ANALYSIS
WASHINGTON — "Bath built is best built" is one of the most recognized slogans in shipbuilding. Dating as far back as the 19th century, it harkens to the days when dozens of shipbuilders dotted the Maine coast.
In the 20th century the term came to apply more directly to Bath Iron Works (BIW), builders of hundreds of destroyer-type ships for the US Navy. The slogan continues in wide use, by the Navy and by Bath and its corporate parent, General Dynamics.
The shipbuilder has enjoyed a stellar reputation, particularly over the last decade — a time when its chief rival in building Navy surface ships, Ingalls Shipbuilding in Pascagoula, Mississippi, suffered through mismanagement, natural disasters and a host of issues, often earning the public ire of the Navy. Those problems led to a widespread reputation making the gulf coast shipbuilder the Navy's chief shipbuilding problem child, while Bath was the yard with the highest dependability.
Recently, however, Bath has experienced more than its share of problems. In the view of its own management, the yard needs numerous improvements and changes to maintain efficiencies: better facilities, enhanced process procedures, more effective allocation of the workforce. Relations with craft unions at Bath are strained. Completion of the large destroyer Zumwalt (DDG 1000), first of a three-ship class of very advanced stealth destroyers, has run into numerous difficulties. All three ships of the class have fallen behind schedule, and delays reportedly are affecting the Arleigh Burke-class destroyers under construction in the yard.
Ingalls, meanwhile, seems on the verge of at long last climbing out of a deep hole, getting back to delivering ships more or less on schedule, and avoiding fit and finish issues that plagued many of its amphibious ships. To be sure, the road to recovery has not been straight, but overall the yard's trends seem to be moving in the right direction.
"It does seem like there's a shift in polarity going on," observed a congressional source. "It seems like Bath could be coming to the end of a good run, while Ingalls seems to be on the rise."
General Dynamics, Ingalls Shipbuilding and the Navy all declined to comment on the record for this story, which is based largely on non-attributable conversations.
Cyclical in Nature
"I think the proposition is true," Jerry Hendrix, an analyst with the Center for a New American Security and former director of Naval History, said of the shifting shipyard fortunes. "But this is not the first time we've seen this cycle. The problem is every time you get into a downswing, there's always the vulnerability the downswing could coincide with a broader strategic movement that could result in your demise.
"For instance, I remember when BIW went through a labor dispute in the early 1990s that coincided with post-Cold War cutbacks in defense spending. A similar environment exists today. We're in a time of fiscal constraint, and it's also a time of different budget rules," he said. "That always raises the specter of where we need to make cuts."
Bath's future was somewhat in doubt in 2004, a time when several shipbuilding programs — and shipyards — faced uncertain futures. John Young, then the Navy's top acquisition official, told Defense News in December he was less concerned about BIW's future than he was with getting good deals for the Navy. He acknowledged that "shipyard consolidation" could lead to Bath closing its doors and its workload absorbed by other yards, adding it wasn't his responsibility should that occur.
At the same time, Ingalls Shipbuilding, then owned by Northrop Grumman and part of a division that included the Avondale shipyard in New Orleans, was having immense difficulties in completing the San Antonio (LPD 17), first of a new class of large amphibious dock transports. The program was plagued with endless delays, constant design changes from the Navy and poor workmanship. A sense of exasperation pervaded the program and those around it.
On July 20, 2005, the Navy accepted delivery of the ship, even with so many problems that, wrote the Navy's top inspection officer, it "may never be right."
Just over five weeks later Ingalls and much of the gulf coast was hit by Hurricane Katrina. The storm and its surge of seawater wrought immense damage to the region between Pascagoula and New Orleans, destroying much of the infrastructure at the sprawling Ingalls yard.
While Ingalls and Avondale strove to get back to work, Navy officials became wary of storm damage problems being included in normal project difficulties or capital investments. There were numerous — often heated — discussions between the Navy and the Northrop Grumman yards about liability.
Ingalls, a yard that built almost 40 percent of the Navy's surface ships, became widely reviled within the Navy's acquisition community. Young and other service officials minced few words when speaking of Northrop's needs to change their shipbuilding ways and culture.
Recovery was slow. The LPD 17 program continued to be beset with problems, well into subsequent ships of the class. Employee turnover in the gulf yards was rampant; aside from the general disruption of life along the Gulf coast, skilled shipyard workers were coveted by booming reconstruction work, followed by a burgeoning oil industry. New employees lacked the experience of those they replaced.
While the shipyard was rebuilt, Ingalls struggled with quality control under a succession of executive managers. Completion of the large amphibious assault ship Makin Island was delayed by production problems that Northrop acknowledged were due to poor management decisions, and the company ponied up around $350 million to fix the ship.
All the while, Northrop's top management began to view shipbuilding as a liability, and in March 2011 the gulf yards, styled as Ingalls Shipbuilding, along with Newport News Shipbuilding in Virginia, were spun off as Huntington Ingalls Industries (HII), led by former Newport News President Mike Petters. Irwin Edenzon was installed as Ingalls president, introducing a new work ethic. Workmanship quality continued to improve, evidenced by a steady decline in the number of defects discovered on sea trials.
All the improvements were helped by growing maturity and experience in the primary shipbuilding programs underway at Ingalls, particularly with the LPD 17s and the US Coast Guard's National Security Cutters. The next amphibious ship, America, was vastly improved at delivery in April 2014 over the Makin Island.
Edenzon in March 2014 moved up the corporate ladder and was replaced as yard president by longtime gulf shipbuilder Brian Cuccias. Navy officials spoken to for this article praised Petters, Edenzon and Cuccias.
Ingalls and Bath have both returned to building DDG 51 Arleigh Burke-class destroyers, a "restart" after the Navy decided to build only three DDG 1000s, all at Bath.
A Downhill Slide
Unlike Ingalls, which at times has simultaneously built up to five different ship classes, Bath usually has only two designs in hand. The DDG 1000s, a program that, ironically, was originally won by Ingalls, represent one of the largest challenges in recent US shipbuilding history. Displacing nearly 16,000 tons and more than 600 feet long, the ships are the largest surface combatants built in the US since 1961, and certainly the most complex.
BIW made major improvements to build the ships, particularly construction in 2008 of a huge ultra hall so that major outfitting could be done indoors, protected from the harsh Maine winter. The yard was also reconfigured to install a land-level transfer facility, allowing entire hulls to be more easily moved inside the yard. A new expansion plan was approved by GD and the Navy in 2013.
But Bath also needed to eliminate older, less efficient facilities and streamline labor practices. And in September 2011, it received the first "restart" construction order for a new Arleigh Burke-class destroyer, the Rafael Peralta (DDG 115). More destroyer contracts were received over the next three years.
General Dynamics in September 2013 restructured some of its top shipyard executives. Jeff Geiger, president of BIW since April 2009, was transferred to Electric Boat, a yard that specializes in nuclear submarine construction. At EB, Geiger is charged with preparing to build SSBN(X) Ohio Replacement Program (ORP) submarines, envisioned as the Navy’s largest and most expensive new shipbuilding program for the next 25 years.
Fred Harris, a longtime EB manager who had been sent in 2006 to fix GD’s troubled National Steel and Shipbuilding Co. (NASSCO) yard in San Diego, was given the added responsibility of overseeing Bath. Highly thought of in the Navy, Harris is credited with turning around NASSCO by modernizing and streamlining production, improving installing improved labor practices, and importing good practices from international shipbuilders.
Those changes in turn led to greatly improved performance on the Navy's T-AKE dry cargo ship program.
Harris, who, through General Dynamics, declined repeated requests for an interview, attempted to install at Bath techniques and approaches that were successful in San Diego. One oft-reported example was an effort to hire non-permanent electricians to handle the surge in ship construction. Local unions balked, insisting that additional work could be handled by overtime, a solution that reportedly proved only partially successful.
But Harris' efforts to continue changes at Bath met with increasingly acrimonious protests. "FOF" signs began to appear around Bath — a non-complimentary acronym that aimed union opposition personally at the yard president. Street demonstrations appeared earlier this year, and the yard's troubles are being regularly reported in Maine's media. The Bangor Daily News called the problems at Bath the "company's largest labor unrest in decades."
Meanwhile, work to complete the Zumwalt has run into increasing difficulties. A recurring problem is the complexity of the integrated power plant, a design far beyond anything yet installed in a ship. With virtually every system connected to the 78-megawatt plant, sequencing systems tests has proved to be a recurring challenge, often leading to delays to bring on systems ahead of or different from planning schedules.
BIW has surged workers, particularly electrical workers, to the ship, leading to delays in the next two ships, Michael Monsoor (DDG 1001) and Lyndon B. Johnson (DDG 1002).
In March, the Navy announced the problems meant the Zumwalt's planned delivery date of August 2015 would be delayed at least until November. But by mid-July, that goal was gone, and the Navy acknowledged it was hoping to begin the first sea trials in December. No new delivery date has been announced, but it clearly won't happen this year.
Neither the Navy nor BIW would respond to queries about exactly how far behind schedule the DDG 51-class destroyers are.
"That's something we would like to know," one service official said with a sense of frustration. But it does appear that, like Ingalls a decade ago, every ship under construction in Bath's yard is falling further behind schedule.
Assigning responsibility for the delays is also problematic. BIW is not solely responsible for the Zumwalt's propulsion and combat systems, that's on the Navy and its prime systems contractor, Raytheon. All bear significant responsibility for the delays.
Other factors complicate the situation at Bath. On the labor side, the yard's collective bargaining agreement expires next May — clearly a lot of the rancor this spring and early summer was with that deadline in mind. The situation has calmed for the moment. Union officials, quick to talk to media this spring, did not respond to numerous phone messages and emails, and it seems both sides are trying to negotiate behind closed doors.
Tensions remain, however, and the atmosphere inside the yard reportedly remains apprehensive.
Looming over these developments is a hull swap agreement that was part of a 2002 decision to reassign LPD 17-class ships from Bath to Ingalls. Should a 12th LPD be built, Bath would receive an extra destroyer or equivalent workload as compensation.
Now that Congress has funded the ship, the clause is being invoked, but it remains unclear how the agreement will be adjudicated. For now, the Navy is withholding judgment, perhaps to see if Bath can handle the ships it already has, much less take on more.
And next year, the US Coast Guard will choose a lead shipbuilder for the 25-ship Offshore Patrol Cutter program, (OPC), the largest new government surface ship program now planned. Bath is one of three finalists in the competition, while Ingalls has already failed the cut. Federal acquisition law forbids outside factors from being considered in a contract award, but Bath’s inability to manage its current workload could still be a factor.
The situation at Bath has yet to publicly affect GD's earning statements, noted Byron Callan, a defense market analyst at Capital Alpha Partners in Washington, but it is cause for concern.
"Has it shown up yet in their finances?" Callan said. "I would say no it hasn't, but I think that's a question people should ask." The company could be covering losses with reserves, he said, "but you can run through reserves in a hurry.
"GD is kind of riding a wave here of good stable performance, but it will be interesting to see how they manage this if indeed it causes some turbulence."
Email: ccavas@defensenews.com
