Philadelphia Bets on Hanwha Shipyard’s Future as Profitability Questions Mount

PHILADELPHIA — Days after the Wall Street Journal questioned whether Hanwha’s $5 billion bet on its Philadelphia shipyard can ever pay off, the yard’s defenders point to a $2 billion answer: a contract to build missile-tracking ships for the Pentagon’s “Golden Dome” missile defense initiative.

The Journal reported Oct. 12 that the shipyard faces doubts over high U.S. labor costs, thin external orders and six straight quarters of losses, with profitability now expected next year instead of this year.

But the yard’s biggest win came just last week. On Oct. 7, Hanwha Philly Shipyard announced a formal contract award to build Missile Range Instrumentation Vessels, dubbed “Golden Defender,” for the U.S. Missile Defense Agency — up to three vessels, with one firm order now, replacing ships dating to 1965 and 1970. The program is valued at about $2 billion, according to the Office of Management and Budget, with first delivery scheduled for 2030.

“We are honored to continue our partnership with TOTE Services and to build these vessels here in Philadelphia,” chief executive David Kim said in the announcement.

The contract gives the yard something the Journal said it lacks: a major non-Hanwha customer. Hanwha Philly Shipyard will build the vessels with TOTE Services as construction manager, and the Maritime Administration will operate them for the Missile Defense Agency.

The workforce story is the other pillar of the local bet. Employment has doubled to about 2,500 over two years, and Hanwha aims to hire up to 10,000 workers over five years to support its goal of building 20 ships a year. Apprenticeship applications tripled this year, and an $8 million U.S. Department of Labor grant is funding shipbuilding workforce training with Delaware County Community College.

Pennsylvania is backing the expansion. Gov. Josh Shapiro’s administration launched a Pennsylvania-Hanwha Leadership Task Force to expedite permits and build the workforce pipeline, and the state has directed $6 million in redevelopment grants plus $30 million through its PA SITES program toward the yard. Shapiro has called shipbuilding “a key part of Philadelphia’s identity and our economy.”

Corporate changes are also afoot. Hanwha Systems is transferring its 60 percent stake in the shipyard to a Hanwha Aerospace affiliate for $237.6 million, a deal closing Oct. 31 that consolidates U.S. shipbuilding under Hanwha Aerospace.

Neither Hanwha nor Shapiro’s office has publicly responded to the Journal’s profitability questions. At an Aug. 28 earnings briefing, Hanwha Systems chief financial officer Jeon Yeon-bo said a turnaround is expected “around next year when deliveries of loss-making vessel types are completed and construction of profitable vessel types begins in earnest.”

For Philadelphia, the stakes go beyond one company’s balance sheet. The Navy Yard’s shipbuilding revival carries 2,500 jobs today and a vision of 10,000 — a test of whether American shipbuilding can be rebuilt at American wages.