The South End’s biggest employer closed its doors after 43 years on the island.

Nichols Brothers Boat Builders laid off its entire workforce Friday morning.

Company officials later said the shipyard ceased operations at both its Freeland and Langley facilities.

The company has faced significant financial challenges in recent years and has sought additional capital to assist in restructuring the company, Nichols Brothers officials said in a statement to the press.

“Those efforts have been unsuccessful, due in part to pending litigation, and cash flow challenges ultimately forced Nichols Brothers Boat Builders to make the difficult decision to close its doors,” the statement said.

Company President Bryan Nichols declined to talk about details of the closure, which caught many on the South End by surprise.

The company is the South End’s largest private employer. Company officials said they made the closure announcement with “great sadness.”

It was a somber mood at the Freeland facility of Nichols Brothers Boat Builders Friday morning as nearly 200 employees packed up their tools and headed to their cars in the parking lot. Some people hugged while others traded jokes. Workers were uncertain if they would be hired back in the future; employees contacted outside the business declined to speak to a reporter.

Inside the main office, employees filled out paperwork and asked questions about insurance.

Later in the afternoon, grim-faced shipyard workers gathered at local watering holes. Those contacted by the press did not want to talk about the layoffs, which came just weeks before the start of the holiday season.

The news quickly sent ripples through the community.

“I think it is absolutely awful. It is a big blow to the community,” Michele Rambicur of Freeland said.

“I think Nichols Brothers contributes to the community; I can’t even imagine all those people being out of work at this time of year, or at any time of year. It’s going to affect this town greatly. I hope they get their jobs back soon,” she said.

“I’ve heard that this might be happening,” said County Commissioner Phil Bakke.

“It’s certainly going to have a ripple effect through the Island County economy,” he added. “It’s a big deal. Nichols Brothers is an industry in the county that provides family wage jobs.”

“My heart goes out to the workers and their families and all the other people on South Whidbey and in Island County whose jobs depend on their success,” Bakke said.

Port of South Whidbey officials said they expected no immediate impacts but said they are concerned about the overall effect of the closure.

“The port is trying to create and attract exactly the kind of family-wage jobs that Nichols provided,” Port Commissioner Geoff Tapert said.

“This sets us back substantially. Our thoughts today are with the families of the workers,” he added.

The company has been one of the driving economic forces on the island since the 1960s.

The company is the third largest private employer on the island, said Sharon Hart, executive director of the Island County Economic Council.

Nichols Brothers Boat Builders in Freeland employs an average of 200 to 250 workers.

Hart said Nichols Brothers has a significant impact on the local community, not just because they are a major employer but also because most of these employees, about 85 percent, live in the community.

“In May, with about 172 employees, they had a $12 million payroll that circulates through our local economy,” Hart said.

She also said that an employer of Nichols’ size sustains other businesses. For example, Hart pointed to the Nichols Brothers’ benefit package that allows workers to use local healthcare providers and even vision care.

The greater business community is expected to take a major hit from the closure.

“It’s going to hurt a lot of businesses,” said Melody Bryant, deli manager of the Freeland Texaco.

Her co-worker agreed.

“Nichols Brothers employees are what make our lunch rush. It’s going to suck. It’s Christmas time,” said deli worker Shannon Smith.

The company was family run for four generations.

In 1964, Frank Nichols, the father of shipyard CEO Matt Nichols, moved with his wife and their 11 children to Whidbey Island where he purchased the land for the boatyard and began building steel- and aluminum-hull vessels.

Matt Nichols has been president since 1972, when he and his brother took over running the company from their father. Archie Nichols left the business in the 1990s to pursue other interests.

Matt Nichols’ son, Bryan, has been working alongside his father as president of the company in recent years.

The business got its start in Oregon. George Mark Nichols started Nichols Boat Works in Hood River, Ore. in 1939 after leaving his farm in the Yakima Valley and settling on the Columbia River. He went into business with his son, Frank, and they began building riverboats.

The first big change for the Whidbey Island company came in the early 1980s.

With the decline of the fishing industry in the early 1980s, the yard diversified by introducing high-speed catamarans to the passenger vessel market.

Since then, the shipyard has built 35 high-speed catamarans.

This year, Nichols Brothers worked on a car ferry for Pierce County that stretches 216 feet and has a capacity to carry 54 vehicles and 325 passengers.

Earlier this year, the company submitted a proposal to build ferries along with other Puget Sound shipyards for the Washington State Ferries.

The company also had contracts to build three ocean-going tugs.

The shipyard recently helped build a 230-foot tour boat called the Grand Luxe for ExpoShips in Florida.

ExpoShips plans to use the boat as a floating art gallery to sail between 34 cities on the East Coast.

The Grand Luxe was launched March 3, several months later than Expoships had planned, according to the company’s Website, after Nichols Brothers had trouble finishing the vessel on time due to a steel shortage.

The inaugural tour for the boat was pushed back almost a year.

the Western Washington Federal District Court in Seattle said Friday.

Expoships’ attorney in the lawsuit was not available for comment Friday.

Experts in the Puget Sound shipyard industry said qualified workers may find jobs at other regional boatyards.

Kevin Quigley, president of Everett Shipyard, said he had heard the rumors about Nichols Brothers being sold.

The closure was bad news he added.

“If true, obviously it’s a big tragedy,” He said. “We have great respect and admiration for Nichols, especially as they build boats and we repair them.”

Quigley said there is always a demand for qualified shipfitters and welders in the Puget Sound region.

“Of course, it wouldn’t be as easy as walking down the street and getting another job if you live on the island. Hopefully, whatever the problem, it’s short-term,” Quigley said.

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