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