Part 2 of 3
Choppy water for ship repair workers over budget crisis
By BILL BARTEL | The Virginian-Pilot | Published: February 19, 2013
Tom Taylor has trouble sleeping most nights because he worries about what might happen to the 100-plus employees at his ship repair business
"If all these cuts come, I could be down to as low as 15 or 20 people," said Taylor, whose MF&B Marine in Chesapeake is near the private Elizabeth River shipyards that work on Navy vessels.
"The hardest for me - being a small business - is the employees are also friends. They hear stuff on the news. The problem of this is I don't know what to tell them.
"It's tearing at me," he said. "I've never laid off a person in all the years of doing this."
Taylor's angst is shared throughout Hampton Roads by scores of business operators and thousands of skilled workers as they wait to see whether the Navy will lock in place plans to cancel or delay billions of dollars' worth of ship maintenance and construction projects.
About 40,000 people in Hampton Roads work in the ship repair industry, according to the Virginia Ship Repair Association. Roughly half are employed by the behemoth Newport News Shipbuilding, the only place in the United States that builds and refuels aircraft carriers.
The cancellations would interrupt a carefully orchestrated cycle of ship repairs, overhauls and modernization projects intended to keep the Navy's warships in top condition.
Military and industry officials say that delaying the repairs and upgrades will make the work - which must be done eventually - more expensive, and that the wait could shorten a ship's service life. Warships whose overhauls are canceled in 2013 might have to wait years for another opportunity because others will need servicing in the meantime. Those delays can heighten the chance of system failures and put more stress on aging equipment, industry officials said.
Also at stake is the survival of many small, specialized businesses like Taylor's company that don't have deep enough pockets to stay afloat without Navy contracts.
Another concern: Skilled workers, including welders, pipefitters, and sheet metal workers, could migrate to jobs outside Hampton Roads if the military cuts come to pass. These workers, who spend years learning their craft, are an average age of 54. Their pay averages about $20 an hour, which equates to $41,000 a year, plus the chance to earn overtime.
Michael Patterson, a pipefitter at BAE Systems in Norfolk and president of International Brotherhood of Boilermakers Local 684, said the union anticipates that at least 600 of its 1,027 members at the Norfolk yard might be laid off. "It could be catastrophic," he said. "I mean, some of them live week-to-week."
Until recently, Patterson said, it appeared many BAE workers didn't believe the Navy would cut funding.
"I heard people talking in hopeful voices saying, 'Aw, the government's not going to let that happen,' " Patterson said. "But it looks like it's going to happen and it doesn't make sense."
Top Navy officers and the leaders of larger firms, such as BAE, that have the resources to weather a downturn say the potential loss of expert workers is troubling.
"They have a tremendously marketable skill. And if they go to another industry, we're not going to get them back," said Bill Clifford, president of BAE Systems Ship Repair. "If we lay them off for months and turn the key back on, they may not be there."
The defense cuts will begin in March, Pentagon officials have said, unless Congress can reach agreement on steps to block or mitigate the budget reductions.
The reductions - and many other cuts in operations, construction and personnel - are driven by political stalemates involving a divided Congress and the White House that will come to a head next month.
When Congress was unable to agree on an annual federal budget, it approved a short-term spending plan - a continuing resolution - to keep paying Washington's bills until March 27. The short-term spending numbers are based on 2012 budget figures, not the slightly larger budget that Navy leaders anticipated. Before the resolution expires in late March, Congress must decide how to fund the remainder of the fiscal year.
If lawmakers don't authorize extra funds or allow the Navy to shift money from other accounts to keep up ship maintenance, the repairs would be canceled to help the service make up a $4.6 billion shortfall.
A second set of cuts is also bearing down.
If Congress doesn't intercede, the Navy will have to chop an additional $4 billion between March and Oct. 1 - part of more than $1 trillion in automatic reductions, applied across the federal budget, to occur over 10 years. Known as the sequester, the cuts affect a wide range of military functions, including overseas operations and some ship overhauls. They are set to begin March 1.
If Virginia's ship repair industry is hit with double-barrel contract cancellations, the cuts would reverberate through the local economy, which relies on defense dollars for almost half its income.
The most immediate concern for local shipyards is cuts related to the continuing resolution.
The Navy has said it will cancel 70 percent of all ship maintenance projects at private shipyards scheduled for April through September - the second half of the federal fiscal year.
In Hampton Roads, that means forgoing $270 million in repairs and maintenance for 10 vessels: eight destroyers, an amphibious assault ship and the carrier Eisenhower, which is slated for maintenance later this year when it returns from a scheduled four-month deployment.
The service also is warning that it may have to stop the overhaul of two aircraft carriers and delay construction of a new carrier at Newport News Shipbuilding. Unless Congress sets aside more money, the refueling overhaul of the Theodore Roosevelt won't be completed as planned in June; a three-year, $3.3 billion overhaul of the Abraham Lincoln won't start; and construction of the carrier John F. Kennedy will not get under way.
Two Norfolk shipyards would bear the brunt of the cuts to work on destroyers and amphibious ships, typically handled through multi-ship, multi-option contracts.
BAE Systems is the primary contractor for three ship overhauls identified for cancellation. The projects in jeopardy include dry-dock repairs to the Wasp, an amphibious ship, and the destroyers Laboon and Porter.
Meanwhile, MHI Ship Repair & Services holds contracts for maintenance of six destroyers on the cancellation list: the Barry, Forrest Sherman, Jason Dunham, McFaul, Oscar Austin and Winston S. Churchill.
Leaders of BAE and MHI indicate that layoffs are likely to follow cancellations.
"Our layoffs really wouldn't happen until the middle to end part of May and only effective in June," said Tom Epley, president of MHI, which employs about 450.
But the cuts won't stop there.
Under federal rules set up to ensure a diverse defense industrial base, both yards must share 40 percent of their Navy work with an array of smaller contractors. Those subcontractors, including Taylor's MF&B Marine, often turn to even smaller outfits for specialized work.
And all the companies, large and small, provide business to a network of parts and equipment suppliers in Virginia and elsewhere.
Industry officials say they expect that the Navy repair business would eventually return - but if the contracts are canceled for most of the year, many subcontractors will not survive.
Adm. Bill Gortney, head of U.S. Fleet Forces Command, predicts the cuts could do the most permanent damage to smaller firms.
"The major shipyards will get through it," Gortney said in a recent interview with The Virginian-Pilot. "Their subcontractors that live from contract to contract, most likely won't.... When I lose that industrial base, it really impacts the strength of our nation."
One of the self-described "little guys" is Jennifer Whitham, president of Vanwin Coatings of Virginia. The firm provides painting, specialized coating and abrasive blasting for Navy projects.
"It's a big deal to us. Work has already slowed down," said Whitham, who employs 38 people at Vanwin's Suffolk and Chesapeake facilities. She's already made small staff cuts through layoffs and attrition.
The firm does about $4.5 million in business annually, Whitham said, noting that if the Navy work dries up, "you're talking about 60 percent of that going away."
Several Navy contractors and their workers stressed that while the loss of business creates financial hardships, they are also frustrated that the Navy's cutbacks will hurt the quality of its warships and pose a threat to national security. Many speak with personal pride about doing work that contributes to the national defense.
"Our first and primary concern is the readiness of the fleet," said BAE's Clifford. "Jobs, of course, are significantly important to everyone, but we're very patriotic."
It's vital, Clifford said, that the Navy's fleet doesn't degrade because of deferred maintenance or a failure to invest in modernization.
Taylor, a 50-year-old Army veteran who has been working on Navy ships for than 30 years, is more blunt.
If the ship repairs are put on hold, "we will have warships waiting at the pier to be fixed," Taylor said. "How embarrassing is that?"