Less than two years ago, Edwin M. Hood, President of the Shipbuilders Council of America, said:
“I refer to the stifling competition the private shipyard industry has day in and day out, year in and year out, from the 11 naval shipyards and one naval ship repair facility.
By owning and operating these shipyards which duplicate all that the commercial yards can do, the Federal Government is, in fact, slowly suffocating the Private Shipyard Industry of the United States. No other major industry in this great nation is plagued by such insidious destruction under government auspices.”
The Navy stands accused of attempting to eliminate the nation’s private shipyard industry. Variations of these charges against the naval shipyard complex appear in speeches, in the press, and in Congressional reports.
The movement by private shipyard interests to reduce the number of naval shipyards has been underway for quite some time, but, in recent years, this drive has gathered a great deal of momentum.
It is difficult to say how much influence this campaign had on the closing of the Naval Ship Repair Facility in San Diego, California. Perhaps none. But there is no question that the campaign is largely responsible for the Congressional action which requires the Navy to spend in private shipyards at least 35 per cent of the funds made available for ship repair, alterations, and conversions.
The supporters of the private shipyards have been encouraged by recent published statements concerning a naval shipyard study with implications that some yards would be closed or curtailed.
On the surface, the controversy generated by the private shipyards is an old issue—free enterprise versus government “big business.” Basically, the private shipyards, in addition to building the Navy’s ships, want a much greater share of the Navy repair, alteration, and conversion dollar. Implicit in this aim is their feeling that most of the naval shipyards should either be closed or turned over to private industry.
Branded as “high cost” and “tax free,” the naval shipyards are pictured as a government institution operated to compete with, and flourish at the expense of, the “low cost,” “tax paying” private yards. Accused of driving the private shipyards out of business, the Navy is charged with the simultaneous destruction of the mobilization potential of such yards.
Most of the private shipyards are in serious economic trouble; of that there is little doubt. To imply that the Navy is responsible for this condition, or to charge that the Navy is crushing them with unfair competition is wrong. Actually, the controversy can be viewed as an attempt by each party to achieve an ideal.
In the case of the private shipyards, the ideal is that of a free economy based on private enterprise. It is fundamental that private industry should be given every opportunity to provide the goods and services the nation needs, but regulated to prevent unfair competition or monopoly. The government should not compete with private enterprise, nor should it undertake any private enterprise type of business except when the task is beyond the capabilities of the private sector.
The foundation of the private shipyard’s case against the Navy is that through the free enterprise system the nation will be able to achieve greater economic effectiveness and a better defense capability at lower cost. In short, by eliminating what they consider the “unfair competition” represented by the naval shipyards, more work will be placed with the private yards, thus improving our economic system and strengthening the responsiveness of the Fleet.
In the case of the Navy, the ideal centers on the principle of military responsiveness. Fundamental to the Navy’s justification for a strong inhouse shipyard capability is the military requirement that logistic support must be responsive to the operating forces. Fleet operations, Fleet maintenance, and Fleet base support are basic to naval strength. In this regard, the Navy, since 1801, has viewed its shipyards as an integral part of our nation’s naval strength afloat.
By statute, the Navy is responsible for the construction, armament, equipment, and deployment of ships of war. The Navy relies upon the naval shipyards for a large portion of the logistic support to fulfill this statutory responsibility.
The combat effectiveness of a military organization is directly related to the responsiveness and quality of its logistics support. The logistics base must be tailored to the war readiness needs of the operating forces in time of peace and still be capable of rapid expansion in case of war.
This is a valid objective and as such it does not stand in opposition to the objectives of free enterprise. Indeed, it is an unrelated concept with different terms of reference.
In 1947, the Report of the President’s Advisory Committee on the Merchant Marine stated: “The size and general soundness of the shipping and shipbuilding industries are dependent inevitably upon one another. Neither can maintain itself in a healthy condition if the other is lacking.”
This is a fundamental point, and neither the shipping nor the shipbuilding industry in this country is healthy. In fact, these two mutually dependent industries are sick, and have been for a hundred years. The United States, a maritime nation, has not been a maritime power since 1860.
During the period when other nations were shifting to steel and steam, no serious attempt was made in this country to meet the challenge. The reasons were several, but the result was singular. By 1870, except for certain trade routes, American flag sailing ships were swept from the seas. Unlike Great Britain, this country was, and is, content to allow other nations to carry its commerce. Except for the artificial impetus of war, the maritime industries of the United States have been unable to meet foreign competition.
After 1880, technological developments made the large passenger liner and the heavy, high-speed combatant ship possible. These developments coincided with the rise of power politics in the United States and popular support for a strong, modern Navy.
Fortunately, it was decided to build the new steel Navy at home. This fact, coupled with a policy to build warships in private yards during peacetime, had a highly beneficial effect on the private shipbuilding industry. With the Navy as its major customer, the industry was assured of a steady flow of business without fear of foreign competition. This in turn gave them the incentive and by 1888 American builders were constructing the latest and largest warships of the time. This effort continued through and beyond the Spanish American War.
Modern warship construction in the private yards got the industry moving, but it fostered a growing dependence on the government. Along the seaboard, naval business was the only business that kept the industry alive. The large naval building program did not enable American industry to compete in merchant ship construction. Only on the Great Lakes, where foreign competition was absent, did the industry develop with vigor.
World War I brought American merchant ship construction to life. Output increased greatly but, except for naval construction, the effort was largely an achievement in organization. Characterized by a sustained high level of production, with shop work kept to a minimum, ship construction was an assembly effort which did not lend itself to flexibility. The fabricating yard produced the tonnage by taking components from other industries and erecting them into ships at an unheard of rate of speed.
The tremendous building program during the War did not improve the competitive position of American builders. The fabricating yards did not have the technical organization or the equipment to produce the specialized peacetime ships cheaply; these came from Europe.
The expansion of shipbuilding during World War II exceeded that of World War I. The pattern was much the same, however, with the establishment of numerous yards designed for mass production and the expansion of existing private yards and navy yards for custom work on large combatants. By 1943, this industry was consuming 20 per cent of the nation’s steel output. Employment in the private yards jumped from about 70,000 in 1939 to over 1.4 million in 1944. By the end of the War, the United States owned 60 per cent of the world’s total merchant tonnage, and American flag-shipping carried about 65 per cent of our foreign trade. Except for slight upturns during the Korean War and the Suez Crisis, the postwar period has followed the historical pattern.
Our share of the world’s total merchant tonnage has fallen to less than nine per cent. Our foreign trade has nearly tripled; yet we build less than five per cent of the world’s ships, and the amount carried in U. S. flag shipping hovers at and below 10 per cent. Average employment in the private yards is in the neighborhood of 120,000.
The U. S. maritime industry is in a state of health reminiscent of the period prior to, and between, the two great wars. Unable to compete in the past, the industry is not competitive today. In addition to foreign competition, the maritime industries have domestic competition in the form of trucks, railroads, and pipelines which have sharply reduced the size of the coastal fleet.
In terms of our national security, the nation has had to pay a handsome price for its maritime weakness. We may have to do so again. During the Spanish American War, we were forced to buy 137,000 tons of shipping from foreign owners. In 1908, the Great White Fleet had to rely on a fleet of foreign tenders for services. In 1914, as Europe went to war, this nation, as today, was caught depending on foreign ships to carry 90 per cent of its foreign trade. American goods meant for export piled up on the docks, and many factories, depending on imports, were forced to close.
The weakness of our maritime posture at the beginning of World War II modified the whole strategy of the War and caused us to fight a longer and more expensive conflict. The lack of ships and shipyards seriously modified the war production program by claiming a large part of the labor and materials available for production.
Government assistance to our maritime industries has not been absent, nor is such assistance uncommon. Every leading maritime nation, with the possible exception of Norway, lends assistance to its maritime industries to a greater or lesser extent than does our own federal government.
The Cargo Preference Act requires a certain percentage of all government-sponsored shipments to be carried in U. S. bottoms. The Act of 1817 and the Jones Act of 1920 prohibit foreign-built ships from engaging in U. S. domestic and coastal trade. With Congressional sanction, this wall was breeched in 1963 when a Japanese freighter carried lumber from the West Coast to Puerto Rico.
The basic subsidy program under which the nation is operating is the Merchant Marine Act of 1936. This act provides for a direct method of payment to both builder and operator for the purpose of bringing American prices down to world market levels. It is designed primarily to help assure an adequate domestic shipping and shipbuilding capacity for national defense.
In theory, government assistance should develop a strong Merchant Marine and a strong supporting industrial base. The facts are that it has not.
One of the biggest problems can be found in the shipbuilding industry itself, an industry beset with uncertainty, with wild fluctuations or swings, due to a lack of steady volume. It is an industry in trouble with downward trends in new orders, output, employment and repair work. Meanwhile, construction levels abroad remained at a reasonably high level.
With few exceptions, U. S. shipyards are outdated when compared with those in foreign countries. Productivity in the best European and Japanese shipyards is significantly higher than in the United States.
Funds devoted to research, development, and modernization of the maritime industry in this country have been minor. Obsolescent yards are causing low profits and vice versa. Archaic attitudes, group apathy, and conservative thinking have discouraged cost reduction efforts and encouraged reliance on government subsidies.
It is true that we have the highest wage rates in the world, but our productivity in comparison with foreign yards is among the lowest. Management is either too complacent or too timid. Labor has been too apprehensive and belligerent. The problems involving labor, in fact, are of such great magnitude that perhaps only Congress can solve them.
Wage rates in Japan and Europe are rising faster than in the United States, but productivity abroad is keeping better pace with these increases. This is reflected by the fact that subsidy rates in this country have risen from approximately 45 per cent of the construction cost in 1957 to the present range of 53 to 55 per cent today. Further, the differential percentage has inched up to 60 per cent for the reconstruction of passenger ships. In truth, shipbuilding costs in the United States are increasing at a faster rate than foreign costs.
Ours is a nation with 21 major shipyards. There are more than 20 others capable of building large ships. It should be clear that the 17 or 18 merchant ships built under the Maritime Administration each year are woefully insufficient to sustain the industry. A progressive, prosperous shipbuilding and repair industry can exist only when there is a progressive, prosperous Merchant Marine.
The entire maritime industry has been reduced to its present unsound and unhealthy condition for a variety of interrelated reasons ranging from poor management to unsound labor practices to improper legislation. But at the root of the entire problem is the fact that this industry and its supporters in government have not convinced the American people or the Congress of the importance of maritime prosperity to our security or to our economic strength. In the international numbers game we have become a first rate nation in international trade, but a tenth rate shipbuilder with a fifth rate Merchant Marine.
The commercial shipyards in this country are an industry of high costs, low productivity, low profits, declining output, and declining employment supporting a deteriorating merchant fleet while foreign nations carry our trade.
Private enterprise has made America great, but as a type of private enterprise, our commercial shipyards have been notably unsuccessful and have depended almost exclusively on government funds for sustenance. Even during the high wartime production years, it was the government that bought the ships produced, and it was the heavy investment of government money that made shipyard expansion possible.
National security is the responsibility of the federal government. If private industry, in its regular operations, can for economic reasons furnish what is needed—then the government should not try to do so. It has been demonstrated time and again that commercial shipyards, which are subject to the law of supply and demand, cannot furnish what is needed for their own survival, let alone furnish the minimum needs of the nation for national security.
Indeed, this fact was so clear to the Shipbuilders Council of America in 1947, that it considered an employment level of 35,000 to 40,000 sufficient to preserve an essential level of knowledge and skills in the private yards, provided the work load remained at a fairly constant level. In order to achieve this goal, this organization further proposed the integration of merchant and naval construction and government allocation of work to selected shipyards on a time sequence that would promote a balance among the yards.
One of the more popular arguments made by the private builders is that, during World War II, the Navy operated 11 shipyards to support 10,000 ships, and that these same 11 shipyards are now used to support a fleet of only 860 ships. Meanwhile, more than 20 private yards have been forced out of business. Moreover, employment in the private yards has contracted to less than 10 per cent of the wartime level, whereas naval shipyard employment has not.
Actually, the Navy operated about 200 building and repair activities in support of its World War II Fleet, not including advance bases and mobile repair forces afloat. In addition, at its peak, the wartime strength of the Fleet was about 6,000 ships of all types— not 10,000. The hard core of the combatant fleet at the time consisted of 1,171 warships.
The point is that the 11 naval shipyards, in addition to special manufacturing and some construction, existed primarily to serve this hard core of warships, not the nearly 4,000 amphibious ships, auxiliaries, patrol craft, and mine craft.
Today the hard core of the combatant fleet consists of nearly 400 warships—about one- third the wartime strength—and naval shipyard employment at about 85,000 is about one- quarter of the wartime maximum of 330,000.
In addition, during the War most of the first-line ships were new and, as a consequence, did not require major overhauls until after the War. Thus, battle damage, urgent alterations, interim dockings, and essential voyage repairs were the problems faced by the naval shipyards at the time.
Today, the problem is not only the continuous maintenance of a large fleet in a battle-ready condition, three-quarters of which is rapidly approaching overage, but also the maintenance of ships far more complex than anything that existed during the War.
The basic point raised by the private yards is unsound. If it were sound, then one could argue that since the Navy operated nine shipyards and 148 combatant ships in 1932, today over 20 naval shipyards should be in operation.
It is true that private shipyards have been forced to close. Even so, there are still more private yards in business today capable of building large ships and hiring nearly twice as many people, as there were in 1939, when the number of U. S.-flag ships in our foreign and coastal trade exceeded today’s number.
In 1939, the naval shipyards employed 46,000. The total today is less than twice that number, but the size of the Fleet has nearly tripled.
It is true that naval shipyard employment has not constricted to the same degree as private yard employment since the War. As previously indicated, the 330,000 peak employment in the naval shipyards during the War was not representative of the total naval building and repair effort. Thus, a statistical comparison of this sort in support of an argument for greater naval yard contraction is meaningless.
The private shipyards argue that greater use of private yards for repair work today would not detract from the effectiveness of the Fleet. To substantiate this claim and the claim that the “private shipyard industry is a far more important mobilization base than the naval shipyard complex,” President Hood points to the tremendous World War II construction record of the private yards, and offers the following comparison:
Between the years 1942 and 1946 our private yards completed 4,915 large merchant ships. These totaled 36,960,000 gross tons. In addition . . . our private yards also delivered 1,177 large naval vessels ... of 3,544,929 tons. The Government-owned and Government- operated naval shipyard output during this period, by the way, was only 319 ships of 900,000 displacement tons.
This argument is not only unsound, but it uses the wartime production effort of the private yards to discredit the naval shipyards. It should be emphasized that the functions of the private and naval shipyards during the War were decidedly different.
During the urgency of war, the primary role of the private yards was production of standard design merchant and amphibious ships and craft, at any cost, to compensate for losses and to meet greatly expanded requirements. The mass employment of people to accomplish this task under those circumstances, including the construction record of fighting ships, cannot be equated with the private shipyard’s case for more naval repair work today.
In fact, of the 1.4 million private shipyard employees, only 146,000 were engaged in repair of all kinds at the peak of wartime employment. The Navy yards had nearly this many engaged in repair work in the West Coast yards alone. This underscores the point that it was the intention to throw the bulk of new construction, including naval construction, on the private yards, and that their repair function was minimal.
During the War, the primary role of the private shipyard was the mass production of shipping and the primary role of the Navy yard was the repair of combatant ships; a condition that does not lend itself to a statistical comparison.
The Navy yard had three basic functions during the War: repair of combatant ships; some new construction; and the manufacture of equipment and special products. The concept was to leave the naval shipyards free to handle battle damage and do repair work. Pearl Harbor and the West Coast yards were engaged almost exclusively in emergency and major fleet repairs and performed very little construction. The effort of the East Coast yards, except for Portsmouth, New Hampshire, was fragmented. For example, the effort at the Norfolk Naval Shipyard was split: 51 per cent repairs, 32 per cent new construction, and 17 per cent manufacturing.
The point is that both civilian and military yards played vital wartime roles, but the wartime role of the private shipyards does not justify the role they wish to play today.
To begin with, it is not possible to compare new construction work with repair, overhaul, and conversion work. These latter functions are far more difficult and require a highly skilled and versatile labor force. Relatively speaking, new construction is a repetitive process to a large degree. Overhaul and conversion work is seldom if ever repetitive. Even among ships of the same class receiving identical alterations, the work requirements will vary, sometimes to a remarkable extent.
In the repair of naval ships, flexibility becomes extremely important. In addition to the unexpected ship needing urgent repairs, the relative priority among ships may suddenly shift. World tensions may accelerate the demand for speed of completion. In short, the overhaul and repair complex must be responsive to a larger variety of demands than must the building yard.
It is this need for responsiveness that is of nagging concern to the Navy. If 35 per cent or more of the Navy’s alteration, conversion, and repair effort is to be accomplished in private yards, then some of the ships from the hard core of the Fleet will have to rely on private yards—yards not responsive to command and not really geared to do the job. Consequently the effectiveness of Fleet support and thus of the Fleet itself will be downgraded.
To determine the relative importance of the naval and private shipyard as a mobilization base is like trying to determine the relative importance of the heart and brain. Survival is not possible unless both are present. The same is true of the private and naval shipyards—both are vital to our mobilization base. Therefore, it boils down to what is expected of each under mobilization conditions, and what type of war we are talking about.
Under mobilization conditions, the private yards, as in the past, will be called on primarily for new ship construction and a portion of the repair and conversion of auxiliary- type ships. The naval shipyards will be expected to accomplish the major portion of combatant ship overhauls, conversion, and battle damage repair.
It is for these reasons that, in addition to less cost, the major portion of Navy new construction is assigned to private yards. It is essential that the private yards retain the skills necessary to do the job that they are not only best suited to do, but the job that they will be called upon to do—the building of ships. The repair role of private industry was minor in World War II; it is not expected to be much different in future conflicts.
On the other hand, the naval shipyards are receiving the type of work they are best suited to do and will be needed to do in time of war—maintenance of the Fleet.
This raises the second important point—precisely what kind of war are we discussing?
In general nuclear war, the mobilization plans may never be implemented. We may have to fight with only the ships at sea at the time of first attack. This is one reason why the continuous material readiness of the Fleet is so essential, and why the Fleet must rest upon a logistics base that is an integral part of, and responsive to, Fleet requirements.
The second possibility, and the more likely, is that in this era of political and social change we shall continue to see peripheral wars, local wars, wars with limited objectives as well as just plain revolution and strife. This has been the pattern since World War II, and if the general nuclear war deterrent prevails, then this is the pattern we shall continue to see in the future. Thus, the need for a modern, highly responsive, combat-ready naval fleet is more necessary than ever before.
Under either condition, then, naval shipyards are more necessary than ever before to meet the requirements of the Fleet. The job they are doing today, as an integral part of the Fleet’s logistics base, cannot be done by the private yards without nationalizing the industry.
The private shipyards make the point that based on unbiased cost studies by two reputable accounting firms, it has been proven that costs in a naval shipyard are anywhere from eight to 32 per cent higher than in private shipyards. The supporters of the private shipyards erroneously imply that these percentages are applicable to all shipyard work including the repair and overhaul of warships.
The first study to be produced was undertaken by the accounting firm of Ernst & Ernst. A representative of this firm stated to a Congressional Committee that they were unable to break out the cost that could be identified as new construction versus repair, alteration, and conversion. Yet, President Hood of the Shipbuilders Council interpreted the report as follows:
“ . . . experts, on the basis of exhaustive investigations, agree the private yards can build, repair, alter, and convert ships at a cost of 20% to 28% below the cost of having work done in . . . naval shipyards.”
The second, and by far the more thorough and comprehensive study of the two, was performed by Arthur Andersen and Company.
In the construction of submarines and guided missile frigates the Andersen report shows that the cost to the government is 15 to 20 per cent less in private yards. Further, in a comparison between one private shipyard and one naval shipyard in the construction of attack aircraft carriers, the private shipbuilder did the job at 31 per cent less cost to the government.
Certain valid statistical adjustments tend to reduce this differential, but the fact is that on a straight dollar-for-dollar basis, the naval shipyard is not usually competitive with private yards in new construction of naval ships. This point has never been contested by the Navy. Indeed, it is one of the main reasons that over 80 per cent of the Navy’s ships are built in private yards.
Nevertheless, there is an overwhelming tendency among the private yards to use these statistics to support a contention that private industry can do the job of the Navy yard not only cheaper but better. Neither the Ernst & Ernst report nor the Andersen report supports this view.
For example, on conversions, the Andersen report states that, “Since the percentage differentials are small and the adjustments required to establish comparability were both large and unusual, we can reach no conclusion with respect to the relative costs of these conversions.”
On ship repairs, the Andersen report found “. . . that it was not possible to establish reasonably comparable work performed on specific ships for either a total ship overhaul or specific work items.”
On a group of underwater hull items, limited to minecraft, auxiliaries, and amphibious ships, it was concluded that the cost to government is 10 per cent less in the private yards. The type of work and the types of ships used to determine this differential destroy its validity as a yardstick when compared with the more intricate and difficult task of repairing warships.
On ship alterations, the Andersen report states that, “Based on comparisons ... it appears that there were no significant differences between naval and private shipyards.”
Thus, the private yards have no factual basis on which to support a claim that they can more cheaply and more effectively respond to all fleet requirements. Indeed, there is strong evidence to support the view that they cannot.
The same Andersen report indicates that ships repaired in naval shipyards are completed more quickly and stay at sea longer than those overhauled in private yards.
In this connection, an examination of the principal causes of delay in the delivery of new construction ships underscores why it is not wise to rely on private yards for effective fleet support. For example, strikes, inability to hire critical trades, low productivity, fire control and electronics difficulties, and inexperience were the main causes of delays in private yards. On the other hand, delays in naval shipyards were characterized by late equipment arrivals, manpower diversions, and correction of private yard deficiencies.
It is also a fact that every ship built by a private yard must, at a later date, receive most of the changes and alterations which are normally incorporated into the construction of those same type ships built in navy yards. Ships have been, and are being, delivered to the Fleet in which hundreds of these changes and alterations are not performed because of the impact that contract renegotiation complexities have on extending completion dates.
To return to this very elusive business of cost, the Andersen report concluded that there were “two principal factors contributing to higher overhaul costs in naval shipyards . . . indirect salaries and wages . . . and fringe benefits.” Naval shipyards “have more personnel per non-supervisory hourly worker in production shops” and “appreciably higher fringe benefits costs” than do private yards. The fringe benefit costs represent the most significant factor in the higher overhaul rates at the naval yards. This includes payments for time not worked—annual vacations, holidays, sick time—and other fringe benefits. There was no marked difference in direct labor rates between private and naval shipyards.
Even so, the fringe benefit advantages enjoyed by the Navy’s industrial employee over his counterpart in a private shipyard may, perhaps, offer a clue to some of the labor problems that seem to afflict many of the private shipyards. Fringe benefits comparable to those received by government employees are not uncommon in other private industries. It is not impossible, but it is certainly unlikely that Navy yard industrial workers have taken the lead in establishing fringe benefit scales anywhere. This leads to the more likely possibility that the fringe benefits of private shipyard workers is something less than those in other industries.
The great disparity in injury and disability rates between private and naval shipyards lends credence to the view that the labor situation in many private yards is probably less than the accepted standard. Disability cost figures per productive hour are ten times higher in private shipyards than in naval shipyards, and the frequency rates of lost time due to injuries in private shipyards have been seven to ten times greater than in naval shipyards.
The Navy’s insistence on the use of safety devices and safe practices, at no cost to the employee, is nevertheless part of the cost of operating a naval shipyard. Moreover, it is believed that these costs exceed the higher disability rates paid by the private yards. The foregoing fringe and disability factors go a long way toward explaining why a closed naval shipyard involves more than the transfer of a lunch box to a private yard.
Another reason for higher costs in naval shipyards is the situation among the private yards themselves. With the decline of commercial work, the private yards instead of competing for profits are competing to stay open. As a result, they are bidding at prices which are near and below cost.
For example, the Andersen report found that losses were incurred on five of the 14 new construction ships studied. On a sample of 78 ships, not new construction, the private yards earned only one-half of one per cent profit on the original contract.
This raises the question of what can happen to a ship in repair once it has become the captive of the low bidder—when the unknown factors of a repair contract become known. In the 78 ships previously mentioned, the private yards made a 20.5 per cent profit on the changes.
Shipbuilding and repair prices in the private sector are influenced largely by the market price rather than by true cost. The Navy knows from experience that when private yards are well filled with commercial work, the more difficult construction and repair of warships becomes less attractive. The best private yards show their dissent by bidding high, forcing the work into the less efficient and less capable private yard. The private yards can and do refuse work; something a Navy yard does not do. The Navy yard, in maintaining a high ratio of first class mechanics to helpers, by introducing stability in the work force, and by investing heavily in training and yard facilities for current and future needs, keeps itself ready to meet not only today’s assignment, but tomorrow’s as well, including emergency expansion. The private yards are very flexible in their employment practices, hiring men when needed and letting them go as the work tapers off. Where the private yard can discontinue functions and facilities that do not contribute to profit, the naval shipyard dares not.
At best, “capacity” is an elusive quality in industry. It can be measured in a variety of ways and expressed in a variety of terms. The charge is made that the private yards are operating at less than 50 per cent capacity while the naval shipyards are operating at 90 per cent of their capacity. Actually, the 90 per cent figure for naval shipyards is from the Naval Industrial Fund report, which used average manhours worked at the height of the Korean War as representing 100 per cent capacity. For example, in 1961, based on single-shift capacity, the over-all average utilization of naval shipyards was 74 per cent.
If 1952 average employment figures are used as a basis, it will be found that, in 1963, Navy yards were operating at 66 per cent of capacity whereas private yards were operating at 77 per cent. This is an over-simplification using straight arithmetic, but at least the basis for both figures is identical.
The competitive bid does not lend itself to warship repair work. Aside from that fact, the material and personnel support now available in the naval shipyard and the ability to integrate yard schedules with Fleet operations would be destroyed by the bid concept. Ships, after an extended tour at sea, instead of being overhauled in a yard located in or near their home port, could be sent anywhere in the country, depending upon which firm made the successful bid.
In naval shipyards, ship’s force personnel, in addition to their regular shipboard duties, overhaul and repair a wide variety of equipment. As a consequence, personnel of a ship in overhaul spend more time per week in the industrialized atmosphere of the shipyard than do regular yard employees. This not only extends the depth of the overhaul, but the experience gained raises the level of a crew’s technical competence. Application of this competence at sea is a bonus beyond price. Ship’s force work in a private shipyard is often resisted and restricted by union- management work rules. Thus, overhauls in private yards will not only produce a gap in this type of experience, but will reduce the informal and formal training opportunities now available to ship’s personnel by the Navy yard itself and by the adjacent naval base.
Finally, destruction of the Navy’s home yard/home port concept by the competitive bid process, and the absence of adequate personnel support in private yards would seriously impair morale. Men who do not reenlist and young officers who resign take with them all the skills, training, education, and experience they have gained. This is not economical either.
Since private yards do not provide the living facilities now available in naval shipyards, they are prone to dismiss these advantages as transparencies and as time-worn, self-serving arguments.
“Government must do only those things which private enterprise cannot do.” In fact, this is the point of it all—private enterprise cannot do the job—it cannot provide the total support necessary for the maintenance of a strong fleet. There would be no rationale for a naval shipyard anywhere at any time if it did nothing more than make repairs to ships. What the Navy buys for its combatant ships in a naval shipyard cannot be bought in a private yard simply because it is not available.
The naval shipyards, responsive to naval command, exist to serve the Fleet. Private yards, responsive to profit, and hampered by the ever-present possibility of strikes and jurisdictional disputes, and the lack of facilities, experience, and capability, are not and cannot be made to be responsive to the demanding needs of the Fleet.
The Fleet must never be placed in a position where it cannot “wag the shipyard tail.”
If a private shipyard is not capable of a specific job or is unable to accommodate to Fleet schedules, the consequences would be the prolongation of overhauls and repairs. The Fleet would have units tied up in shipyards, where they were of no operational value. Other units would be required to delay overdue repairs and overhauls for lack of replacements. In fact, the Navy would need more ships to do the same job at sea if the private yards were to receive a greater portion of the Navy’s repair, conversion, and alteration dollar.
It is true that the Navy yards duplicate all that the private yards can do. But it is also true that with the Navy yard system, the Navy can do more—and the “more” is what cannot be done in the private yards.
It is undoubtedly true that there are variations in the efficiency of naval shipyards and it is also true that the Navy has shipyard capacity in excess of current needs. But is the “excess” not really “reserve” capacity? Should these yards be closed for the purpose of keeping private yards in business?
The Navy does not have an obligation to the private shipbuilding industry per se. It does, however, have a responsibility to the nation for the maintenance of a strong, efficient, combat-ready Fleet supported by a responsive logistics base.
The ability to contribute to the maintenance of an efficient combat-ready Fleet is the final measure of the effectiveness of logistics support. This should be the first consideration in awarding repair, alteration, and conversion work to private yards.
The Navy is also obligated to the nation to insure insofar as possible that the private shipbuilding industry retains its skills to meet the demands the Navy will place upon it in the event of a national emergency. In light of the industry’s depressed condition, this means placing a good percentage of the Navy’s new construction in private yards. The placement of as much ship repair work as possible in private yards without causing a hardship on Fleet personnel or adversely affecting Fleet readiness should also be given continuous consideration. But the Navy should be freed of legal restrictions which would prevent it from exercising work-load ratio judgments between private and naval shipyards.
The Navy is carrying out its major obligation to the private yards—allowing them to maintain that expansible nucleus to build the more difficult fighting ships the country must have in an emergency.
For the private shipyards to charge that the existence of the naval shipyards is the main reason for their underemployed commercial capacity and to accuse the Navy of being directly responsible for their economic condition is to ignore the fact that the private yards are suffering from a decline in commercial work.
There is not enough construction, naval or merchant, in this country to use fully the capacity available. This is a national problem. The private yards have lost the prime requisite for health—a constant volume of work from a strong U. S. Merchant Marine. Low cost foreign competition has deprived the private yards of the merchant ship work needed to support the industry. A strong merchant marine is essential to a strong shipbuilding and repair industry and, under the circumstances, instead of suffocating the industry, it should be recognized that the government is the only force keeping it alive.
The federal government has a responsibility to assist efficient private yards commensurate with the readiness needs of the naval and maritime fleets, not because the private yards have a right to continue in business, but because of the special qualities they offer the nation, and because economic forces alone will not sustain the industry. Both the private and naval shipyards are essential adjuncts to our national strength.
The interdependence of maritime operation, shipbuilding, and repair is a demonstrated fact. It is this structure that has become weak, and it will not be strengthened by weakening the Navy’s logistics base. Closing all the naval shipyards would not cure the ills of the private shipyards. But it would surely cripple the Fleet.
The real reason behind the controversy is that the nation’s maritime strength is in a state of steady decline. Until this strength is revived, the present dilemma of the private yards will continue.
The shipbuilding industry is not suffering from a lack of naval work. When spokesmen for the private shipyards imply that the Navy is responsible for their misery, or charge that the Navy is ignoring the essentiality of the private yards to national security, they are not being reasonable. President Hood said as much when he made this statement:
The controversy that has arisen over the ratio of naval work that is performed in naval and private shipyards would not have occurred if this country’s sea power was being maintained at the level that our stature and position in world affairs dictates it should be.
America has been indifferent to its stake in the sea. It is this indifference that must be overcome.
To create controversy and to voice dissent are healthy for the nation. A wide open airing of views is necessary. Such a discussion should stick to logic based on well-defined facts, however. What is vitally needed is an honest study of the causes and a concentrated effort to work out a practical solution. We must face the problem squarely, and soon; for not only will the shipyard industry continue to decline, but also the strength of U. S. sea power and the nation itself will suffer.