American Shipbuilding Association

Congressional Members Urge Administration To

Increase Navy’s FY 06 Shipbuilding Budget

Several Members of Congress have expressed the need to increase the Navy’s FY 06 proposed shipbuilding budget – which calls for only $6 billion for just four ships.  While some Members of Congress are urging the President and the Secretary of Defense to budget what is needed for our national security, the Navy’s fleet dropped to 290 ships in late September.  The fleet is now 85 ships below the 375-ship fleet that has been identified as the Nation’s requirement. 

Senator Joseph Lieberman (D-CT) recently stated that the Navy’s proposal to buy only four ships in its fiscal year 2006 budget is “troubling” and that “most every program is in peril…”  The Senator expressed further concern that if the Department of Defense submitted a budget with only four new ships, then the fleet would fall to dangerous levels.

In a September 20th letter to Secretary of the Navy Gordon England, Senator Susan Collins (R-ME) wrote the following:

   I am contacting you in regard to disturbing reports about the Navy’s proposed FY 2006 shipbuilding budget.  This is an issue of utmost importance to our nation. 

   As you know, the 2001 Quadrennial Defense Review called for a naval fleet strength of no fewer than 310 vessels.  Currently, there are only 295 ships in the fleet.  I am deeply concerned about reports that the Navy has prepared an FY 2006 shipbuilding proposal that would further, and more dramatically, erode the current force structure.  The nation’s naval posture relies upon the continued enhancement of the fleet’s strength and size. 

   By dramatically reducing warship procurement plans, we would be placing our critical naval shipbuilding industrial base, which would be virtually impossible to reconstitute, in jeopardy despite the certainty that significant future threats to our national security will arise…

A bi-partisan coalition of Senators led by Senator John Breaux (D-LA) has also contacted the President, and asked the Administration to increase the Navy’s shipbuilding budget.  In a letter dated September 27th, Senators Thad Cochran (R-MS), Mary Landrieu (D-LA), Jack Reed (D-RI), Lincoln Chafee (R-RI), Trent Lott (R-MS), and Olympia Snowe (R-ME) joined Breaux in voicing their concern not only over the Navy’s budget for FY 2006, but the proposed shipbuilding plan for FY 06-FY11 – a plan that will drop our Navy to below 250 ships. 

Discussing the delays in construction starts for programs like CVN-21, and cuts or early terminations to programs like DDX, LPD-17, and T-AKE, the Senators pointed out that delays and smaller shipbuilding plans will only add to the cost of ships.  This will create a death-spiral from which it will be difficult, if not impossible to stop.  The Senators urged the President to increase the shipbuilding budget in FY 06.  They further stated:   

As you [the President] consider this budget proposal, we also ask that you take into account the devastating impact these budget cuts would have on the defense shipbuilding industrial base.  The industry has contracted dramatically over the last decade and further contraction will result in the loss of critical companies, technologies, and tens of thousands of highly skilled engineering and production workers, which will threaten the future viability of the American defense shipbuilding industrial base.  Without an immediate increase in the shipbuilding rate, the already depleted defense shipbuilding industrial base will no longer be able to build enough ships and submarines to even sustain a 250-ship Navy.

In a letter spearheaded by Representatives Jo Ann Davis (R-VA) and Gene Taylor (D-MS) to Secretary of Defense Donald Rumsfled, Members of the House of Representatives pointed out the Navy’s present need for more ships, and urged prudent consideration of the FY 2006 shipbuilding budget.   

…This budget threatens to undermine America’s sea power capability at a time when ships are needed as never before to wage war on terrorism and in defending our security interest against today’s threats and potential emerging naval threats, such as China…

Only naval forces provide the country with the mobility and flexibility to respond quickly and decisively around the globe – without a permission slip from other nations – in defending America’s interests… America’s naval forces are clearly stretched too thin now, and the stress will only grow worse as the fleet continues to decline…

The following Members co-authored the letter with Reps. Davis and Taylor:  Representatives Rodney Alexander (R-LA), Tom Allen (D-ME), Jo Bonner (R-AL), Leonard Boswell (D-IA), Jeb Bradley (R-NH), Robert Brady (D-PA), Max Burns (R-GA), Richard Burr (R-NC), Ken Calvert (R-CA), Ander Crenshaw (R-FL), Duke Cunningham (R-CA), Susan Davis (D-CA), Phil English (R-PA), Randy Forbes (R-VA), Virgil Goode (R-VA), Bob Goodlatte (R-VA), Gene Green (D-TX), Melissa Hart (R-PA), Robin Hayes (R-NC), Maurice Hinchey (D-NY), Amo Houghton (R-NY), Steve Israel (D-NY), William Jefferson (D-LA), Chris John (D-LA), Walter Jones (R-NC), Patrick Kennedy (D-RI), Jim Langevin (D-RI), Rick Larsen (D-WA), John Larson (D-CT), Frank LoBiondo (R-NJ), Donald Manzullo (R-IL), Jim Matheson (D-UT), James McGovern (D-MA), Mike McIntyre (D-NC), John Mica (R-FL), Michael Michaud (D-ME), Jeff Miller (R-FL), George Nethercutt (R-WA), Solomon Ortiz (D-TX), John Peterson (R-PA), Chip Pickering (R-MS), Todd Platts (R-PA), Ileana Ros-Lehtinen (R-FL), C.A. Dutch Ruppersberger (D-MD), Loretta Sanchez (D-CA), Bobby Scott (D-VA), Ed Schrock (R-VA), Rob Simmons (R-CT), Christopher Smith (R-NJ), Billy Tauzin (R-LA), Peter Visclosky (D-IN), David Vitter (R-LA), Curt Weldon (R-PA), Roger Wicker (R-MS), and Joe Wilson (R-SC). 

The Secretary of the Navy has been quick to point out that the preliminary budget is still under consideration.  In public comments made on September 29th, the Secretary acknowledged that costs are increasing throughout the Department of Defense, and attributed costs increases in the shipbuilding account “partly because of requirements and part of it is because our base is smaller and less competitive.”  The base is smaller because fewer ships are being built.  Conversely, costs will increase even more if the Navy continues with its proposal for four ships next year and the industry will continue to shrink.  It is a viscous cycle that must be broken if the U.S. ever expects to maintain its sovereign capability to build naval ships. 

The American Shipbuilding Association applauds the leadership of the aforementioned Members of the House and Senate and urges the entire Congress to support an increase in the FY 2006 naval shipbuilding budget.

Tax on Delivery Legislation Included in Jobs Bill

Before adjourning for the election, the House Ways and Means and Senate Finance Committees completed work on the American Jobs Creation Act (HR 4520).  Senator Olympia Snowe (R-ME), with support from Senators Trent Lott (R-MS) and John Breaux (D-LA), and Representatives Nancy Johnson (R-CT) and Eric Cantor (R-VA), successfully included legislation to amend the Tax Code to permit naval shipbuilders to pay 40% of their taxes during the construction period, and 60% upon completion of construction.  This change essentially provides parity to naval shipbuilders as that provided to commercial shipbuilders under the Tax Code.  If the naval vessel takes longer than five years to build, the shipbuilder would have to pay 60% of the deferred taxes at the end of five years, and then annually pay a percentage of the estimated tax through delivery of the vessel.  The new law applies on a ship by ship basis, and will begin on the date construction commences.  The Joint Committee on Tax placed a $495 million cost to this change in the Tax Code over five years, even though it is not a tax cut – but rather a payment timing issue.    

This is a tremendous victory for the U.S. shipbuilding industry.  It will help to strengthen the financial health of the entire shipbuilding industrial base by allowing taxes to be paid closer to the time income is actually received.  The industry extends its gratitude to each of the Senators and Representatives whose initiative made this change possible. 

New Partners

ASA welcomes ODI Advanced Technology Systems of Ormond Beach, Florida, Baker Sheet Metal Company of Norfolk, Virginia, and American Metal Bearing of Garden Grove, California as new partner companies.  ODI is a leading producer of sub-sea electrical and fiber-optic interconnect systems.  Baker Sheet Metal Co. is a manufacturer of shipboard furniture, and bathroom and galley components.  American Metal Bearing Company designs and builds propeller shafts and other marine bearings. 

Industry News

Tom Schievelbein Retires from Newport News

It is with great regret that the American Shipbuilding Association announces the retirement of Tom Schievelbein, president of NG Newport News.  In his seventeen years at Newport News, eight of which he served as President, Mr. Schievelbein has been a leader, not only for the shipyard, but the entire shipbuilding industry. 

C. Michael Petters, Vice-President of Human Resources, Administration, and Trades, will assume the position of President on November 1 of this year.  Mr. Petters has been with Newport News for seventeen years. 

ASA would like to thank Mr. Schievelbein for his years of dedicated service, and congratulates  Mr. Petters on his new position. 

Sea Power Ambassadors Now Number Over 11,000 –

Well Said!

“Climbing 40-foot ladders and staging…squeezing into tight areas…crawling into small tanks…using mirrors to see what they are welding…working in tolerances that most people cannot comprehend…Building a submarine is tough work.  It’s team work.  It’s noble work… We should all feel privileged to be in their company…”

Tom Schievelbein
President, NG Newport News
Christening of the USS Texas
July 31, 2004