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HII Petters: Now is the ‘Most Exciting Time’ in Shipbuilding in 30 Years

Ingalls Shipbuilding in 2017. HII Photo

Congress and the Pentagon are in the midst of a two-year spending spree, and Huntington Ingalls Industries (HII) leadership is positioning the shipbuilder to capture as many contract awards as possible before the funding window closes, perhaps as early as the Fiscal Year 2020. 

The FY 2019 National Defense Authorization Act gained Senate approval this week, just ahead of a quarterly earnings call Thursday morning by HII President and CEO Mike Petters in which he detailed the company’s near-term strategy with Wall Street analysts. Congress opened the checkbook in 2018 and 2019, but Petters said its unclear whether the increased spending will carry on through the next budget cycle.

For the quarter, HII reported revenues of $2 billion, compared to revenues of $1.6 billion a year ago. The revenues increase was due to increased work at the company’s Newport News Shipbuilding facility that builds carriers and parts of the Virginia-class submarines and refurbishes existing U.S. aircraft carriers. Earnings for the quarter were $257 million, an increase from the $241 million reported a year ago, according to the HII second quarter financial report.

HII CEO Mike Petters

“This is the most exciting time I’ve seen in shipbuilding in 30 years,” Petters said. “If you step back and just look at what we’re doing now, we have an offer in to the Navy to build two aircraft carriers. Our team has an offer into the Navy to build 10 submarines. And we are in a competition for a share of 10 destroyers.”

The Navy is evaluating bids for a new guided-missile frigate, with a request for proposals expected next year and a contract award anticipated in 2020, Petters said. HII’s Ingalls Shipbuilding submitted a bid for the work but has not announced any details. Also, Congress and the Pentagon are considering a multi-year plan for buying more San Antonio-class amphibious warship, Petters said.

In April, USNI News reported that the Navy plans to buy 13 Flight II San Antonio-class transport dock landing ships, which HII builds at its Pascagoula, Miss., shipyard.

“Is this an indication of a new sustained level for the business, or is this just going to be the rat in the snake where we have a lump in the business that we’re going work over the next five to ten years?” Petters said. “The job right now is to get the lump under contract, and then we go figure out how do we keep it at that sustained level.”

When considering both the FY 2018 and FY 2019 Department of Defense budget requests and appropriations, this two-year period increased the amount of money spent on shipbuilding to a point HII leadership is confidently predicting annual revenue growth of at least 3 percent for the next several years.

USS Gerald R. Ford (CVN-78) is pushed by tug boats as the ship enters Huntington Ingalls Newport News Shipbuilding to begin Post Shakedown Availability. US Navy Photo

“This two-year window is really special for shipbuilding. There’s a big question, really, about what happens in ’20? Sequestration kicks back in; what happens after that?” Petters said. “Our view is that a lot of the work we’re going to get under contract before ‘20 puts us in a pretty unique place.”

If the same type of spending continues in 2020, 2021 and later years, then the business will be even better, Petters said. But just because HII is bidding on ship programs, including those already built by the company, doesn’t mean the Navy will offer new awards to the shipbuilder.

The Navy’s bidding process for its anticipated purchase of 10 Flight III Arleigh Burke guided-missile destroyers is being run differently than before, which is why HII officials are optimistic but yet also somewhat unsure about how the contract awards will shake out.

“We had to price several different schedules and quantities of ships,” said Chris Kastner, HII chief financial officer. “For us, it created a circumstance in the proposal, basically, if you want the ships faster, there’s an opportunity to do that.”

Launch of Frank E. Petersen, Jr. (DDG-121). HII Photo

Meanwhile, HII has kept the cost of the future USS John F. Kennedy (CVN-79) within expectations, and the company expects launch will occur by the end of 2019, which is ahead of schedule. The company has a proposal to build the next two carriers under one contract, which he said would further reduce costs because of more efficient use of labor and bulk buys of building materials.

“We are not across the goal line, and we’ve been around long enough to know you do not get points until you’re across the goal line,” Petters said. “As far as the longer-term view, I’m encouraged to think that we’ll be able to get contracts for all of these ships over the next year to 18 months, and that will set the shipbuilding piece of our business up for the next five to 10 years. I’m very encouraged about that.”

  • ew_3

    Anything but the JFK II.
    Made a point during the two times I ran the Cape Cod Marathon and several Hyannis 1/2 Marathons of taking a leak right in front their compound.

    • TKnowles

      Classy, very classy.

    • Mr. Speaker

      You showed them!!

      • ew_3

        Better then my plan 2.
        He was my senator at the time.
        Suspect I knew more about him then the general public. He was a vile human.
        Just as Kerry was a vile character. He pretended for years to be Irish. Used to watch him show up at the South Boston St Patrick’s Day breakfast. Problem is he is not Irish. He’s Jewish. Nothing wrong with that, but why pretend your Irish?

        • ElmCityAle

          Aside from your interest in genetic heritage, Kerry – of part Jewish background – was raised Catholic. He served our country in the military proudly and with distinction.

          • vetww2

            I agree, even though I think that he is a fink.

          • ew_3

            Absolute BS.
            I served about 10 miles south of Kerry. He never served with distinction.
            He wanted to be like his role model JFK. He joined the Swift boats (I was CI).
            He thought he would run around Vietnam on something like a PT Boat like his role model. Sadly (for him) Swift boats were moved to the rivers.
            He got his first purple heart up in Da Nang (sp?). On his first day in action. And there are medical reports and after action reports show any indication of combat action.
            He got 3 purple hearts and spent a total of 1 day in hospital.
            Tell that to a combat Marine. They’d laugh at it.
            He’s a phony who did anything for anyone but himself.

        • vetww2

          I dididn’t know that. Are you sure. If so, why?

          • ew_3

            I’m sure about him.
            He got thrown out of Harvard for cheating. If his father had not been Joe Kennedy, former ambassador of England (and Hitler lover) he would never been taken back.
            He and McCain shut down an investigation into our missing POWs from Vietnam.
            I’m sure about McCain too.
            They were both cowards.

  • NavySubNuke

    Now we just need HAC and SAC to do their job and pass an appropriations bill so all of this ship building can actually get going.
    The block buy authority for carriers in the NDAA is a particularly important win for the future of the carrier force.

  • Jeff Myhre

    I hope C.V.N. 81 will be named Independence .The name reminds us of what we fight for alot more than naming it after a crook like Nixon or the crook that pardoned him or a cheating scumbag that could not remain faithfull to his wife Kennedy,Clinton,Trump if we name a carrier or any ship after a president or person they should be very respectable and honorable. I don’t think you can say that about Kennedy Clinton. Trump Ford anyone who cheats on thear wife or pardons a crook or has secret meetings with Russians with no American secret security or F.B.I or N.S.A. or C.I.A. or Homeland security in the room to keep things above board should not get a ship a building or anything named after them we should not be honoring any criminals or scumbags.

    • DaSaint

      So the USS Obama? He didn’t cheat on his wife as far as we know.

      But I don’t support the naming of carriers after presidents. They should be major events or concepts. Or Naval stalwarts. Not presidents.

  • tpharwell

    “It was the best of times. It was the worst of times.” The outlook for shipbuilding in America is closely tied to that for government finances and thus the overall economy. The good news is that due to years of underfunding, second-hand treatment, mismanagement, huge overruns, poor planning and dim strategic thinking, shipbuilding now has nowhere to go but up. The bad news is that with GNP surging to 4.1% in the last quarter in a sustained recovery from the Great Recession, a ballooning deficit as a result of a corporate tax cut of historic proportions, the outbreak of a trade war between the United States and the rest of the world, fought with tariffs that unavoidably will add to the cost of everything, a once again strong housing market, a central bank that has lifted interest rates some seven times in a row, and which can be expected to continue to do so in order to guard against inflation, and a giddy stock market that appears to be insensitive to these concerns, the US economy would appear to be close to having nowhere to go but down.

    Note the complete absence of any discussion of commercial contracts by the head of HII. Also note how isolated and close to the water the nice shipyard is. Sea level rise, anyone ?

  • Mr. Speaker

    Building ships is fine …….. it’s just getting something useful out of the PEO’s that is the problem.

    • Lazarus

      Why be hard on the PEO’s?

  • Jeff Myhre

    I agree they should not name any ship especially a carrier after a president . They also should not name any building or library or park after a president unless he is a honorable man with absolutely no criminal history or dishonorable behavior. Back to naming carriers I think they should be named after admiral’s or captains who have honorably in battle or war same gos for other u.s. war ships they should be named after a officer who served honorably in combat or war say from commander to lieutenant.

  • vetww2

    What he is really saying is code for the SWIPE program is in great shape. Who cares if we are building junk or the wrong ships.