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New Pentagon Report Points to Problems in the U.S. Shipbuilding Industrial Base

A unit for the future aircraft carrier John F. Kennedy (CVN-79) rests on the assembly platen at Newport News Shipbuilding, Va. US Navy Photo

The U.S. shipbuilding industry has contracted during the past two decades and is indicative of the financial pressures squeezing the entire defense industrial base, according to an unclassified version of a new Pentagon report released on Friday.

Since 2000, the report said the entire defense industrial base lost more than 20,500 U.S.-based manufacturing firms. As these firms closed, the work they once performed was sent overseas, creating a situation where “A surprising level of foreign dependence on competitor nations exists.”

Companies involved in manufacturing shipbuilding components were among the hardest hit by a shifting global marketplace during the past 20 years, the report states. Across the shipbuilding sector, manufacturers and suppliers have left the industry, limiting competition. In some cases, the Navy is forced to rely on a single and sole source supplier for critical components.

“These companies struggle to survive and lack the resources needed to invest in innovative technology,” the report states. “Expanding the number of companies involved in Navy shipbuilding is important to maintaining a healthy industrial base that can fulfill the 355-ship fleet and support the Navy’s long-range shipbuilding plan.”

The Navy currently has only one firm manufacturing and refurbishing shafts used by both surface ships and submarines. Having only one source for shafts hampers the Navy’s ability to both build and refurbish ships. Meanwhile, the report said because only one employer exists, technical schools have stopped training students to operate the type of aged equipment used by the firm.

“If the forge is not modernized, the facility may exit the market, causing disruptions to multiple Navy programs,” the report states.

The total number of shipbuilding workers has also decreased, and the report predicts will continue shrinking. This contraction will become direr because as the number of jobs decreases, fewer new workers will enter fields critical to shipbuilding, such as ship-fitting, welding, and casting.

“While we have not had time to study the administration’s industrial base report in detail, what we have seen of the report validates many of our own concerns about the health of the base. We will continue to study the report and we look forward to working closely with the Department of Defense to address critical areas of risk,” Beci Brenton, a spokeswoman for Huntington Ingalls Industries, said in a statement to USNI News.

“Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States, ”was created by an interagency task force led by the Department of Defense Office of Industrial Policy. An unclassified version of the report released Friday lists several factors facing the defense industrial base, including uncertain government spending, foreign competition, a shrinking domestic industrial workforce and a decline in critical markets and suppliers.

“The shipbuilding sector illustrates how a decline in U.S. manufacturing, coupled with budget sequestration, impacts the industrial base,” the report states.

Overall, manufacturing jobs in the U.S. have steadily disappeared. On January 1, 1980, there were about 19.3 million manufacturing workers in the U.S., According to the Bureau of Labor and Statistics. By January 1, 2018, the number of manufacturing workers in the U.S. had shrunk by 35 percent to 12.6 million.

Investing in machine tools, which are power-driven machines that shape and form metal, are cited by the report as an example of where U.S. firms have lagged behind international competitors in reinvesting in their plants.

“Critical to creating modern defense and non-defense products, machine tools impact the entire supply chain and multiple sectors,” the report states.

But today, the machine tool production in the U.S. is worth $4.6 billion, far less than the $24.7 billion spent by Chinese firms.

The problems facing the defense industrial base today, though, are hardly new.

  • A 1985 GAO report stated, “Concerns about the ability of the industrial base to meet defense requirements is not new but has been exacerbated by the prospects of defense-spending increases totaling some $1.9 trillion over the next five years and possible perturbations caused by an improving economy. Adding to the concern is the transition from short-duration scenarios of war to those in which probable conflicts are of indefinite duration, anywhere in the world.”
  • A 1988 GAO report warned a dependence on foreign-made component-parts in the short term could provide cheaper high-quality parts, overtime relying on overseas contracts could weaken U.S. companies and evolve into a vulnerability. Citing a Pentagon study, this report stated, “The Under Secretary’s report stated that (1) DOD does not know the extent to which foreign sourced parts and components are incorporated in the systems it acquires and (2) in a national emergency, the consequences of extensive dependence on foreign sources could be extreme.”
  • A 1993 GAO report took a dim view of the Pentagon’s plan to rely on the defense industrial base to adjust to what was then an anticipated period of declining defense spending. “DOD has taken the position that free market forces generally will guide the restructuring of the defense industrial base. We believe that this is not a realistic strategy for ensuring that government decisions and industry adjustments will result in the industrial and technological capabilities needed to meet future national security requirements,” the 1993 GAO report states.

As for reversing declines in defense industrial base production, stable funding tops the list of suggestions. Increasing the amount of U.S.-manufactured military equipment sold overseas will help expand the demand for products made by many of the smaller manufacturers.