Vallejo’s Mare Island Dry Dock files for bankruptcy as it seeks to avoid closure

VALLEJO – The Mare Island Dry Dock has taken steps to restructure its debt as it works to retain employees and continue operations in anticipation of a possible sale or merger. 

The company filed for Chapter 11 bankruptcy on Saturday and will seek court approval of a plan to reorganize its debt so the company can pay its creditors, according to a statement from the company.  

In late December, the company announced it would lay off employees and possibly close after losing a key contract with the U.S. Coast Guard, despite being the lowest bidder. 

“Ultimately, seeking bankruptcy protection was necessary to safeguard and preserve the shipyard’s operations,” Mare Island Dry Docks CEO Steve DiLeo said in an interview. “It will help the company navigate through difficult financial times into a better position for bidding and contracting new business.” 

According to DiLeo, the company has laid off 65 workers since the December announcement but the bankruptcy will allow them to keep 50 remaining employees working. In recent years the company has employed as many as 200 workers and with additional contractors it can employ hundreds more.

DiLeo hopes to bring laid off employees back to work soon. He said that the company is talking with several interested parties about a merger or sale. The potential partners or buyers include larger organizations that intend to expand beyond the company’s current ship repair work to include ship building activities at the facility, DiLeo said.    

“We're on the cusp of doing something very large for the organization,” DiLeo said, “This will again secure jobs for the people who work at the shipyard and increase jobs through the local economy. And It will also resolve any payment issues we've had with creditors to their liking.” 

While DiLeo is working to steward the company through a difficult period, national, regional and local efforts to support a revitalization of the U.S. shipbuilding industry may be coming into focus.

On Friday, the Trump Administration released its long-awaited Maritime Action Plan, which President Donald Trump had called for in an April 9 executive order.  

The plan outlines a wide range of policy initiatives, including tax incentives to support domestic industries, port fees on foreign flagged vessels and workforce education programs. 

Extensive legislation will be required for the plan’s initiatives to move forward. However, many elements of the plan align with the bipartisan SHIPS for America Act, which is co-sponsored by U.S. Rep. John Garamendi, whose district includes Vallejo, Fairfield, Benicia, Richmond and Antioch. 

Garamendi expects that the legislation, which was first introduced in 2024, will reach the president’s desk to be signed into law in 2026.

“There is much work to be done to strengthen our domestic maritime industry,” Garamendi said in a statement. “I am encouraged to see the Administration’s commitment to the maritime industry through the release of its Maritime Action Plan. To accomplish this vision, Congress needs to pass the SHIPS for America Act, the most substantial and comprehensive approach to ensuring that America leads the global maritime industry.”

Last year, Garamendi urged Vallejo city officials to lobby for new investments as interest in restoration of the U.S. shipbuilding industry intensified. In November, the city of Vallejo approved funding for a contract with defense lobbying firm the Roosevelt Group to develop a plan to attract maritime investment in Vallejo. 

The arrangement with the lobbying group includes assessment of existing infrastructure and capabilities, identification of federal funding sources for infrastructure improvements, relationship building with private companies and lobbying activity with the Defense Department  as well as on Capitol Hill.

The Trump Administration’s Maritime Action Plan calls for funding to be directed toward Maritime Prosperity Zones that will be identified by the administration. According to the plan, the zones will be selected from locations where communities are already engaged in maritime activities as well as from less traditional locations such as on the Great Lakes or along rivers. 

The billionaire-backed group California Forever, which hopes to build a new city in Solano County along with a modern shipyard near Collinsville, recently teamed up with Mare Island developers the Nimitz Group to submit a proposal to the federal government in January to designate portions of land in five counties surrounding the Sacramento-San Joaquin River Delta as one of these Maritime Prosperity Zones. 

DiLeo said that these are all positive steps. “Everybody's leaning into the right direction for ship building and ship repair to be consistent,” he said, adding that the merger or acquisition of the Mare Island Dry Docks by a larger entity would allow the shipyard to compete for larger contracts that the company is currently too small to tackle on its own.

“Mare Island Dry Dock and Mare Island itself are in a very good position that brings the company and the region toward exactly what everybody has been talking about, large scale ship repair and large scale ship building,” DiLeo said. “I would call it imminent.”

DiLeo is also optimistic about a bid that the company submitted for a five-year maintenance contract for the U.S. Coast Guard ice breaker Polar Star.

The recent lay-offs were in part triggered by the loss of a contract for the Coast Guard vessel Healy, even though Mare Island Dry Docks submitted the lowest bid. The company has prior experience working on both the Polar Star and the Healy.

When the contract for the Healy was awarded to Vigor Marine in Portland, Garamendi sent a letter to the Coast Guard seeking information about why the agency did not select the low bid. According to DiLeo, the Coast Guard’s response to Garamendi’s request for information stated that the majority of the ship's crew is closer to the competitor shipyard so they opted for that location to cut down on travel time.

“The crew is out of Seattle, and it's just a car ride to Portland, but it's quite a journey to us, obviously. So it was a favorable location for the crew,” said DiLeo. “I think I can swallow that.”