Largest U.S. shipbuilder sees long-term challenges.

• Author: Erwin, Sandra I.
• Position: Defense Insider

The United States faces a strategic choice of whether it wants to maintain its shipbuilding industrial base, says Mike Petters, president and chief executive officer of Huntington Ingalls Industries, the nation's largest military shipbuilder.

The ships the Navy owns and plans to build in the future are highly complex and demand specialized facilities and workers that currently only exist in the private sector. Maintaining those industrial assets requires long-term planning and investment, Petters says. Even if the government chose to nationalize the shipbuilding industry, it would still be costly to sustain it, he adds.

"There's no magic formula to this," he says. "The ships we make are complex" and the "build rate" is not efficient. Unless the Navy bought more ships, costs will not come down, even if ships were built in government-owned yards. "I don't see that as a panacea to save any money," Petters states.

He says he does not believe that shifting procurement contracts to fixed-price deals will reduce the cost of weapons. "Our incentives are built around efficiency," Petters says. He claims that cost-plus contracts are unfairly vilified but in reality are necessary in order to manage the risk of building sophisticated warships, such as a new class of nuclear-powered aircraft carriers.

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