The "Death Spiral" That Is Shipbuilding

Yet another reason why I think Gene Taylor (D-MS) is a straight shooter. From this July 30 testimony opening statement.

"The total cost of a ship can be divided into three broad areas, I am interested in discussing with each of our panels which area we can invest to receive the greatest payback in lowered costs.

"The three areas to which I refer are: 1) the cost of materiel—this includes everything from the steel plate to the computers which run the ships weapons systems, 2) the number of man-hours it takes to construct the vessel, and finally 3) the rate the shipyard charges for each man-hour—it goes to reason that if a shipyard is building only one ship, then the rate must include the overhead for the entire shipyard on the man-hour rate of that one ship, but if the shipyard was building ten ships they would be able to spread the overhead across the rate for all the ships. So quantity matters in more ways than one. So the question of ‘what should the ship cost?’ also must take into account ‘how many ships are you building?’

"As I look across our ship construction programs, I see significant differences in meeting cost and schedule. Our T-AKE program and our submarine program are meeting or exceeding cost and schedule targets, but I wonder if we could do even better. The final ships of the original run of DDG 51 destroyers are also doing well, helped in part by capital improvements at the shipyards which were aimed for the DDG 1000 class. Our Amphibious ships are running over cost and behind schedule. Some of that is still attributable to the effects of Katrina, but some is not.

"We have a new aircraft carrier program that has bet the future on an unproven technology for electromagnetic launch. The Navy is not sure, or at least not telling the Congress, what the future has in store for surface combatants after the re-start of the DDG 51 program. The LCS program is still a disaster, there is no way to sugar coat it, the program is still a disaster. Those first vessels were constructed in the most inefficient manner possible, just like my house construction analogy, and now we are being told by both the contractors that the cost of these ships really is in excess of a half a billion dollars. I am not sure the Congress is willing to go forward with that program unless significant progress is made on cost control, and I do mean significant.

"With the challenges being faced by all the Services in trying to reset from the wars in Iraq and Afghanistan the Navy cannot count on additional funding for ship construction. We all need to figure how to rebuild our Fleet with the procurement dollars available. To do that all costs must come under control. Hard decisions need to be made. Soon.

"I look forward to the testimony. I look forward to an honest and open dialogue both today and in the future, because the days of throwing more money at the problem are gone. I am not sure everyone understands that hard reality, but it is true.

This is an interesting bit from the testimony of Mr. Ronald E. Ault, President, Metal Trades Department, AFL-CIO (PDF).

The U.S. shipbuilding industry has been caught in what some have called a death spiral for more than a generation as a result of policies of not-so-benign neglect. In the 1970s, with few exceptions, politicians of every stripe embraced the notion of unfettered world trade and disparaged concerns over the loss of domestic manufacturing capacity as “archaic” or “quaint.” The steepest drop came during the Reagan Administration with cuts in operating and construction differential subsidies. As a result of this continuing trend, the U.S. shipbuilding industry and the network of industries that provided components began to wither along with the tens of thousands of jobs that network provided. The result today is a shipbuilding base that includes a mere six yards capable of producing large vessels supported by four U.S. Navy shipyards that perform repairs. As a point of comparison, China has one shipyard with a larger capacity than all U.S. yards combined.

Virtually the only customer that the nation’s six private shipyards have is the U.S. Navy and, today, we are down to delivering around eight Navy vessels a year. The current situation is not sustainable.

For me personally and on behalf of the unions affiliated with the Metal Trades and the five million members of those unions—we are confident that given the right policies, the shipbuilding industry can revive and ultimately thrive.

Our recommendations focus on four areas:

1. Valuing the skills and training of the shipyard workforce by investing more in apprenticeship training, proper utilization of apprentices and opening up new opportunities for career growth in the industry.
2. Broadening the horizons for the U.S. shipbuilding industry by living up to the letter and the spirit of Buy American regulations, enforcing the Jones Act, adequately funding Title XI, and imposing realistic limits on leasing foreign ships by the Department of Defense.
3. Looking to the future of maritime transportation as a growth industry that will help America improve our energy efficiency and independence.
4. Improving the Navy’s strategic planning and coordination in shipbuilding.

Only one thing is clear from the testimony: a lot more money is needed than is prioritized as available.

H/T Salamander