American Shipbuilding Association

American Shipbuilder - Volume 7, Issue 6 - August 2001

Senator Olympia Snowe Receives
The Herbert H. Bateman Award

On July 18th Senator Olympia J. Snowe (R-ME) was presented with the American Shipbuilding Association’s highest recognition, The Herbert H. Bateman Award: “For consistent, outstanding, and inspirational leadership in support of a strong American shipbuilding industrial base.” Mr. Dick Vortmann, ASA Chairman and President of National Steel and Shipbuilding Company, and Mr. Allen Cameron, ASA Vice Chairman and President of Bath Iron Works, and Ms. Cynthia Brown, President of the American Shipbuilding Association presented the award. Also present at the presentation was Mr. Michael Toner, President of Electric Boat, Mr. Tom Kitchen, President of Avondale Industries, and Mrs. Laura Bateman, wife of the late Congressman Bateman.

In her remarks upon receiving the award, Senator Snowe strongly reaffirmed her support for rebuilding the U.S. Navy, “I tell you -- I am still firmly committed to maintaining a strong Navy, and I will do all that I can to work with you, to work with the defense department, Secretary England, and Secretary Rumsfeld to reverse the shipbuilding decline. I am committed to this, because I firmly believe that we have to get back to doing what we need to do, to sustain a minimum naval fleet of more than 300-ships.”

Senator Snowe spoke to the importance of shipbuilding to America’s national security and the many communities impacted by shipbuilding. “When I think about this association, and note that the six member shipyards engage over 90% of the workers who provide shipyard construction, and how crucial shipyards are to our communities, our states, and our country, it is essential to maintain a strong shipbuilding industrial base. Of that there should be no question or no doubt. We cannot afford to loose that infrastructure.”

Senator Snowe also addressed her long-established commitment to commercial shipbuilding: “I will continue to fight any challenge to the Jones Act, the Passenger Vessel Services Act, or any time in the future there is an ill conceived agreement such as the OECD.” Senator Snowe went on to say, “I was appalled by the recent New York Times article and the editorial premised upon that article, that somehow claimed Title XI Ship Loan Guarantee Program was comparable to pork-barrel politics. I thought how easily one could glibly dismiss the value of this program, without understanding the fundamental principles that support the program and what it is all about. I guess that is easy to say if you don’t mind other countries building our ships. But obviously that article doesn’t reflect an appreciation for the struggles that American shipbuilders confront in competing with subsidized shipyards in other countries. Subsidized by their governments, not just by loan guarantees, but by cold, hard, cash.”

Senator Snowe also spoke of her legislation to allow naval shipbuilders to pay their taxes upon delivery of a ship. Her “Tax on Delivery” bill enjoys bipartisan support, and when enacted will remove an onerous cash flow burden placed exclusively on shipbuilders because of the long construction time for naval ships compared with that of other defense manufacturers.

This is Help?

One of President George W. Bush’s prominent campaign themes regarding the military was, “Help is on the way.” With the release of the Fiscal-Year 2002 Defense Budget, many are wondering what the President meant. The President’s budget proposes an $18 billion total increase for the Department of Defense. The lion’s share is going to operations and maintenance accounts, personnel issues, and $3 billion for missile defense. No funding increases were recommended for procurement of modern tactical weapon systems. The budget fails to address the last decade of neglect that has left the Navy with the smallest fleet since 1917 – more than 80 years ago. Navy Officials have long maintained that if the shipbuilding trends of the last decade remain unchanged, the Navy will shrink to a 180-ship fleet.

The FY2002 President’s budget request seeks funds for only 5 and 1/7th new ships. This budget request marks the (9) ninth year in a row that the Navy’s shipbuilding budget request funds for only six-ships a year, on average. Well below the 10-ships a year necessary to sustain the minimum force level of 300-ships identified as the requirement in the 1997 Quadrennial Defense Review. Specifically the budget request funds for, (3) three DDG-51 destroyers, (1) one SSN-774 attack submarine, (1) one T-AKE support ship, and 1/7th of LHD-8 amphibious assault ship. This neglect of the Navy’s shipbuilding account is making naval ship procurement a serious “quality of life” issue for the dedicated men and women serving at sea today and tomorrow.

In a reaction to the President’s budget, Ms. Cynthia Brown, President of the American Shipbuilding Association, said, “Nero fiddled while Rome burned, I hope President Bush ceases to fiddle before we have no Navy to defend the security and economic interest of all Americans.”

Senate Holds Hearing On Sea Power

In her opening statement at the July 31st Senate Armed Services Sea Power Subcommittee hearing, Senator Susan Collins (R-ME) voiced her support for working with the administration to reshape our military and rebuild the Navy’s fleet, “As I have stated before, numbers do matter. The number of ships under construction ten years ago was 110, while only 37 ships are under construction today – this is a 66 percent decline in ship construction. Furthermore, while the number of ships authorized to be built ten years ago was 11, today the budget request before us authorizes a mere six ships.” Senator Collins added, “We have been consistently under funding the naval shipbuilding and research and development accounts; the future force is at risk. Navy Officials have repeatedly warned that the fleet is stretched perilously thin and needs to be increased to at least 360-ships to meet its present mission requirements.”

The witnesses at the hearing were Mr. John Young, Assistant Secretary of the Navy for Research, Development, and Acquisition, and Admiral William Fallon, Vice Chief of Naval Operations. Secretary Young and Admiral Fallon, in their combined statement to the committee, noted that the FY2002, “shipbuilding plan is barely adequate to sustain the remaining naval shipbuilding industrial base, including the suppliers that provide supporting equipment and associated engineering services.”

Secretary Young and Admiral Fallon acknowledged three major deficiencies with the FY2002 naval shipbuilding budget request. First, that it will exasperate the existing “bow wave” of future-shipbuilding requirements. Second, it will add additional stress to the Navy’s operation and maintenance budget accounts, as the fleet tries to sustain and extend the service lives of aging and increasingly obsolete ships to maintain current force structure. Third, the continued low level of naval ship procurement will result in increased employment cost to the government for future ship construction, as it will create a layoff-hiring cycle within the shipbuilding industry.

House and Senate Support Title XI
Reject Presidnt's Recommendation

The President’s budget request for FY2002 proposed eliminating all funding for the Title XI Ship Loan Guarantee program labeling it an unnecessary “Corporate Welfare” program. Congress recognized that a program that has generated $83 million in revenue to the U.S. Treasury and that plays an important role in sustaining the defense shipbuilding industrial base could not be labeled “Corporate Welfare,” and rejected the Administration’s recommendation.

On July 18th the House of Representatives passed H.R. 2500, the Commerce, Justice, State Appropriation Bill for FY2002, by a vote of 408 to 19. In that bill, the House provided $34 million for the Maritime Administration’s Title XI Ship Loan Guarantee Program, $30 million above the President’s budget request. On July 19th the Senate Appropriations Committee reported its version of the bill, 29-0. Included in the Senate version of the bill is $100 million for the Maritime Administration’s Title XI Ship Loan Guarantee Program.

To state that commercial shipbuilding is “Corporate Welfare” or “Pork-Barrel Politics” reflects a complete lack of understanding of the shipbuilding industry. The major builders of naval ships in this country have always depended on a combination of commercial and naval ship orders to sustain their companies, their highly skilled engineering and production workforce, and the network of thousands of ship system and equipment manufacturers throughout the nation. Foreign-built commercial ships are cheaper because foreign governments provide billions of dollars in subsidies for shipyard facilities, technologies, and to discount ship prices. Many foreign governments even offer interest free loans to ship-owners who contract for ships built in their shipyards. Ships won’t be built in the U.S. if owners can’t have access to affordable financing.

FY2001 Supplemental Includes Money For
Prior Year Shipbuilding Bills

Congress passed the FY2001 Supplemental Appropriation and President Bush signed the bill into law on July 24th. Included in the bill was $297 million to cover prior year shipbuilding bills for four Navy programs: CVN 76, LPD-17, DDG-51, and the Virginia class submarine. This funding will cover bills owed by the Navy through the end of September of this year. At that time additional money is needed to avoid work stoppage.

Industry News

Peter Gwyn Retires as President of Bird-Johnson/Rolls-Royce Naval Marine

Mr. Gwyn joined Bird-Johnson company in 1991 as President and CEO. Under his guidance Bird-Johnson stressed responsiveness to the U.S. Navy and U.S. shipyards. Under Gwyn’s leadership the company expanded its product lines to include water-jets and in the process patented the Bird-Johnson-AWJ-21 propulsor, which has great promise for naval applications and will undergo Office of Naval Research testing during 2001-2002. Mr. Gwyn dedicated his 23-years of service in the shipbuilding industry to fighting for a strong American shipbuilding industrial base.

Bath Iron Works Opens New Land-Level Transfer Facility

The new $240 million land-level transfer facility was dedicated on May 5, 2001. In November 1998, Bath Iron Works (BIW) began a modernization program of the shipyard with the centerpiece being a new 750-foot long dry dock and 15-acre land-level transfer facility. Allan Cameron, President of BIW, remarked at the dedication, “Our unions and our employees supported this project with tremendous energy and enthusiasm. They worked tirelessly to spread the word on the importance of modernizing this facility.”

The opening ceremony of the facility featured the keel laying of the destroyer Chafee (DDG-90). The ship is named for the late U.S. Senator John Chafee of Rhode Island, and is the 22nd of the class to be built at Bath Iron Works. Senator Susan M. Collins (R-ME), Senator Olympia J. Snowe (R-ME), Representative John Baldacci (D-ME), and Mrs. Virginia Chafee, wife of the late U.S. Senator, attended the ceremony.

Avondale Alliance Awarded $113.2 Million Advance Procurement For 5th and 6th LPD-17 Ships

On July 20th the Avondale Alliance, led by Avondale Industries and teamed with Bath Iron Works, was awarded $113.2 million for advance procurement of long-lead materials for the fifth and sixth ships in the LPD-17 program. “This advance procurement award demonstrates the importance of the LPD-17 program and the Navy’s commitment to it,” said Tom Kitchen, President of Avondale Industries. Long-lead material consists of items such as the main engines, generators, propellers, and reduction gears.

Ingalls Shipbuilding Awarded $81.3 Million Contract For Amphibious Assault Ship

On July 2nd Ingalls Shipbuilding was awarded an additional $81.3 million for the continuation of work towards the construction of an eighth WASP class amphibious assault ship (LHD-8). Ingalls will purchase materials and begin initial preparations for the construction of selected assemblies and subassemblies. A contract for full ship construction is expected in early 2002. Thus far, Congress has appropriated a total of $880 million in design and material procurement for the LHD-8. The ship will be incrementally funded through FY2006.