Michael Fabey, AEROSPACE DAILY & DEFENSE REPORT
6 November 2015
How the U.S. funds its next ballistic missile submarine fleet will set the tone for all other shipbuilding programs in coming years, says Michael Petters, CEO for Huntington Ingalls Industries (HII), the U.S. Navy’s stop shipbuilder.
“I you take a look at this business over the next five or 10 years, the single most important issue in front of the industry – not just us – but the industry, is how is the Navy going to pay for the Ohio replacement program,” Petters told Wall Street investment analysts during a quarterly conference call Nov. 5.
“If the money for that program is going to be paid out of the traditional shipbuilding account at the traditional levels, then a lot of other programs are going to be affected,” he says. “On the other hand, if there is a way for that program to be funded, either outside of shipbuilding account or above the shipbuilding account, then you have a chance for the industry to remain healthy in support of all these programs that the Navy needs.”
He says, “I am less concerned about the mechanism for the funding. The legislative branch has created a mechanism for the funding. I think the Department of Defense is thinking about whether that’s the right mechanism or if there is another way to do it, or do we just bring it back into the shipbuilding account. I think what matters here is that you fund the design and you fund the early lead-time procurement, you fund that on time. We have seen over and over and over again, what happens when you get yourself into a place where you need to move into production and the design is not done or the suppliers are not sorted out. And so I think what matters right now is that we keep the funding profile for the design and the early procurement, because that’s going to set the stage for early success in that program. And that’s going to be ramping up over the next over few years. I mean it’s a pretty healthy requirement to keep that program on track.”
He notes, “It’s a national priority. I am a little biased. I was a boomer sailor myself when I was back in the Navy. But it is something that the nation is going to do. And so the question now is, how do you do that and still do all of the other things that we need to be able to get done?”
He says, “We are working closely with the other members of the Submarine Industrial Base and the U.S. Navy to try to find the very best way for the nation to produce the Ohio replacement program at the same time that it is producing [the] Virginia-class program. The Submarine Industrial Base has shown that is able to do that in a very, very efficient and effective manner and we are working our way through that now. And so ... we will negotiate that, and then come back and let you know how it all turned out.”