In 2003 Ed Whitmore bought a small tug company with plans to
build it into something more. Sounds like a typical story about
someone who's spent his career in the commercial marine
industry, then takes over a vessel company of his own. Not this
time.
Whitmore spent most of his adult life as a Wall Street
executive, working in foreign exchange and derivatives, and
later in structured finance.
That all changed four years ago when he returned to his
native Virginia and purchased Norfolk Tug Co., which, he said,
basically consisted of a good logo, a good location, and a
small amount of military towing work in Hampton Roads, Va. The
company owned one tug and had a pick-up crew. Since then,
Whitmore crafted and is executing a business plan based on
providing high quality, customer driven service in the 1,000-
to 3,000-hp towing sector. His belief is that this tug market
segment is due for an overhaul.
Whitmore, an avid racing sailor, is the first to admit he
knew little about tugs back in '03. "I couldn't have told a gas
from a diesel engine." But he did know a thing or two about
risk management and making money, and he began applying this
knowledge to what he views as just another market.
He began by surrounding himself with tug experts. Then he
got rid of the one boat Norfolk Tug owned, began building a
fleet of coastal and inland tugs, and instituted a corporate
culture that he hoped would attract some of the region's best
mariners to operate his fleet.
Early on, Whitmore teamed with industry veteran Paul
Horsboll. Horsball had recently retired from Moran Towing where
he ran the company's Hampton Roads tug operation. In addition
to a vast knowledge of the local scene, Horsboll brought with
him a Rolodex loaded with contacts that every tug owner needs:
shipyards, suppliers, technicians, etc. Then Horsboll set about
securing towing jobs.
The result is a tug operator that's well positioned as a
versatile contract and spot towing company.
"We are located within easy reach to the ocean, the ICW and
the Gulf, and we are, of course, in Chesapeake Bay," said
Horsboll.
GROWTH SPURT
In 2005, Norfolk Tug made a savvy move by merging with A1
Towing Inc. of Hampton Roads. A1 had a good reputation, solid
corporate relationships with some of the East Coast's product
transporters, and its staff read like a "Who's Who" of
Tidewater area tugboating, bringing familiar names and faces to
Whitmore's new company. The merger doubled Norfolk Tug's fleet,
and Whitmore began an aggressive modernization program on the
boats.
One of the former A1 principals, Brian "Jitterbug" Daniels,
took over most of the shipyard duties and took on Whitmore as a
willing apprentice.
"Jitterbug is an incredible resource. His knowledge of
marine engines, systems and tugs runs very, very deep, and he
is well respected by everyone both on the water and in the
shipyard," said Whitmore. "I have learned an awful lot from
him."
The benefit of starting from scratch is that Norfolk Tug
does not have the baggage associated with a legacy company. As
one competitor put it, "They have no orphans at their
table."
Viewing the Norfolk Tug fleet like an investment portfolio,
Whitmore tends to trade boats like a broker trades stocks and
bonds.
"The fleet, as a pool, has to earn a return," Whitmore said.
"You have to invest carefully across the pool to produce a
sustainable return. It is a fine balance."
On the way to assembling the company's current fleet of
eight tugs, Whitmore has sold four boats. Nothing is sacred
when you are inventing yourself. If a boat no longer fits the
pool, it has to go.
The current fleet of seven model-bow tugs and one bay
pushboat have a power range of 900 hp to 2,600 hp and are 60'
to 115 SSSq in length.
The fleet is broken down into three ocean and near-coastal
tugs that work along the East Coast and in the Gulf of Mexico.
The 2,600 hp, 94 '× 28 SSSq Lucky D , originally built in 1970
at Quality Shipyard , was repowered last year with twin
Caterpillar 3512B EPA Tier 1 compliant engines, Twin Disc 5600
gears and new John Deere 100-kw gensets. A new aluminum and
fiberglass house gives the boat a 42 SSSq height of eye. Wiring
was also replaced and electronics upgraded.
The Lucky D was acquired through the A1 merger and is an
example of Whitmore's philosophy that he "doesn't mind old
steel as long as it is good steel."
Recently, Norfolk Tug acquired the 105 '× 28 SSSq Pathfinder
, a former Maritrans tug built in 1972 at Main Iron Works , and
has begun a comprehensive rehab of the vessel - rebuilding
engines, replacing electronics, improving stern fendering, and
adding a high house. The 115 '× 32 SSSq Miss Gill , the third
offshore boat in the fleet, will get new Cat 3516s and new
gears installed in early 2008 that will increase her horsepower
from 2,250 to 2,600.
The three boats in the midrange of the fleet - 1,700-2,000
hp - largely work in Chesapeake Bay and Delaware Bay and near
coastal waters tending dredges and moving fuel. The inland
pusher Ellie J , repowered in 2007 with Cat 3508Bs, and the
Mason Andrews , spend most of their time moving barges around
Hampton Roads.
"We are in a position here to serve both a bluewater and a
brownwater market," said Horsboll. Currently, he said, more
than half the fleet is dedicated to contract work.
QUALITY EQUIPMENT
Whitmore feels that there is a demand for the high-quality,
low-cost service that Norfolk Tug provides. His belief is that
the same kind of scrutiny insurers are giving shipdocking tugs
and product carriers is trickling down to the coastwise tows
and spot moves that Norfolk Tug provides.
"The days of showing up with junky equipment to tow a fuel
barge are over, and that's a good thing. I also think that the
same applies and will increasingly apply to other commodities,"
said Whitmore. Repowering the tugs with fuel efficient, low
emission engines and developing a culture of environmentally
responsible practices is one of Whitmore's core business
priorities.
"Look, I grew up here on the water and manage my company in
such a way to respect the waterways," he said. SDLq This isn't
just talk for me. It is my way of life. I can't see running a
business any other way."
Much of Norfolk Tug's work is subcontracted from larger
marine transportation companies.
"We are pretty far down on the food chain. We need to
provide a reason to these guys to use us rather than their own
boats," said Whitmore, who believes that well-maintained boats
and high-quality crews offer a viable alternative for his
larger customers.
In his office, Whitmore has a white board that he uses
regularly to illustrate his points. When describing his
business plan for Norfolk Tug, he draws a diagram known to
investors as the "efficient frontier." It's a curve along two
axes - one representing risk and one representing return. At
the bottom of the curve, there is low risk and low return. A
careful investor will work his way up the curve to what he
considers an acceptable level of risk yielding a sustainable
and reasonable return. Whitmore said that by applying the risk
management principles he learned on Wall Street, he could
safely navigate the company to provide an adequate return.
"I am not foolish enough to believe we are 'accident-proof,'
but we can control many factors in this enterprise to manage
our risk profile," he said.
Vessel crewing is one of the biggest items on Whitmore's
chart. It is one thing to build a good landside management and
support team, but staffing the fleet with quality mariners is
an industrywide problem. For this, Whitmore again turned to his
financial background. Starting from scratch, he has been able
to create and build a corporate culture at Norfolk Tug, one
that he says is based upon mutual respect.
"Good people work for good companies and vice versa," said
Whitmore of his recruiting strategy. He offers a competitive
salary and a benefits package more in tune with the larger
towing companies. He also offers a chance to be part of his
vision.
"You really get the sense that Ed wants to hear what you
have to say," said Mark Steinlein, who joined the company last
year, "unlike other companies where you get on the boat and no
one wants to hear from you till you get off."
"Guys like Steinlein and the others have been around for a
long time. I would be a fool not to listen to them and what
they have to say. We let them exercise their abilities,"
Whitmore said.
Another tug veteran, Capt. Steven Briggs, spent 10 years
towing in the Hawaiian Islands and, like Whitmore, returned
home to Hampton Roads. Briggs had plenty of options when it
came to finding a job in Hampton Roads, but he chose Norfolk
Tug and is now a captain on the Pathfinder .
"What made me go with Norfolk Tug was that they were
flexible with my schedule," said Briggs.
Briggs is also impressed with the commitment to training
Norfolk Tug shows to qualified young mariners, like his 22
year-old nephew.
"I want to let these guys know that they are not just
getting a job here. They are building a career," said
Whitmore.
Whitmore's vision for Norfolk Tug is to grow when
opportunity within its niche market knocks. This could be done
by purchasing more boats if they fit into the portfolio, but
more likely it will be through consolidation and mergers.
"I am a deal junkie," he said.