The announcements, which run contrary to the general sentiment surrounding the US Submarine Industrial Base, come during a turbulent period for the industry and the broader US Navy submarine force.
“…turning to labor, we have hired nearly 5,400 craft personnel year-to-date through the third quarter, which puts us 8% ahead of our full-year plan of approximately 5,000. We have work to do to improve our retention rate and the shipbuilding teams are laser focused on addressing this challenge. Retention and attendance and the acceleration of workforce development will remain consistent focus areas for us going forward,”
Chris Kastner, President and CEO of Huntington Ingall Industries in an earnings call.
The company’s Newport News Shipbuilding division co-builds the Virginia-class and Columbia-class submarines with Electric Boat. The company is also the sole builder of the US Navy’s Ford-class aircraft carriers.
The sentiment at Electric Boat was similar to that at HII:
“…this year has turned out to be quite a bit different than we originally anticipated, and that’s largely attributable to the increased throughput that we’ve seen at Electric Boat in particular as the hiring and retention dynamics have really improved faster than we thought,”
Jason Aiken, Executive Vice President, Technologies, and Chief Financial Officer.
In recent years, both shipbuilders have been working around the clock to get back the construction cadence they had before COVID-19. The deadly pandemic was one of many compounding factors that affected the industrial base. Attendance at Newport News Shipbuilding dropped to about 50 percent during the second quarter of 2020.
Aside from the pandemic, the cadence was also affected by the switch from delivering one submarine a year between the two yards to delivering two submarines. However, the industry teams were close to reaching this goal before the pandemic complicated things.
“I think the way I think about that is prior to COVID, if you look at the couple quarters leading up to 2020, we were — as a team, we were right on the threshold of getting to two per year on the Virginia-class program, so it is imminently doable in terms of the industrial base and the team that’s working that program,” said Jason Aiken, Executive Vice President, Technologies, and Chief Financial Officer in an earnings call.
Today, shipbuilders are working around the clock to scale production up. The goal is to deliver one Columbia-class and two Virginia-class submarines a year. Despite the difficulties in reaching this figure, the workload now is many times higher than what the industry was anticipating a few years ago. The Block V boats, in particular, are longer and displace more than the prior Blocks due to the addition of the Virginia Payload Module.
AUKUS and Shaping The Future Industrial Base
The announcement of the security partnership called AUKUS between Australia, the United Kingdom, and the United States, has been viewed by many as taxing the already strained submarine Industrial Base.
This is due to one of the key proposals under the 1st pillar of the agreement calling for Australia to potentially buy three to five Virginia-class submarines from the United States. As such, many commentators have started calling for the US Navy to readjust its construction goals from 2+1 (two Virginias and one Columbia) to 3+1 to account for the potential sales, while others have called for the US Navy not to sell any submarines until more and yet-to-be-defined investments have been made in the industrial base.
However, the industry remains uncertain about the impact of AUKUS on production and whether or not to center their investments around the effort. When asked about the impact of AUKUS on their forecasts and plans, both shipbuilders reiterated their focus on present goals to meet 2+1.
This is hardly surprising as many details surrounding AUKUS are still uncertain and the current AUKUS schedule is measured in multiple decades. Furthermore, three to five Virginias represent a very small figure in the grand scheme of the entire Virginia program and its production.
On the side of investments, the US Navy and industry teams have been hard at work and investing heavily in expanding the industrial base. Electric Boat is currently winding down work from a $852 million expansion to the company’s Groton shipyard in Connecticut. The company also expanded facilities at its Quonset Point shipyard for handling the Virginia Payload Modules.
Likewise, the Navy has been awarding contracts to strengthen the subcontractors that the major shipbuilders rely on. In 2019, Electric Boat received a half-billion-dollar modification contract award for such an effort. Furthermore, the Navy’s FY2024 budget request includes $393.57 million for increasing production rates and further stabilizing the submarine industrial base.
Aside from these efforts, a more recent attempt to address the supply chain constraints involves contracting other yards that don’t work on submarines, in what is known as “strategic sourcing”. The first of such contracts was awarded to Austal USA earlier this year.
While the road ahead is a long one, industry officials seem confident in their ability to meet the delivery cadence of 2+1 with the current investments and infrastructure.
