylvania 18707 Mr. Thomas M. Gerusky, Director Bureau of Radiation Protection Department of Environmental Resource Commonwealth of Pennsylvania P.

O. Box 2063 Harrisburg, Pennsylvania-17120

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.. Everything went wrong when

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'-for atomic reactors. The whole

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The long-awaited transition of the U.S. electric-yower industry into the nuclear age has been slowed by a num-ber of factors, including technological difiiculties and yub-

'ic resistance.

But' syecial and unexpected cause for

delay has been one company's crucial failure to deliver a

..single vital component of nuclear power plants. The fail-

ure, basically, was a management failure, and on a scale that would be cause for concern even in a fly-by-night newcomer to the nuclear industry. The company, hovrever,

'as no nevrcomer. Itwas yroud old Babcock &WilcoxCo.,

a pioneer of the steam generating business whose boilers were used in one of the first central power plants ever

'uilt (in Philadelphia, in 1881). Babcock &Wilcoxhad an

.- impressive $648 millionin sales last year, making it 157th on F0RTUNE's list of the 500 largest industrials, and ithas

.been engaged in nuclear work in a major way for fifteen years, producing, among other things, atomic power sys-tems for Navy submarines.

Moreover, the corporation is one of only five that are

'engaged in building nuclear. power ylants in the U.S. With consumption of electricity growing by nearly 10 percent a year, the utilities are counting heavily on the nevr nu-clear stations to avoid brownouts and yovrer failures in the years ahead. Poor performance at Babcock & Wilcox is thus one of those problems that could send ripples through the whole economy.

'.Allof B. & W.'s troubles involve a single product: nu-clear pressure vessels.

These are the huge steel yots.

some are more than seventy feet long and weigh more

'han 700 tonsthat contain atomic reactions. They must meet rigid specifications set by the Atomic Energy Com-mission, and B. & W. built a $25-million plant at Mount Vernon, Indiana, just to fabricate them. Cockily sure that the Mount Vernon plant would oyerate as planned, B. &

W. sold its entire projected output of pressure vessels for years ahead. But nothing seemed to go right at Mount.

Vernon. Plagued by labor shortages and ma!functioning machines, the plant yroduced just three pressure vessels in its first three years of operation. Late in 1968, after

he production snarl reached horrendous proportions, a 4.

gb vice president responsible for the Mount Vernon opera-tion committed suicide in a bizarre fashion.

Last May, B. & W. was forced to make a humiliating disclosure. Every one ofthe twentywight nuclear pressure vessels then inthe Mount Vernon Works was behind sched-ule, by as much as seventeen months. For the utilityin-dustry, the nevrs from B. &W. meant intolerable delays in bringing twenty~ght badly needed nuclear plants into service, vrith sll the added expense and yroblems that would be entailed. Philadelphia Electric Co; estimated that it vrould have to spend an extra $50,000 a dsy just to yrovi'de from other sources, such as high-cost gas tur-.

bines, the, power that it had counted on getting from its delayed nuclear units.,

Creating its own competition With so much at stake, B. & W,'s customers could not well'fFord to be patient. Twentywne',of the pressure ves-sels tied up in the Mount Vernon Works were there on subcontracts from the two giants of the nuclear industry, General Electric and Westinghouse Electric. Both com-yanies swiftlytook the almost unprecedented step of forc-ing B. & W. to turn most of their ysrtially eomyleted vessels over to other manufacturers. When B. & W., in an ill-conceived gambit, tried to hang onto two of the trans-ferred vessels, Westinghouse took the case to court and won. In all, fourteen G.E. and Westinghouse vessels per-haps $40 millionvrorth were taken outof B. &W.'s shoys.

Some of the firms that got the business had never made

.a pressure vessel before for use in a U.S. reactor; B. &W.

had managed to create hungry nevr competitors in its ovrn" line of work Only four G.E. and three Westinghouse ves-sels remain at Mount Vernon.

The company itself hss barely begun to pay the high

- price of.failure. Its earnings last year were still a robust

$2.04 a share. In the first six months of this year, losses associated vrith nuclear work pushed earnings down to 22 cents a share not even enough to cover the 34-cent quarterly dividend. From a 1969 high of40% last January, Babcock & Wilcox stock hss sagged into the lovr 20's.

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"All.areas of the company were profitable in 1968 with the ex-ception of atomic energy," President George G. Zlpftold Babcock 8 Wilcox stockholders after taking over as chief executive offfcer from Chairman Morris Nielsen in September, 1968. Up to then, losses on nuclear work had never seemed particularly trouble-some. They were regards'd simply as the price of B. 8 W.'s ticket into the atomic ageand B. 8 W. has been getting into, and prospering ln, new technologies for a hundred years.

But'.ane segment of its nuclear venture has driven B. 8 W. into deep troubfe. The plant (right) that lt built along the Ohio River at Mount Vernon, Indiana, to produce huge steel pressure vessels for atomic reactors failed to function as expected, with all kinds of dire results. One especially unhappy result was that B. ft W.

had to give up some partfagy completed pressure vessels to com-petitors. At far tight ls cne.section of a B. 8 W. vessel arriving for completion at the Chattanooga shops of Combustion Engi-neering, inc., B. 4 W,'s arch rival..

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At that price the stock is hovering around book value.

The man in the middle of all these troubles is President i

George G. Zipf (pronounced Ziff),forty-nine, a low-key executive who started with.B. & W; in 1942 as a metal-lurgical engineer. But the man who bears the main onus,:

of responsibility is Zipf's predecessor, Chairman Morris Nielsen, sixty-five, vrho chose Zipf for his present job a

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year ago and handed him his present problems.

Bad boy from Blair, Nebraska Nielsen is a flamboyant leader, a big, bluff man vrith, bright blue eyes and a full head of gray-blond hair, who has a gift for salty language.

More than one secretary, quit "Doc" Nielsen's employ because of his profanity, and

more',than one 'executive sufFered a colorful,tongue-lash-ing in the chairman's office.

l Nielsen got his nickname by virtue of being a doctor's

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son in Blair, Nebraska, where he was known as "Young; Doc." That vras as close to earning an academic degree as Niielsen came. As a boy, he himself has said, he was "in-corrigible" and was kicked out of school "forbeing a bad infiuence on the rest of the students." He then enrolled in, a Lincoln, Nebraska, high school and vrorked part-time as

'n embalmer. "Igot into trouble in Lincoln, too," ¹ielsen j told an interviewer a few years ago. "One night I came, home with my nose over under my eye. I'd been in a fight,'nd got hitwith a pair ofpliers. I woke up my old man and.

he looked at my nose and said, 'You'e going to look like 4

~tf a goddamn syphiliticthe rest ofyourlife.'Iyold man useB'.""."='o tell me that there were two steps ahead of mefirst re-" "",,

form school and then the pen."

'nstead, Young Doc became a steeplejack and irott-*~==.

'~g,l; worker, and in 1924 joined the corporation he was i~==,;'.-'.

to head. "I came to B. & W. by accident," Nielsen has ~

called. "I was vrorking at American Bridge as an iro~:~:=:;

monger on a job in Chicago, and another fellow and E'if9tp,".'runk, rVe got on the train and got ofF at Des Moines-

~<<'~='ere walking past this construction job, and a fello~~~;=;

slid down a column and said, 'You looking for vrork1'Ã<:t'-";

'figured vre vrere." It was a B. & W.

ob, erecting boil~'-'.;--'or central-station povrer plants, and from the start D.

¹ielsen felt at home in the bvo-fisted company. 'Th+

construction workers were goddamn rough people ~"="=~:

were hard drinkers, fighters, and lived by their wits- ';.-,~~;

By the time World War II came along, Nielsen-~-",'-'...

superintendent of marine erection. He supervised the m""'

stallation of B. &W. boilers in 4,100 Navy and march marine ships during the war. Later he headed the <~'.".-',"-;

boiler division, including manufacturing, and i>>9o.',

came president and chief executive ofBcer.

When Nielsen took charge pf B. &W. the compatiy ~".-:".":

already deeply involved in nuclear vork. Nielsen's P~>..~-

cessor, Alfred Iddles, had recognized early that B +-.~

to prepar~ for the day when the challenge fossil fuels as a source of energy fo<<e"~"~~

generating plants. Under Iddles B. & >V.

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'ioi tanding stable of nuclear scientists and engineers and

-;;.ia'2956 set up an extensive research facilityat Lynchburg,

~Lirginia. One of B. & W.'s first important nuclear jobs

~-;~ build Consolidated Edison's Indian Point ylant.

, i~other early project was the reactor forthe nuclear ship

~~~>nazi; B. &W. lost'money on these jogs, but itgained

>pe~~experience needed to secure a corporate toehold in w&eeuciear era; -.

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'ucjear losses continued under Nielsen,'but he '

~eg-"B.'r& W.'s.over-all profitability dramatically. Id-

~~".~>had run the company as a loose-knit grouping og

-.Ieuu~utonomous subsidiaries.

Nielsen centralized and

~~niatized management.

Every executive's areas of re-

':gPJnsibility and.authority mere carefully spelled out in

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.. rs of the business. Although sales stayed near or be-

...o2@>e.1958;figure of $866 million until 1968this was

'-¹.lomyeriod in the utilitybuying cycleearnings climbed

~'bv..:year. Profits went from $13 million in 1958 to

".B:mii>>on in 1968. At that point, sales also began to go

.-'.p..~>>g.71 percent in the next five years. Profits peaked

.;-~<<-at $33 million, or $2.69 a share (compared to Ka share in Nielsen's firstfullyear).

4,n.';the view of his critics, who have lately become nu-'-

..ous;-the seeds of B. & W.'s present yroblems were in the years of Nielsen's rich harvests. It can be

'+-.'..~ retrospect, that he may have been too successful m, ~>'ng B. &W. lean. His determination to keep down

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the fat sometimes "had the effect of cutting into good re meat," says a former B. & W. executive.

Experience managers found themselves stretched too thin to cove all their areas of responsibility. Worse, they did not a mays feel that their authority matched their responsibili i.e.,'en in the field were held'responsible for resul I

that they did not have the power to bring about.

The most biting criticism of Nielsen's, regime corn from men charged mith nuclear assignments.

In the eyes, Nielsen's lack of formal education yroved a serio handicap. Explains one former B. & W. executive "Nie sen created an atmosphere in which engineers and tec nical people just didn't feel at home. Their ideas we not treated with respect. They felt that top manageme didn't understand technical yroblems and didn't'tru those who could understand them."

A touch of corporate arrogance From the start,'3. &.W.had foreseen a long wait befo its nuclear work became yrofitable. Developing the nec sary skills and technologies to compete in the nuclear i dustry has proved to be a slom and expensive process f every comyany that has tried it, including G.E. and Wes inghouse. But what B. &W. had not expected mas to lo money on its Mount Vernon Works. When the plant m planned in the early 1960's, Nielsen appeared to belie>

that he had found a niche in the'nuclear industry th offered a quick return. A nuclear pressure vessel, thou confinued page X

The Frustrations of the Acquired Executive coniinrccd when he sold his highly successful company, Wilkens Instru-ment & Research, Inc., to Varian Associates in 1965. Al-though nominally retained as president, Dimick found him-self in a cubbyhole office with no secretary and scarcely any entree to Varian's president. A chemist and introvert, Dimick had never had the stomach for the "people problems" of management and somehow had convinced himself that a merger would free him of running controversies with his general manager and other problems. Instead, Varian put the more able general manager in charge of Wilkens and hoped Dimick would leave. Wealthy as a result of the sale, Dimick resigned and has now set up a new company to pro-duce an invention of his own, an elaborate exercise bicycle called the Lifecycle. As long as the firm remains

small, Dimick will probably remain its chief executive. But an-other merger may someday be his only escape if the Life-cycle becomes successful..

For most executives a merger has a benign effect, even though it may not always seem obvious during the difFicult transition period. When a company president wakes up one day in his new and larger universe, what he is really con-fronting is a hard but useful. choice about the future of his career. Whether he elects to resign and pursue his accus-tomed ways, or to break out of an old mold and achieve greater professional competence, is not so important as that he is obliged to make the conscious choice. Whatever his decision, it is an act of self-renewal.

END The Great Nuclear Fizzle at Old B. 8 W. continmdfrmn papc185 I

huge and manufactured to demanding technical standards, is essentially just the kind of heavy steel unit that B.&W.was accustomed to fabricating with ease.

While the Mount Vernon plant was under construction, U.S. utilities went ori a n'uclear-plant buying spree, starting in 1965. At the time, the surge in orders seemed like a lucky break for B.&W. The Mount Vernon plant was designed to produce one completed pressure vessel a month, once it was in fulloperation, and,there had been considerable doubt dur-ing the planning stages "ifwe'd ever get enough work to flll the place," a former B.&W.executive recalls. Orders forpres-sure vessels poured in, faster than anyone had predicted, and the Mount Vernon plant soon got loaded up with work. Itis now clear that management made too littleprovision for the time it would take to get the new plant operating at fullca-pacity. Says one B.&W. customer: "Ithink you have to s'ay that corporate arrogance was involved."

The first delays at Mount Vernon were caused by suppli-ers fallingfar behind schedule in providing vital equipment.

Alinear accelerator, used to detect welding flaws, was not de-livered until August, 1966, eleven months late. Even worse, a highly automated, tap~ontrolled machining 'centerthe heait of the plant as originallyconceived amved a fullyear behind schedule, in September, 1967.

The lure of unspoiled labor By then, the plant had been operating on a makeshift ba-sis for almost two years. And it had already become appar-ent that B.&W.'scentury of demonstrated competence in the fabrication of heav eel products had not protected the com-

. pany from some grievous errors. Aprincipal one was the site it-selfa cornfield near the little farm town of Mount Vernon

, (population: 6,200) in southwestern Indiana. The location had been chosen mainly because of its position on the Ohio River, safely above any known flood level, and yet reliably acces-sible for deepwater barges. This was an important advan-tage because nuclear pressure vessels are so immense that they can best be transported by water. B.&W.had owned the land for a number of years and had set up a small plant there for making boiler parts.

What Mount Vernon did not have was a pool of skilled labor. This was a serious drawback, because the AEC, forsafe-ty reasons, sets rigid standards for machine work and weld-ing on nuclear projects. Late last year a company memoran-dum reviewing the Mount Vernon fiasco observed: "Produc-

. tion workers required a new level of knowledge, intelligence, I and judgment to operate the machinery, perform operation~,

I and maintain the very high quality standards." At the out set, however, B.&W. took an optimistic view of its prospects

': choosing, according to that 1968 memorandum, to regard

'ount Vernon as "an unspoiled labor market." Presumably, the company expected to find a more tractable group ofwork-ers there than it had at Barberton, Ohio, where B.&W.'s

,, power-generation division has had its headquarters and prin-cipal manufacturing facilities for many years.

The company planned to overcome the obvious shortcom-

'ings ofMount Vernon's labor. pool in two ways. First, through automation using that sophisticated machining center and second, through a massive training program that would en-tice farmers away from their cornfields and quickly turn them into skilled welders and machinists. In one year B.&W.spent

$1 million just to train welders. But almost as fast as men reached the levels of skill required, they left B.&W.for jobs elsewhere. On September 30, 1968, only 514 of the 1,606 hour-lyemployees hired in the preceding three years were stillwork-ing for.B.&W.;in other words, the company had hired three men for each one it retained. "Turnover, of the Mount Ver-non work force has been a particularly frustratirig problem and'a major reason why B.&W.has been unable to bring its full manufacturing capability to bear on the situation," the 1968 memorandum concluded. Some potential workers proved to be untrainable, others had a "general negative attitude" to-ward heavy industry, and "some were not able to adjust and therefore returned to their farms."

"It drove us out of our minds"

~ Workers who remained with B.&W.did not prove to be as unspoiled as the company had hoped. Even before the pres-sure-vessel plant opened, itwas organized by the Boilermai'-

ers Union (which also represents B.&W.workers at Barber-

. ton) amid charges of unfair.labor practices against the man-agement. The plant was closed by labor disputes on several occasions. The most serious occurred when the three-year con-tract expired in 1967, while equipment was still being in-stalled. The Boilermakers went on strike over wages and work rules, and the plant was down for forty daysunnecessarily long, in the view of President Thomas Ayers of Chicago' Commonwealth Edison, who had pressure vessels tied up at

. Mount Vernon. From the standpoint of production, Nielsen won a victorythat amounted to overkill. Under the new con-tract, wages remained too low to stem the Row of workers away from B.&W. or to attract qualified workers from other arear'he B.&W. memo cites the "nonwompetitiveness of our wage scale" as a reason for the high turnover rate in the Mount Vernon work force.

continued page 155

$64 FOATUNE November 1969

I

'I The Great Nuclear Fizzle at Old B. & W.

continued'ven for experienced workers, welding two'pieces of eight-inch steel together is a demanding task, particularly in nu-clear work, in which each weld is examined by x-ray. When an imperfection is found, the weld must be "mined out" and done over again. In most plants, less than 10 percent of the welds must be reworked, and a rework rate of less than 1 per-cent is sometimes achieved. But at Mount Vernon 70 percent or more of the welds were rejected on being inspected. "It drove us out of our damned minds," recalls Ayers. "So cost-ly!So tim~onsuming!" Ayers and other B. &W. customers say that they urged the company to increase the supervisory forcewhich regularly worked one and a half to two shifts daily so that a closer match could be kept on the welds as they were built up.

In addition to its labor problems, B. & W. ran into un-expected trouble withequipment. The linear accelerator forx-raying welds was installed in mid-1966 but did not go into fulloperation until a year later. The tape-controlled machin-ing center was even more of a headache, and began func-tioning as planned only a few months ago. In this center, huge vessel segments are positioned on opticallyaligned ways, and then moved a distance of 250 feet while a series of pre-cise machining operations are performed simultaneously, con-trolled by computer-prepared tape. The concept was a good one, since nuclear pressure vessels are custom jobs, each tai-lored to a customer's specifications. But "debugging" of the machinery proved unexpectedly difficult. One problem was that the plant mas not air-conditioned, and temperature

,changes threw oE the many delicate adjustments that had to be made. In addition, an earthquake fairlyrare in Indiana shook up the plant last year and it took nearly a week to reset the machine t:ools. Other start-up difiiculties were sim-ply incomprehensible. For example, a vital boring mill was put out of operation for several weeks when a tool broke.

There was no spare on hand.

Death in a dry bathtub The man directly responsible for the Mount Vernon plant was John Paul Craven, vice president in charge of the pomer-generation division at Barberton. As head of B. &W.'s larg-est division, Craven was No. 3 man in the company, and was paid $87,000 a year. At one time there had been speculation in the company that Craven might someday become pres-ident. A gentle, upright bachelor of sixty, Craven mas tall and distinguished looking. An engineer by training, he had been with B. & W. all his working life, and he had no in-terests outside his job. For a while, Craven had raised roses as a hobby, but after he was made a vice president he gave up roses in order to devote himself more fully to B. & W "His mork was his whole life," says an old friend.

As the bottleneck at Mount Vernon grew morse, Craven came to feel that neither his customers nor corporate head-quarters in Nem York fully appreciated the difiiculties of bringing a new plant into operation, particularly one with Mount Vernon's advanced machine tools. Nor did he believe that he was given the authority, the budget, or the personne1 that he needed to fulfillthe plant's commitments. Says an-other ofCraven's old friends: "Paul couldn' bear to sit inBar-berton and have all the shots called from New Yorkand

'then be expected to take responsibility for not producing."

In September, 1968, before the seriousness of the pressure-vessel crisis at Mount Vernon became generally knoim, Niel-sen stepped aside as chief executive in favor of George Zipf.

For a man destined for the top at B. & W., Zipfhad an un usual background. Allof his predecessors had been identifi with boilers, but Zipfcame from B. &W.'s tubular-produc division at Beaver Falls, Pennsylvania, near Pittsburgh. Thi division, whose workis more akin to steel manufacturing tha to boilermaking, produces tubing for B. &W.'s own use an for sale to other industrial customers; itaccounts for roughly 30 percent ofB. &W.'s total'sales and more than half its prof its. When he transferred to New York as executive vice pr ident in 1966, Zipfhad been at Beaver Falls for twenty-fo years, ever since graduating from Lehigh University. He wa.

a stranger to the problems of the power-generation division, and to that division's big corporate customers.

Less than a month after taking over as chief executive fro Nielsen, Zipfscheduled a meeting at the Mount Vernon plan with Craven and Austin Fragomen, vice president for man ufacturing. The meeting was set fora Monday morning. Dur ing the preceding weekend Craven told friends that for th first time in his life he thought his job was getting beyond

'im. Sometime on the Sunday afternoon or evening befor his scheduled meeting with Zipf, Craven took oK his cloth and climbed into a dry bathtub in his $250-a-month apart ment in Akron's luxurious Carlton House. Then he slash his ankles, cut his throat, and -stabbed himself in the hear with the serrated eight-inch blade of a butcher knife.

After Craven's death, George.Zipf took.personal charge o the power-generation'ivision, and of the Mount Verno works in particular. Before long, both Austin Fragomen and the Mount Vernon plant manager, Norman Wagner, resigned.

That left Zipffree to put a whole new team to work on th company's pressure-vessel debacle.'he chairman sells some stock Beginning in 1967, both G.E. and Westinghouse, along wit many of the utilities that were the ultimate customers for B.

& W. pressure vessels, repeatedly expressed worry over th Mount Vernon plant's faltering operations. In the fallof 1968, B. & W. pacified G.E. to some extent by setting up a tern porary melding shop on barges anchored at Madison, Indi ana, where expert welders from the Louisville, Kentucky, labor pool could be obtained. But for the most part B. &W.

brushed aside its customers'orries wit;h assurances that things at MountVernon mere not really as bad as they seemed.

Even after Craven's death, the B. & W. management con-tinued to maintain that its optimistic scheduling, with some minor'changes, would prove to be realistic. Some utilityex-ecutives who met with Zipfto express their concern mere left with the conviction that he did not appreciate just how se-rious the pressure-vessel delays had become. On some occa-lions he seemed to regard his callers as bothersome intruders

'e just sat there like a damned Buddha," reported one cus-

'iromer after such a meeting.

Faced with such frustrations, G.E. and W'estinghouse be-gan to consider the drastic step of pulling some of their de-layed pressure vessels out of the overloaded Mount Vernon shops. Both companies assigned teams to scout forother man-ufacturers that might be able to take over B. &W. vessels and complete them. There were not many potential candi-dates. Up to then, B.'&W. and Combustion Engineering, Inc.

had pretty much divided the U.S. pressure-vessel business be-tween them. Combustion Engineering had managed to keep close to schedule on its deliveries and had been expanding its Chattanooga machine shops. Ithad unused capacity. In'ad-dition, Chicago Bridge &Iron Co., which had previously done only on-site fabrication of nuclear vessels, mas setting up a continued page 178 168 FORTUNE November f969

fo

The Great Nuclear Fizz)e at Old B. & W. corri>nu'ca pressure-vessel plant in Memphis. (On-site fabrication is a more expensive method of constructing pressure vessels, used only when it is extremely difficultto transport the massive units to a site intact.) The G.E; and Westinghouse teams also looked abroad for companies that might be able to take over some of the work.

In April,while B. &W.'s biggest customers vrere searching.

for other suppliers, Doc Nielsenwho was retiring on May 1 as an ofiicer of the company but.keeping the title ofchairman quietly sold 15,000 of his 20,000 shares'of B. &W. stock.

The price at the time was about $33 a share. A couple of'eeks laCer B. &W stockholders got their firstofiicialhint of

~

serious trouble ahead.

George Zipf revealed at the annual meeting that Ire expected earnings to drop by 20 Co 30 per-cent in 1969 because of the company's losses on nuclear busi-ness. (The actual dechne, of course, has since proved to be much greater than Zipf predicted.) Before long the price of B. &W. stock sank into the 20's.

A quick trip to court'...

= *..

On May 14, less than a month after the annual meeting, B.&W. sent out telegrams brusquely letting customers know that the situation at Mount Vernon was even vrorse than they had suspected. Zipf and his nevr team had completed a gloomy revaluation of the plant's capabilities, and B. &W.

was adding two to twelve months to earlier delivery sched-ules, some ofwhich had already been stretched past the dates called for in B. &W.'s original contracts.

On receiving this nevrs, both G.E. and Westinghouse sought B.&W.'s cooperation in transferring vessels to the other shops that they had scouted out.B. &W. agreed to subcontract some of its vrork to these plants. But an unexpected difiicultysoon arose. Westinghouse had deteimined that Rotterdam Dock-yard Co.,'

major shipbuilding and steel fabricating firm in the Netherlands, could take two vessels and improve on the B. &W. schedule provided that the vessels were transferred promptly. Westinghouse located space on a'ship that would be calling at New Orleans on the desired date and, by paying a premium, was able to arrange for the ship to cancel calls at other ports and proceed directly to the Netherlands. B. &W.

agreed to put the two pressure vessels on barges and start them on their way to Nevr Orleans.vrhile itnegotiated a sub-contract with Rotterdam Dockyard. But negotiations broke dovrn vrhen B. &W. and Rotterdam could not come to terms.

To the horror of Westinghouse ofiicials, B. &W. ordered the barges back to Mount Vernon.

Westinghouse then decided to pay B. &W. for the vrorkit had already done and take over the vessels itself. But speed was required. If the barges did not continue down the river while these new arrangements were made, they would miss the ship to Rotterdam. Now Westinghouse found itself at a strange impasse it could not reach anyone at B. &W. who could rescind the order for the barges to return to Mount Ver-non. Nielsen was "not available." Zipfwas "out of the coun-try." Frustrated in its eKort to reach top management and work out an amicable settlement, Westinghouse reluctantly went into U.S. district court in Pittsburgh and won a tem-.

porary restraining order to prevent B.'

W. from taking the vessels back to Mount Vernon.

During the hearing Federal Judge Wallace S. Gourley had a revealing exchange with John T. Black, B. &W.'s manager for commercial nuclear components.

JUDGE GOURLEY:... on this contract for$8,542,000, ivhat woui you say that you expect to make on this?

BLACK:This specific contract?

JUDGE GOURLEY: Yes.

BLACK:Idon't expect to make a profit.

JUDGE GOURLEY: You don't expect to make a profit?

BL'ACK:No, sir.

JUDGE G0URLEY:Idon't knmo why ymr uould want the materir

.to work on. You are not in business to lose money foryour stocl holders..

BLACK:We do not expect to make it.

JUDGE GQURLEY:In other words, on this contract tfor) $8,542, 000, you don't expect to make a penny projitfor your corpc rationifyou went ahead and finished it?

BLACK:No, sir.

JUDGE GOURLEY: Hmo much on this other"one, $8,804,t'89, who profit could'you be reasonably expected to make on this contrac ifyou jiniehed it?

BLACK:I would think that one probabLy tis) in the same con dition.

JUDGE GOURLEY: If you ment ahead and jiniehed thie,.ym wouldn't make a cent?

BLACK:I think on direct cost, ure would cover our direct cost t Labor and shop expense.

JUDGE GOURLEY:Imeant after everything, would you or wouk you not make any money on this?

BLACK:¹. ~,

JUDGE GoURLEY:Itvouldn't think yourstockholders mould ivan you tofinis.Icertainly mouldn't.

Back on the track AfterWestmghouse won possession of the two pressure ves sels and sent them off to Rotterdam, B. &W. raised no fur-ther objections to transferring vrork out of its shop. Indeed it actively cooperated with its customers to get the job done.

Westinghouse sent five vessels to Combustion Engineering's Chattanooga shops and two to a French firm,.Soci6th des Forges et Ateliers du Creusot. General Electric Curned three vessels over to Chicago Bridge &Iron and had B. & W. send two others to Japan's Ishikawajima-Harima Heavy Indus-tries. In every case, these firms are expected to equal or bet-ter the delivery dates set in May by B. &W.

With the load at Mount Vernon lightened, prospects look, better for the fourteen pressure vessels that remain there, in-cluding seven for nucIear plants that B. & W itself is buiM-ing. For example, the Sacramento Municipal UtilityDistrict has been notified that the vessel for its Rancho Seco nuclear plant, a B. & W. project, will be only a couple of months late, instead of the year that seemed likely in May. That means that the vessel for Sacramento is essentially on sched-ule again, since the delays now expected are no more than could be accounted forby the labor disputes and earthquake that Mount Vernon suÃered.

To his utilitycustomers, George Zipf,remains ver~ much a man on trial. But novr that their pressure vessels are moving along again, some utility executives are convinced that he has quietly managed to put B. & W. back on the Crack. One move that has met their approval ivas the appointment in Sep-tember of an experienced Westinghouse man as vice presi-dent in charge of the power-generation divisionJohn Paul Craven's old job. Bringing in an outsider at such a level is something new for B. & W, and one B. & W. customer be-lieves that he knows what it means: "Ithink George Zipf is really in command noiv." Ifthis is so, he willhave a lot to do t;o restore the honored old name of Babcock & Wilcox to its former luster.

END