Worried About Navy's Aircraft Carrier Business, Shipyard Seeks to Diversify

11/21/2011
By Dan Parsons
NEWPORT NEWS, Va. — The nation's only builder of nuclear-powered aircraft carriers for the U.S. Navy is seeking commercial business as a hedge against anticipated Pentagon spending cuts and possible delays in ship programs.
Newport News Shipbuilding, a division of Huntington Ingalls Industries, is working on the next generation of nuclear-powered aircraft carriers. The first of those, the USS Gerald R. Ford, is more than halfway built and on schedule to be delivered to the Navy in 2015.
The second of the Ford Class carriers, which will bear the name of President John F. Kennedy, is in the planning stages and the company has already begun buying materials.
But the waters are murky from there into the future, as significant defense budget cuts becomes a distinct possibility.
Speaking to reporters Nov. 18, Matt Mulherin, president of Newport News Shipbuilding, said the company is looking for commercial business opportunities while continuing its Navy work.
The Ford and its successor ships would eventually replace the 11 Nimitz-class carriers in the Navy’s fleet. But a full slate of ships could be delayed as the Navy looks for ways to cut costs, perhaps through reducing its fleet strength or by keeping ships in service longer than their 50-year life expectancy.
“I’m not confident of that,” Mulherin said when asked if he expects the shipyard will build a full class of Ford carriers.  “I’m not convinced we’ll build them all. That’s what keeps us up at night.”
If the Navy decided to lengthen its purchase rate of one ship every five years or canceled one or more new carriers, the company would have to take drastic measures, he said. One immediate course of action would be to downsize, or “reconstitute the work force,” Mulherin said.
If the production process gets interrupted or the interval between carriers is lengthened from the current five-year period, the yard could be forced to suspend operations, Mulherin said. If that happened, getting up and running again would not be "very graceful.”
“Shipbuilders are skilled, trained, capable, ready to go. We have a supply base that touches almost every state in the nation,” Mulherin said. If business dries up, he said, "They aren’t going to wait around. They’re going to move on.”
Bracing for that possibility, the shipyard is banking on its ability to tap the civilian nuclear market in hopes of keeping its 20,700 employees at work. In partnership with French nuclear company Areva, the shipyard has begun construction of a facility in Newport News to build primary power-plant components for the commercial market, Mulherin said. However, market pressures resulting from the recent meltdown at the Japanese Fukushima nuclear power plant have forced that collaboration into a “strategic pause,” Mulherin said.
“Both parties fully intend to drive that into the future,” he said.
The shipyard is also working with Gamesa, a global wind-turbine engineering and construction firm, to increase turbine capacity and engineer them to withstand marine environments.
Mulherin said the company was also trying to leverage its skills with steel fabrication and construction to strike partnerships with other companies in heavy industries and plans to work with the U.S. Department of Energy as it continues to investigate the future of commercial nuclear power. “The skills and capabilities that we have in the yard, all of the things that we as a shipbuilder do in heavy industry lends itself to those sorts of things,” Mulherin said.
Meanwhile, shipyard officials are keeping their nose to the grindstone by focusing on immediate priorities: Building nuclear aircraft carriers and submarines, refueling and overhauling the existing fleet and decommissioning older ships that have met their half-century service life.
The Ford is 60 percent complete, with many of the prefabricated components ready for installation. The ship itself is built up to the main deck, which is the floor of hangar bay. The ship is scheduled to undock in July 2013 with delivery to the Navy scheduled in late 2015.
After the Ford, plans are in the works to build the John F. Kennedy, which is under a pre-construction contract. The shipyard is doing engineering work and purchasing materials in anticipation of a construction contract award in 2013. Delivery is scheduled for 2020. “We’re moving forward with our discussion with the Navy and we’re certainly optimistic about that” ship being built, Mulherin said.
Shipyard officials are looking for ways to cut down on the initial construction and maintenance costs of the $10 billion-plus ships. Mulherin is directing his 20,700 employees to shave cost at all levels from the design and construction process. The goal is to find $5 billion in savings over the life of each new Ford Class carrier, Mulherin said.
“That’s what I can affect is that end cost,” Mulherin said. “We’re always looking to lower costs in our business. And we recognize the external push to lower costs.”
The Navy has a resident officer at the shipyard who works with company officials in cutting costs while making sure the Navy’s needs are met. In the current fiscal environment, the company’s relationship with the Navy has “changed toward a more productive discussion about how do you get at reducing costs,” Mulherin said. Savings would come primarily from automating shipboard systems, which would help to reduce the carrier's crew size. The company is also simplifying the design process of the Gerald Ford using 3-D modeling and design programs, prefabricating large pieces of the ship’s interior prior to assembly and using the proven Nimitz-class hull as a baseline for the next-generation ships, Mulherin said.
When not building new ships, the company is busy rehabbing ships that have hit midlife. The USS Theodore Roosevelt is at the dock undergoing a $2 billion refueling overhaul that consumes 20 million man-hours of work. The process consists of replacing the ship’s nuclear fuel, tearing it down to the steel and refurbishing the structural elements of the ship and, finally, modernizing its weapons and operational systems.
Of the combat ships sailing today under a U.S. flag, 40 percent were built by some division of Huntington Ingalls. All of the Navy’s 11 nuclear carriers were built in Newport News.
But the yard is also responsible for mothballing the ships after the Navy takes them out of service. The next to undergo decommissioning will be the USS Enterprise, whose 50th birthday is Nov. 25. The company is expecting a contract next year to strip the ship down before it is towed to the Puget Sound for disposal.

Topics: Business Trends, Business Development, Partnering, Shipbuilding, Aircraft Carriers

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