(FORTUNE Magazine) – For nearly 400 years, New England's fishermen played a game of hide and seek with the schools of cod that live in the cold, dark waters of the North Atlantic. In recent years technology has triumphed. The fisherman have won--but the game is over. Vast sections of the Georges Bank, the best fishing grounds, are closed, and more severe restrictions are being proposed.

Yet while the cod may be gone, New England's fishing industry is redefining itself, undergoing a painful restructuring of the kind familiar to landlubbers in the Rust Belt. The industry is developing new products, using more market savvy--in short, surviving. It is the fabled lifestyle of the fisherman that is in peril.

In New Bedford, Massachusetts, the largest fishing port on the East Coast, the value of landed catch sank by a third, from $151 million in 1992 to only $108 million for 1993--and 1994 was little better. About 300 vessels called the port home in the 1980s; only 215 boats operate today. Lenders seized many. Crew sizes have been halved to seven or less. Almost 1,000 fishermen here have been left high, dry, and unemployed. (In codless Canada, more than 20,000 industry workers lost jobs.)

New Bedford's industry is staying afloat "by fishing hard," as they say. "This year is looking pretty good," says Marty Manley, head of the Harbor Development Commission and a boat owner. Manley estimates that the value of fish landed so far this year has equaled that for all of 1994. "We had a good thing here, but now we realize that we have to look at where value can be added and how we can compete worldwide." So long, Melville; hello, Champy.

To offset the decreased catch, processors began importing fish from Iceland, Norway, and Alaska to keep their plants going. Now some run seven days a week and have expanded and hired more workers, though at far lower wages than fishermen were used to.

The fishermen got smarter, too. Last fall Kevin Ferreira, who became a fish dealer after starting on a fishing boat when he was 12, set up an auction where buyers can inspect samples of the day's catch before bidding. Previously, buyers bought fish by the boatload, not just the species they wanted.

The comparative shopping helped push up quality, and segmenting the products attracted buyers looking for what used to be scorned as "trash fish." Now tons of hake, cusk, mud skate wings, and dogfish are sold through the auction. Despite their unappetizing names, many of these species are popular in Europe and Japan, though they sell largely to restaurants in the U.S. Good luck has helped: Many New Bedford boats are working a newly found scallop bed off New Jersey.

Fishermen here and elsewhere fiercely debate the government's role in both conservation and economics. Federal backing helped finance many new boats--too many, given the disappearing fishing stocks. Now the Feds are spending $25 million in the Northeast to buy back boats, letting strapped fishermen quit the business. Significantly, the government is buying back the fishing permits with the boats, a policy that will work as a conservation measure as well as an economic one.

Meanwhile, in New England's fishing ports a way of life is ending. Says Bobby Bruno, who worked his way up from a job below decks to owning his own boat: "Nobody will ever be able to do what I did in this industry again." Gary Golas, head of New Bedford's Seafood Industry Coalition, says that more than 50 former fishing industry workers are now in retraining for jobs in construction, air conditioning, and similar work. Others have taken their seagoing skills to new jobs in maritime work--on barges, tugs, or even tankers. "What is lost forever," says New Bedford's mayor, Rosemary Tierney, "is the proud tradition of fishermen working in the industry for generations, and of jobs handed down father to son. Like the family farm, the family fishing boat is leaving the American scene."

- Wilton Woods