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More than 200 years ago, British conservative Edmund Burke warned the Royal Navy that a lack of “attachment” and “deep stake” could lead to the Navy being “nothing but rotten timber.” This is good counsel for us in 1995, for if the Navy and the Department of Defense fail to attend to the current and future health of the U.S. naval shipbuilding industrial base, it may indeed degenerate to “rotten timber.” Ultimately, we may find ourselves unable to design, engineer, and build our next generation of warships, at least in U.S. yards.
Naval shipbuilding confronts a drought that will continue at least for the next six years. In real terms, the administration’s proposed six-year shipbuilding and conversion (SCN) budget is at its lowest level since 1947. The three new-construction warships in the President’s fiscal year 1996 request—two Arleigh Burke (DDG-51)-class Aegis destroyers and the third Seawolf (SSN-21)-class nuclear attack submarine—represent the fewest ships requested since 1932. The balance of the Navy’s proposed SCN plan in the Future Years Defense Program through 2001 is, at best, anemic. Beyond that, the future remains grim.
This situation was the catalyst for the six largest U.S. shipyards—Avondale Industries, Bath Iron Works, General Dynamics’ Electric Boat Division, Ingalls Shipbuilding, National Steel and Shipbuilding Company, and Newport News Shipbuilding and Drydock Company—to form the American Shipbuilding Association (ASA). ASA represents more than 90% of the United States’ shipbuilding employees and accounts for nearly 98% of the nation’s shipbuilding and conversion dollars. Its goals are straightforward: to preserve and promote the U.S. naval shipbuilding industrial base, and to make the case to the U.S. public and government that shipbuilding remains critical to the United States, its economy, defense, and way of life.
To carry out our mission, ASA focuses on ship construction. Other associations, such as the Shipbuilders’ Council of America, represent a broad swath of U.S. shoreside infrastructure, including large and small shipbuilders, repair facilities, and component suppliers. Many of these firms do not share the same interests and requirements, which can result in a fragmented, shotgun-style program of information and advocacy. The specialized need to sustain our naval shipbuilding industrial base was only one of many competing interests and voices.
The unique and intractable problems faced by U.S. shipbuilders were underscored in July 1994 with the signing of the Organization for Economic Cooperation and Development (OECD) Agreement on Shipbuilding. The U.S. Trade Representative negotiated this agreement, the principal goal of which was to “level the playing field” in commercial shipbuilding between the unsubsidized U.S. shipyards and their heavily subsidized foreign competitors. Unfortunately, from the common perspective of the six ASA shipbuilders, it is a bad deal.
The OECD agreement preserves and strengthens foreign subsidized shipyards’ competitive advantage. The inability of U.S. shipbuilders to speak with a single voice resulted in a confused message being sent to the U.S. negotiators. But how does this agreement on commercial shipbuilding affect those shipyards engaged in naval shipbuilding? First, additional commercial work in U.S. yards, including new construction for foreign operators and repair and refit work, reduces the cost of naval ship construction. Existing infrastructure and overhead are spread to more jobs, cutting these fixed costs for individual orders. Second, commercial work, whether for U.S. or foreign operators, sustains critical work-force skills and engineering/design bases for the next generation of ships, both naval and commercial.
The stark reality confronting U.S. yards is that the current Navy shipbuilding program will sustain no more than a 180- ship fleet, not the 346-ship Bottom-Up Review Navy or the even larger fleet desired by the Chief of Naval Operations. Should the funds materialize for a post-BUR Navy, the U.S. shipbuilding industry must be in place to carry the load. Neither the President’s shipbuilding plan nor the OECD agreement do anything to ensure that this will be the case.
The conventional wisdom in the Pentagon and within the Washington Beltway is that there is no real cause for worry; we have plenty of excess shipyard capacity to meet any hoped-for surge in new naval ship orders. These views usually are supported by “data” that “shipyard Y could build as many as seven warships per year even though it now has annual orders for only two. Hence, we have an ‘excess capacity’ of five warships each year.” Armed with such comprehensive understanding of a complex issue, planners and pundits inside and outside of government avow that we can afford to let one or more yards go under without jeopardizing our fundamentally sound shipbuilding base.
This is nonsense. The sophistry of the “excess-capacity argument” is exposed through an examination of actual available capacity. This metric takes into account current work force, people in training and apprenticeship programs, existing physical plant, and other overhead fixtures that support each shipyard’s internal planning to estimate capacity based on real orders in hand and programmed for the near future, including:
► Design, engineering, and construction of new naval ships
► Repair/modernization and life-cycle support on naval ships >■ Commercial or foreign military sales new construction and repair opportunities
And orders that cannot be planned and programmed, such as:
► Battle-damage repair (both the Stark [FFG-31] and Samuel B. Roberts [FFG-58] were repaired in ASA yards following damage from cruise missiles and a naval mine, respectively)
>■ Reconstitution of the fleet in the event of national emergency
Nearly all new-construction orders come from the U.S. Navy- The service should embrace a sense of “ownership” toward the nation’s shipbuilding base and inject stability into its shipbuilding and modernization plans and programs. The more than 20% change in the shipbuilding budget from 1995 to 1996 and projections for continued turbulence and uncertainty do little in this regard. With a product cycle of four-to-nine years from long-lead funding to ship delivery, stability is the great economizer in naval shipbuilding; it allows us to plan well in advance and get the most cost-effective deals from our vendors.
The Navy should investigate creative acquisition policies that are both cost-effective for the taxpayer and industrial-base friendly. To that end, the American Shipbuilding Association is committed to working closely with its number-one customer to create win-win policies and programs that will give the Navy the most capable ships at the most affordable price, while preserving the ability to build more ships to meet future needs.
The Navy and the nation have made a multibillion dollar investment in the “big six” shipyards during the past quarter- century. Such a naval industrial base, comprising facilities, equipment, and highly skilled and motivated men and women, is a national asset. The Navy must use it or lose it!
Captain Bowler recently retired from the Navy to become President of the American Shipbuilding Association.
12
Proceedings/July 1995