Shipbuilding sector remains uncompetitive: U.S. government should take action to make the nation's shipyards more efficient.

PositionIndustrial Perspective

The U.S. shipbuilding industry designs and builds sophisticated military vessels, yet remains uncompetitive in the commercial shipbuilding market. The major yards are unable to compete internationally due to the industrial policies, greater efficiency and lower labor rates in other countries.

The U.S. shipbuilding industry represents just 1 percent of the world market for ocean-going commercial vessels, a substantial portion of which is due to the Jones Act. This legislation requires that all vessels operating between U.S. ports be U.S. owned, U.S. operated and U.S. built.

The commercial outlook for U.S. shipbuilders is bleak. They are unable to compete on the global commercial market due to high material and labor costs as well as lower productivity. Labor costs are kept artificially high by continued union resistance to employee cross-training and shipyard reluctance to invest in automated production tooling. Second and third tier shipyards, meanwhile, continue to compete effectively in niche markets on both the domestic and global market.

To make the industry more competitive, the U.S. government should promote what U.S. shipyards do best-military vessels and small/medium commercial vessels. This will require further consolidation of the military industrial base and a stable procurement plan.

Role in U.S. Economy

More than 95 percent of U.S. imports and exports are transported by sea. At over $10 billion in annual revenues and nearly 100,000 employees, the shipbuilding industry plays a significant role in the U.S. economy. U.S. Navy procurement accounts for about 70 percent of the industry's revenue. The commercial side of the industry is less than half the size of the military, but has grown at a faster rate in the last five years. International business accounts for only about 1 or 2 percent of total revenues. However, the survival of the industry is hinged on improving production and management practices as well as increasing foreign sales.

Approximately 250 companies comprise the U.S. shipbuilding and repair industry. But just 10 percent of these firms account for 85 percent of the business. The six largest companies, grossing over a billion dollars annually, are often referred to as the "Big Six." They represent two-thirds of the overall shipbuilding/repair business and 90 percent of the defense work. (Editor's Note-the Big Six now are owned by just two companies: General Dynamics owns Electric Boat, Bath Iron Works and National Steel and Shipbuilding Co. The Northrop Grumman Corp. owns Newport News Shipbuilding, Ingalls and Avondale)

More than 100 of the smaller firms have annual revenues of less than $5 million and represent less than 2 percent of the industry's total revenues.

The Congress appropriates naval ship repair money each year to private shipyards and four publicly owned naval shipyards. Typically, naval...

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