April 2012

For a time, submarine manufacturers and their suppliers will have it good.

The mantra of building two boats per year, the minimum number advocates say is required to keep the highly specialized industry humming along, will be in place for the next few years.

However, the fiscal year 2013 budget proposal is throwing a wet blanket on these carefully laid out plans.

On the chopping block is one Virginia-class attack submarine slated for 2014. The completion of the Virginia-class submarine fleet would have dovetailed into a program to replace the Ohio-class submarines that carry the nation’s ballistic missiles, and kept the workflow steady.

The proposal has that program being pushed back two years, and research-and-development funding leading up to it is taking a hit.

This is causing a great deal of consternation in the submarine building industry. Only two boatyards currently construct the vessels — General Dynamics Electric Boat and Newport News Shipbuilding. Yet, they depend on some 5,000 suppliers spread across all 50 states. And some of those suppliers, in turn, depend on them to stay in business.

While the large shipyards can better withstand the vagaries of the federal budget, these lower-tier suppliers are more vulnerable to changes to the two submarines per year plan, said Brian M. Wilson, Ohio replacement program director at GD Electric Boat.

“I think the first thing [suppliers] are seeing very early is a lack of stability — a lack of commitment — and that needs to be tempered, especially for this Ohio replacement program,” he told National Defense.

The other mantra coming out of the Defense Department is that the nation must preserve its military industrial base, particularly in highly specialized areas that are critical to national security, and where the work can only be done in the United States. These niche capabilities may require engineering expertise that takes years to nurture, yet the opportunities to work on these programs are few and far between. The nation’s fleet of spy satellites is one example. Submarines also fall into this category.

Wilson said the Defense Department’s proposed cuts and the stated desire to preserve the industrial base sends a mixed message.

The first of the Ohio-class submarines, sometimes called “Tridents” for the missiles they carry, was commissioned in 1981 and construction continued for another 17 years. At one time, the United States had 96 ballistic missile carrying subs plying the seas to deter the Soviet Union from launching a nuclear attack. Both Treaty obligations, and the end of the Cold War, reduced these numbers to 14. (Four of the original 18 Ohio-class subs were converted to cruise missile launchers and do not carry nuclear weapons).

Navy Cmdr. William C. Chinworth, in a 2006 paper, “The Future of the Ohio Class Submarine,” which was produced for the Army War College, noted that there was some debate as to whether Trident outfitted submarines were still needed. Terrorists, for example, would not be deterred from using a nuclear weapon against the United States, some argued. However, nations such as North Korea and Iran, who may be pursuing nuclear weapons, were still a threat, others countered.

Of the nuclear triad, bombers, land-based missiles, and submarines, the latter is also seen as the most survivable when faced with a counter-attack, Chinworth noted.

The debate as to whether ballistic missile submarines were truly needed gained little traction in Congress or the Pentagon, and a replacement program kicked off in 2008 with R&D contracts awarded to the two shipyards. As was the case for the Virginia-class, the Navy intends to give work to both companies in order to maintain the industrial base. Current plans call for 12 of the replacement submarines, which will be made possible because the nuclear fuel and power system will be designed to last 40 years, and the vessels will not have to be docked in order to replace its fuel in the middle of its service life.

Since they are expected to last four decades, the Navy wants the most up-to-date technology possible with open architecture so new capabilities could be integrated as they come along. Meanwhile, it wants to leverage existing components being used in the Virginia-class subs.

The first of the Ohio-class submarines is expected to retire in 2029. There is little the Navy can do about this because the hulls, which must withstand the pressures of sailing under the ocean, will not last much longer.

“It has got to be done right the first time,” said Joe Carnevale, senior defense advisor to the Shipbuilders Council of America. “This is not a program that has a lot of wiggle room in it. It is a national asset that is delivering a strategic weapon, and therefore must be done correctly.”

The two-year delay pushes back the beginning of construction to 2021.

Wilson said one of the key successes of the Ohio program was that it called for 18 ships, there was one a year, and that schedule was stable. Studies showed that consistency was one of the key elements to its success, he said.

“Stability will also need to be a key element in this program,” he added.

“These suppliers — as they look to the 30-year plan — may have been making facility plans, infrastructure plans, resource plans to support it. And now they are seeing the first of a few shifts,” Wilson said.

Brian T. Fields, vice president of supply chain management at Newport News Shipbuilding, said the Ohio-class replacement program is still in the research-and-development phase. “Near term it doesn’t pose a disruption to the supply base, but long term, retaining that link up to what they’re doing” on the Virginia-class submarines is critical, he said.

Some of these lower-tier suppliers came to Capitol Hill in March to state their case to lawmakers at an industry day breakfast.

Thomas V. Costello, executive vice president at Hansome Energy Systems Inc., of Linden, N.J., was one of them.

His company does both engineering design work, and the manufacturing of submarine and surface ship components.

The Ohio-class replacement program is the only new start on the horizon, he said.

“It impacts our engineering staff. If it gets pushed off, it is very difficult to hold onto the engineers in a downturn,” he said.

The company has built up expertise in its design staff in the field of air compressors over the past 40 years. His company employs about 48, but uses about 200 suppliers. Some of these companies are larger than his. Others are small shops like foundries that make metal parts.

He recalls a similar situation when funding for the Virginia-class Block Three was delayed. One foundry’s owner was down to a skeleton crew waiting for the program to start.

“I had to keep telling him, ‘it’s any time now. It’s any time now,’ and he went out of business. And two months later, the contracts came in. He would have been able to stay in business.”

“These peaks and valleys kill me,” Costello said. “If I lose my engineers, I lose my company.”

Janis Herschkowitz, president of PRL Inc., a Cornwall, Pa.-based company that manufactures parts for submarines, surface ships and nuclear power plants, said her problem is finding and keeping highly skilled labor.

“These guys are the best of the best. The best welders, the best level-three x-ray readers and machinists,” she said. But not everyone can do these jobs. She has to plan her human resource needs years in advance to make sure she has the right workers in place. She employs about 150. Despite high unemployment rates, there is a skilled labor shortage in Pennsylvania. Attracting and retaining workers with the right qualifications is competitive.

“It’s not like you can put an ad in the paper and get welders to replace these welders. We have to build up that base, get the next level of skilled labor in there and be able to keep going forward,” she said.

“It’s hard when you get somebody and then have to say, ‘Oh. I’m sorry. It’s been delayed now. We don’t need you.’”

Carnevale said: “The specialized work force they have on submarines doesn’t translate well into companies and skill sets for surface ships, particularly the surface ships that are coming down the pike.”

Fields said the supply base has ramped up to be able to support the two-ship- per-year plan. The industry estimates that 5,800 jobs are at risk if the second submarine isn’t built in 2014, he said.

Ashley Godwin, also a senior defense advisor to the Shipbuilders Council of America, said the shift in the building sequence for the Virginia-class attack submarines will result in lost jobs.

“There is a huge impact. Once those jobs are gone, people will be employed somewhere else, and they’re not going to come back,” she said.

It also threatens to take away the efficiencies that have been gained with the steady amount of work, she added.

Citing estimates from the two boatyards, Godwin said delaying the second 2014 submarine would increase the Virginia-class program’s total cost by more than $500 million, and the per-unit/hull cost in the range of $50 million to $70 million.

“There is nothing that saves money more effectively than continuity of production,” Carnevale said.

“The requirements and the budgets are at odds, and right now it’s not a very happy balance,” he said. “The demand for attack submarines is going up, not going down, and the Ohio-class replacement is a national requirement. I don’t see how you can debate the need to do that.”

These arguments are not lost on members of Congress, Godwin noted.

At the industry breakfast on Capitol Hill, a series of lawmakers, mostly from Connecticut and other states with the two shipbuilders in their backyards came to give speeches lending their moral support.

A few senior lawmakers were veterans of the budget battles to save the Seawolf-class of attack submarines in the late 1990s. Some industry representatives came with “Save the Wolf” buttons that were worn in the halls of Congress back then. The pro-submarine coalition lost that battle, though.

Navy officials have repeatedly called the Ohio-class replacement program delay “an acceptable risk.” It is looking to save $24 billion in its modernization accounts from fiscal years 2013 to 2017.

Whether the two proposals survive the fiscal year 2013 budget battles remains to be seen. Other industries, such as aerospace, are waging similar fights on Capitol Hill to save their cherished programs.

“The president’s budget request is just that: a request,” Godwin said. “The Virginia-class is one of the few major acquisition programs that Congress actually has confidence in,” she added. The per-boat costs have dropped $200 million because of the two-boat-per-year efficiencies. “It’s a model program. It should not be messed with.”