American Shipbuilding Association

Volume 16, Issue 1                                                                      January/February 2010

$13.9 Billion Requested for Navy New Construction

On February 1st, the President submitted the Administration’s FY 2011 budget to Congress. The base budget of the Department of Defense is $549 billion, of which $13.9 billion has been requested for nine new naval ships. The Administration has requested two Virginia-class attack submarines; two DDG-51 multi-mission destroyers; one LHA amphibious assault ship; one mobile landing platform; two littoral combat ships; and one joint high speed vessel. The following chart depicts the Navy’s FY 2011 shipbuilding procurement budget.

Today’s naval fleet is at a 93-year low of 285 ships. According to the Navy’s report submitted to Congress regarding its annual long-range ship construction plans (commonly knows as the 30-year shipbuilding plan), the Navy continues to envision a plan for a baseline battle force fleet of 313 ships. However, the Navy report states that future year ship construction budgets will average no more than $15.9 billion annually (in FY 2010 dollars). The Congressional Budget Office (CBO) has estimated that the Department of Defense (DOD) needs to invest $21 billion for ships in 2013 to carry out its future defense plans. According to additional CBO estimates $25 billion will be needed for ships by 2020.

Coast Guard Funds 5th National Security Cutter

The Administration’s FY 2011 budget requests $856 million for the acquisition of Coast Guard vessels, including $538 million for the 5th National Security Cutter (NSC). The NSC is the major vessel in the Coast Guard’s ongoing fleet recapitalization, and the largest vessel in the Coast Guard’s fleet. The budget request also seeks funding for the production of the ninth through the twelfth Fast Response Cutters (FRC). The FRC is designed to replace the 110 foot large patrol craft currently in operation. The delivery of the first FRC will occur this year. Funding is also requested to continue the pre-acquisition work for the Offshore Patrol Cutter (OPC) to replace the Coast Guard’s in-service Medium Endurance Cutter. The OPC will be the second largest cutter behind the National Security Cutter in the Coast Guard’s fleet.

While the Coast Guard proceeds with the recapitalization of its fleet, it does so at a time when the Administration has been advocating a crackdown on government spending. In order to meet top line budget constraints imposed by the Office of Management and Budget, the Coast Guard may be faced with having to reduce its readiness capabilities to ensure costs do not erode funds needed for new ship procurement. During his fourth and final annual state of the Coast Guard address on February 12th, outgoing Commandant of the Coast Guard Admiral Thad Allen stated that without new ships to replace aging assets the Coast Guard would be a “hollow fleet.” In addition to engaging in marine safety, search and rescue, drug interdiction, enforcing environmental laws, and increased port security, the Coast Guard has been conducting security missions in the Persian Gulf and increasing its presence in the Arctic following the receding of polar ice. Extending the service life of the existing cutters in the fleet is not a viable option. Many of the larger cutters average over forty years of age, and are suffering severe breakdowns.

During his remarks Admiral Allen also stressed that the United States faces a “looming crisis” in the Arctic, and that a decision must be made on the future of America’s icebreakers. The U.S. possesses three polar icebreakers, only two of which are heavy icebreakers, and both are over 30 years old. One of these two ships, the Polar Star, is currently undergoing an overhaul to return it to operational readiness. According to the Commandant, the cost to buy a new icebreaker is roughly $1 billion. No funding was included in the FY 2011 budget request to begin recapitalizing the U.S. icebreaker fleet.

Funding Not Requested for Title XI Loan Guarantees in FY 2011

Despite a push by the Administration to encourage lending for small businesses and calls for the need to rebuild America’s transportation infrastructure, the President’s FY 2011 budget request failed to include funding for a program integral to achieving both goals. As with the previous Administration, no money was requested for new Title XI ship loan guarantees to help small and medium sized ship owners rebuild their commercial fleets.

Administered by the Maritime Administration, Title XI provides small and medium sized U.S. ship owners with a federal guarantee of 87.5% of a commercial bank loan over 25 years. With the continued tightening of the credit market and hesitancy of banks to issue large commercial loans, the affordable financing provided by Title XI has become even more vital to ensuring that ship owners are able to place orders for new ships in America’s shipyards. Sixty million dollars, at a minimum, is needed annually to satisfy the demand for commercial ship construction.

Following appropriations by Congress in FY 2009 and 2010, the Maritime Administration has seen a surge of applications for financing or refinancing of ship construction projects. The influx of applications underscores the need for consistent funding of the Title XI program to assist American ship owners. Funding of the program will also stimulate job growth and stability. Once an application for Title XI financing is approved, the ship construction order is immediately placed in a shipyard, instantly creating and sustaining jobs in the shipyard and supplier base. Title XI is a proven investment of taxpayer dollars. An appropriation of $60 million in FY 2011 will finance up to $1.2 billion in new ship construction, and create and sustain roughly 13,000 shipyard jobs and tens of thousands more jobs in the supplier base.

America’s Sea Services Lead Haitian Relief Efforts

In the hours and days following the 7.0 magnitude earthquake that struck Haiti on January 12th, U.S. Coast Guard and Navy vessels were among the first responders. Throughout the operation, the Navy and Coast Guard have sent additional vessels and were joined by ships dispatched by the Maritime Administration. America’s sea service fleet continues to serve a crucial role in ongoing relief operations.

The Coast Guard Forward was one of the first military ships to arrive on the scene. Anchored at Guantanamo Bay Naval Base in Cuba when the earthquake occurred, the Forward arrived outside Port-au-Prince, Haiti, the morning of January 13th. Within 24-36 hours three more cutters, the Mohawk, Tahoma, and Valiant, joined the Forward in airlifting American citizens and the injured out of the area. The Coast Guard immediately began assessing the integrity of Haiti’s port infrastructure, which had been heavily damaged by the earthquake. In total, 12 Coast Guard cutters have been assisting in the humanitarian response.

On the morning of January 15th, the aircraft carrier Vinson arrived off the coast of Haiti, bringing additional helicopters to assist in rescue and evacuation operations. Possessing three operating rooms, several dozen hospital beds, and capable of producing about 35,000 gallons of drinking water per day, the carrier immediately began staging airlift missions and delivering relief supplies. According to the Navy, the Vinson supported more than 2,200 helicopter sorties and delivered more than 166 tons of food, 89,000 gallons of fresh water, and 38,700 pounds of medical supplies before departing on February 1st to return to its pre-assigned mission.

Amphibious ships and surface combatants have been serving as sea bases from which supplies and personnel can be moved ashore via helicopters and landing craft. These ships include the amphibious dock landing ships USS Carter Hall, USS Ft. McHenry, and USS Gunston Hall, and the USS Bataan, a large deck amphibious assault ship. The Bataan, also equipped with extra water and power, has a large hospital on board, including four operating rooms and its own surgical team. The USNS Comfort, one of the Navy’s two hospital ships, remains on station, with one of the largest trauma facilities. Additional naval ships that have participated in the relief efforts to date include: the destroyer USS Higgins; cruisers USS Normandy and USS Bunker Hill; frigate USS Underwood: amphibious ships USS Nassau, USS Ashland, and USS Mesa Verde; rescue and salvage ship USNS Grasp; dry cargo ships USNS Sacagawea and USNS Lt. Jack Lummus; and container ship USNS PFC Dewayne Williams. The Maritime Administration also sent four cargo ships from the Ready Reserve Force; and two high speed passenger ferries, the Huakai and Alakai.

New Partners

The American Shipbuilding Association welcomes the following new member companies:

Aggreko, LLC

A leader in rental power, Aggreko supplies a wide range of temporary power generation solutions including generator rentals, load banks, and electrical distribution. With the company’s North America operations headquartered in Houston, Texas, Aggreko also has locations in New Iberia, Louisiana; Cedar Hill and Pearland, Texas; Swedesboro, New Jersey; and Phoenix, Arizona. The company has service centers throughout the United States.

Diversified Metals, Inc.

Headquartered in Monson, Massachusetts, Monson Metals is an international distributor of specialty metals.

Electric Motor & Contracting Co., Inc.

Electric Motor & Contracting Co. (EMC) is one of the largest motor shops on the East Coast, specializing in rebuilding and remanufacturing rotating electrical and mechanical equipment. EMC is headquartered in Chesapeake, Virginia.

Hampton Machine Shop, Inc.

Located in Newport News, Virginia, Hampton Machine Shop provides machining and fabrication services.

Sunbelt Stud Welding, Inc.

Headquartered in Houston, Texas, Sunbelt Stud Welding manufactures and distributes stud welding products. Products and services include capacitor discharge weld studs, Arc stud welding equipment, production stud welders, rental stud welders, stud welding parts and accessories, equipment repairs, technical assistance, and installation services.

Triangle Engineering, Inc.

Triangle Engineering is a family-owned organization incorporated in 1960. The company supplies equipment and consulting for welder testing, welder training, and procedure certification. The company is located in Hanover, Massachusetts.

Well Said!

“America needs her Navy today as much or more than we ever have in the past.”

Representative Rob Wittman (R-VA)
January 13, 2010

American Shipbuilder

Volume 15, Issue 7                                                                     December 2009

FY 2010 Defense Appropriations Bill Provides $ 12.5 Billion for 7 Naval Ships

On December 16th, the House of Representatives passed the FY 2010 Department of Defense Appropriations Act (HR 3326, as amended). The Senate passed the bill on December 19th. The legislation appropriates $12.5 billion for seven new naval ships. Congress provided funding for the procurement of one Virginia class submarine, one DDG-51 Arleigh Burke multi-mission destroyer, two T-AKE combat logistics force ships, two littoral combat ships, and one joint high speed vessel. The bill also funds the completion of the third DDG-1000 Zumwalt class multi-mission destroyer, and the tenth LPD-17 amphibious transport dock ship.

Additionally, Congress appropriated $578 million for the advance procurement of components for two DDG-51 destroyers in FY 2011. This is an increase of $250 million above the FY 2010 budget request. During conference of the bill, the House adopted the Senate’s recommendation to add $170 million in advance procurement funding for the LHA-7 amphibious assault ship. This advance funding will help to achieve a construction start in FY 2011. Congress decreased the budget request for three littoral combat ships to two ships and cut $300 million from the request, but increased the amount appropriated for each of the two vessels to $540 million. In the report accompanying the bill, the House and Senate stated that the reduction is “consistent with the Navy’s revised acquisition strategy for the program, which calls for down selecting to a single ship design in fiscal year 2010, versus the two designs that the program has been carrying.” Congress has also directed the Navy to provide monthly progress reports on construction costs of the littoral combat ship program.

Title XI Receives $35 Million in FY 2010 Appropriation Bills; $100 Million Provided in Jobs for Main Street Act

In an effort to stimulate job growth and invest in America’s Marine Highway, the Jobs for Main Street Act (HR 2847, as amended) provides $100 million for the Title XI Ship Loan Guarantee Program. The bill passed the House of Representatives on December 16th. The Senate will not consider the legislation until 2010. The funding is derived from a redirection of unused Troubled Asset Relief Program (TARP) savings to fund investments in America’s infrastructure. Congress appropriated a combined $35 million for new Title XI loan guarantees in the FY 2010 Transportation and Defense Appropriations bills ($5 million was provided in the Transportation Appropriations Bill and $30 million was included in the National Defense Sealift Fund of the FY 2010 Department of Defense Appropriations Bill).

The Title XI program, administered by the Maritime Administration (MARAD) of the Department of Transportation, provides small and medium sized ship owners with a federal guarantee of 87.5 percent of commercial bank loans for a period of 25 years for the construction of commercial ships in the United States. Title XI financing is used by U.S. ship owners to replace and expand their fleets of ships to meet the Nation’s energy transportation needs, domestic commerce requirements, and to serve as a military auxiliary fleet in times of emergency. The past and current Administrations have failed to request annual funding for new loan guarantees. Congress has regularly sought to provide funding to keep the program solvent. With the tightening of the credit market and hesitancy of lenders to agree to large commercial loans, the federal guarantee provided through the Title XI program is essential to making financing for vessel construction available.

The Title XI program has historically had a 20 to 1 multiplier, generating $20 million in ship construction in the United States for every $1 million appropriated for the program. Once an application for a Title XI loan guarantee is approved, the construction order is immediately placed in a shipyard, instantaneously creating and sustaining thousands of jobs in the shipyard and supplier base for two to three years.  

Virginia Members Urge Support for Shipbuilding Jobs

Prior to adjournment for the year, Representatives Bobby Scott (D-VA), Glenn Nye (D-VA), and Rob Wittman (R-VA) sent a letter to the Speaker of the House urging that as Congress continues to examine ways to stimulate job retention and growth, that the shipbuilding industry of the United States be given consideration.

Members of the Virginia delegation highlighted that America’s Navy and Coast Guard have unfunded ship requirements. Additionally, this country’s commercial ship owners need access to affordable financing to build ships for domestic commerce, and for energy exploration and development. Investment in America’s sea services should be a national priority because the nation has a large unfunded ship requirement, and because of the hundreds of thousands of highly skilled jobs created and sustained in all fifty states when ships are built.

Industry News

Shipbuilding Convention Resolution Adopted

The shipbuilding industry adopted a resolution at its annual convention on December 1st, pledging to work with the Administration and Congress to make recapitalization of the country’s Navy, Coast Guard, and merchant fleets a national priority. Following is the text of the resolution:

GROW AMERICA’S SEA SERVICES  

W hereas the Nation has a requirement for new ships to expand the fleet of the U.S. Navy from 285 ships to 313 ships; and

W hereasthe Nation needs to replace its aging fleet of Coast Guard cutters and icebreakers; and

W hereas affordable and available financing is needed for ship owners to replace and expand their fleets of commercial ships to economically carry the Nation’s cargo and expand domestic energy resources; and

W hereas development of a Marine Highway for the domestic shipment of cargo by sea would reduce congestion on roadways, save highway infrastructure costs, and realize a cleaner and more efficient transportation network; and

W hereas building ships for the Sea Services creates and sustains hundreds of thousands of good paying manufacturing jobs in all 50 states;

B e it resolved that the shipbuilding industry commits to working with the Administration and Congress to

1. increase the shipbuilding budgets of the Navy and the Coast Guard in fiscal year 2011; and
2. budget $60 million for the Title XI Ship Loan Guarantee Program; and
3. to support development of the Marine Highway for domestic cargo shipments.

Fairbanks Morse Engine and Nelson Stud Welding Recognized for Outstanding Sea Power Ambassador Recruitment

Cynthia L. Brown , President of the American Shipbuilding Association, presented Sea Power Ambassador Awards to Fairbanks Morse Engine, headquartered in Beloit Wisconsin, and Nelson Stud Welding, located in Elyria, Ohio, on December 1 st.

Become A Sea Power Ambassador

America’s sea services need your help. The U.S. Navy currently possesses only 285 ships, which is the smallest naval fleet since 1917. America’s Coast Guard fleet is one of the oldest in the world. As 2010 begins, show your support for America’s Sailors, Marine, and Coast Guard personnel by becoming a Sea Power Ambassador. As a Sea Power Ambassador, you will receive news articles about decisions that are being made that will impact the security of this country. You will also have the opportunity to “take action” and let your elected officials know that rebuilding America’s sea services must begin today. Visit the Sea Power Ambassador website and click Join Now!

ASA Welcomes New Members

The Hiller Companies, Inc.

Headquartered in Mobile, Alabama, the Hiller Companies designs and provides fire protection equipment for commercial and shipyard customers. The company specializes in fire detection and alarm; fire suppression; specialty flooring; sprinklers; combustible and toxic gas detection; system service; and fire and safety commodities.

NSC Technologies, Inc.

Well Said!

“A powerful Navy we have always regarded as our proper and natural means of defense; and it has always been of defense that we have thought, never of aggression or of conquest…
We shall take leave to be strong upon the seas, in the future as in the past.
And there will be no thought of offense or provocation in that.

President Woodrow Wilson
Annual Message to Congress
December 8, 1914

American Shipbuilder

Volume 15, Issue 6                                                                    September-October 2009

Senate Appropriates $13.6 Billion for Seven Ships

On October 6th, the Senate passed its version of the FY 2010 Defense Appropriations Bill (HR 3326, as amended), providing $13.6 billion for seven naval ships. The Senate added $1.7 billion and one additional DDG-51 Arleigh Burke class multi-mission destroyer to the Administration’s request, increasing the proposed FY 2010 procurement from one ship to two. In the report accompanying the Senate bill, appropriators stated that they believed that additional funding is needed to ensure economy of scale and “improve stability in the nation’s shipbuilding industrial base” as the Navy restarts the DDG-51 production line. The Senate also added $170 million in advance procurement funding for the LHA-7 amphibious assault ship, expressing support for funding LHA in FY 2010 in order to achieve a construction start in FY 2011.

The Senate cut the budget request for the T-AKE combat logistics force ship by $400 million, reducing the recommended procurement from two ships to one. Senate appropriators opted to halt funding for the second ship until after the Department of Defense completes the Quadrennial Defense Review of the Maritime Prepositioning Force of the Future. An additional cut of $300 million was made to the Administration’s request for the littoral combat ship, reducing the budget request from three ships to two. In the accompanying bill report, Senate appropriators expressed concern that the FY 2010 budget request of $460 million per littoral combat ship is insufficient to support the procurement of three ships given “the cost and schedule performance as well as the future acquisition strategy for the program.” The report stated that $540 million per ship in FY 2010 was a more realistic cost estimate.

The conference to resolve the differences between the House and Senate versions of the FY 2010 Defense Appropriations legislation is underway. The major differences to be resolved will be T-AKE, DDG-51, and LHA-7 funding. Another issue will be funding for the Title XI Ship Loan Guarantee program for commercial ships, which was funded at $50 million in the House bill. 

Secretary of the Navy Meets With Congressional Shipbuilding Caucus

On September 30th, the Congressional Shipbuilding Caucus, co-chaired by Representatives Gene Taylor (D-MS) and Rob Wittman (R-VA), hosted a meeting with Secretary of the Navy Ray Mabus to discuss the importance of maintaining strong Navy and Marine Corps fleets and a vibrant domestic shipbuilding industrial base. Other Members of Congress attending the meeting included Representatives Roscoe Bartlett (R-MD), Travis Childers (D-MS), Joseph Cao (R-LA), Joe Courtney (D-CT), Susan Davis (D-CA), John Duncan (R-TN), Gregg Harper (R-MS), Walter Jones (R-NC), Jim Langevin (D-RI), Eric Massa (D-NY), Glenn Nye (D-VA), Steve Scalise (R-LA), and Bobby Scott (D-VA). Other distinguished guests included Commandant of the Coast Guard Admiral Thad Allen and Sean Stackley, Assistant Secretary of the Navy for Research, Development, and Acquisition.

In his opening remarks, Secretary Mabus posed the question, “Why, in today’s shrinking global environment, does America need to maintain a robust Navy?” In response, the Secretary stressed that as a maritime nation, the United States must possess a global fleet. He said, “America’s Navy and Marine Corps are always forward deployed and are able to respond to any threat that comes at [the United States]. We do not have to ask permission to use the sea lanes, nor do we need a footprint on land to conduct wars, provide humanitarian assistance, or respond to disasters.” Citing the earthquake and tsunami that struck the Samoa islands on September 29th, Secretary Mabus said that U.S. naval ships were already underway to respond to the crisis. He stressed that America needs enough of these multi-mission platforms to respond to all missions, stating, “One ship, no matter how high the quality, cannot be in two places at once. At some point quantity becomes a quality all its own.”

Maintaining a robust shipbuilding industrial base is critical to maintaining a naval fleet capable of meeting global challenges. Secretary Mabus commented that the Navy has responsibilities to the U.S. shipbuilding industrial base to provide stability and predictability in its procurement plans. He noted that industry also has responsibilities to invest in facilities and train and maintain a skilled workforce that will result in cost savings that can be passed on to the American taxpayer.

In closing, the Secretary stressed again the importance of America maintaining a strong Navy. He said, “America needs a Navy in order to remain a global power. We need to be able to reassure our allies, deter conflicts, build relationships with other nations in order to avoid conflicts, and maintain the capabilities to provide humanitarian assistance and disaster relief. In other words, do all the things only a great Navy can do.”

U.S. Sea Services Focus on the Arctic

As new sea lanes open in the Arctic region and ship traffic increases, America’s sea services continue to develop strategies to ensure that this country’s national security and economic interests in the region are protected. During a September 22nd conference sponsored by the U.S. Naval War College on climate change, Rear Admiral David Titley, Oceanographer and Navigator of the Navy, outlined the Navy’s efforts to create an “Arctic road map.” According to Rear Admiral Titley, the road map will be used to make decisions about what ships, equipment, and infrastructure the Navy should invest in going forward. While no new naval missions have been specified, there exists the potential for an increased scope of naval operations in the Arctic. In addition to ensuring access to the Arctic region, the U.S. Navy is also concerned with the location of coastal bases as sea levels rise. Furthermore, climate changes may lead to changes in ocean currents and weather patterns, resulting in regional droughts and floods, which could result in increased humanitarian assistance and disaster relief missions. “The Navy sees the Arctic as much more of an opportunity than a challenge,” stated Titley. “Not to minimize the challenges that are there, but this is an opportunity to show the world that different nations can cooperate while simultaneously preserving their interests. We can get this right. We have the opportunity to get this right,” he went on to say. The Navy’s Arctic road map is expected to be publicly released at the end of the year.

The Coast Guard, the principal agency tasked with executing and supporting America’s interests in the Arctic, has been working closely with the Navy to determine the assets needed for an increased Arctic presence. For the Coast Guard, the issue is polar icebreakers. The Coast Guard has only three. Two of the ships have exceeded their 30-year intended service lives, and the other one is currently not operational. Commandant of the Coast Guard Admiral Thad Allen has testified before Congress that insufficient polar icebreaking capability places the ability of the United States to support its interest in the Arctic region at risk. In regard to naval assets, Rear Admiral Titley commented that submarines will continue to play a critical role in providing maritime security in the Arctic. With the current limited base infrastructure and harsh operating environment, a greater role for naval surface ships in protecting Arctic sea lanes is being evaluated.

The increased focus by America’s sea services to develop an Arctic strategy coincides with a report by the Danish Defense Intelligence Agency (DDIA) that warns of an increase in diplomatic and military conflicts as access to the Arctic increases, especially among the major Arctic powers. In addition to Denmark (via Greenland), these include the United States, Canada, Russia, and Norway. As published in the September 28th issue of Defense News, the DDIA report states that “the growing demand for oil will cause tensions as countries attempt to control the resources around the Arctic. The northern sea route will also increase in popularity, as the route will reduce shipping times and costs… In turn, this will augment the possibility of minor clashes and diplomatic crises between the coastal states in the Arctic region in the medium to long term.”

China Displays Military Strength

As part of celebrations marking the sixtieth anniversary of the People’s Republic of China, fifty-two types of new weapon systems developed and made in China, including the country's most advanced nuclear-capable missiles, were displayed. According to an October 1st article in People’s Daily, ninety percent of the weapons were exposed for the first time. The October 5th edition of Defense News reported that the weapons on display included anti-ship missiles, ship-to-air missiles, ground-to-ship missiles and amphibious vehicles.

Last April, the People’s Liberation Army Navy (PLAN) displayed two of China’s new indigenously constructed nuclear submarines, which was reported to be the first public that fleet.

You Can Make A Difference

Today’s Navy of 285 ships is the smallest naval fleet the United States has had in 92 years, and it is 28 ships below the force structure requirement of a 313 ship fleet. Keep informed of the decisions Congress is making with respect to America’s sea services. Sign up today to be a Sea Power Ambassador.

Well Said!

“We need to have the greatest Navy in the world in order to remain a global power.”

Secretary of the Navy Ray Mabus
Congressional Shipbuilding Caucus Breakfast Meeting
September 30, 2009