Huntington Ingalls CEO ‘Concerned’ Over Delays in U.S. Navy Carrier Contracts
A unit for the future aircraft carrier John F. Kennedy (CVN-79) rests on the assembly platen at Newport News Shipbuilding on March 5, 2014. US Navy Photo
Mike Petters — chief executive officer of Huntington Ingalls Industries (HII) — said delays in U.S. Navy contracts for the refueling and complex overhaul (RCOH) of USS George Washington (CVN-73) and construction contracts for the second Gerald Ford carrier John F. Kennedy (CVN-79) are causing the shipbuilder concern, during a Thursday call with investors.
Two-thirds of HII’s Newport News Shipbuilding unit business is based around building carriers and their mid-life refueling and complex overhaul (RCOH). Earlier this year Secretary of Defense Chuck Hagel said George Washington would be defueled and decommissioned if the Pentagon continued to operate under the sequestration funding restrictions as part of the 2011 Budget Control Act (BCA). HII is also waiting on budget approval for $1.3 billion of Fiscal Year 2015 (FY 2015) incremental funding for the $11.49 billion Kennedy.
HII CEO Mike Petters
“With this in mind, we are concerned that continued delays in award of the RCOH planning and execution contracts as well as delay of the detailed design and construction contract for CVN-79, John F. Kennedy, it is creating pressure on our programs at Newport News,” Petters said during the call following the company’s third quarter earnings report.
George Washington’s RCOH contract, in particular, has been a contentious political issue.
“The Navy has decided to continue planning efforts for [RCOH] of the George Washington and is working to reallocate investment across the future year defense plan to fund the RCOH air wing, manpower and support… Newport News was awarded a contract to begin planning of defueling work on George Washington as another positive step toward an anticipated contract for the full RCOH in Fiscal Year 2015 (FY 2015),” Petters said.
“However, the scope of work for planning the defueling work is only a small portion of the full planning effort we need to be performing to prepare for the RCOH.”
The Navy and its shipbuilders consistently stress the key to cost saving and preservation of the industrial base is predictability.
“Across the board in shipbuilding, our priority is the affordable solution, and the key to affordability is stability—in requirements, build rates, quality and wholeness for our fleet at sea through modernization and maintenance,” Sean Stackley, assistant secretary of the Navy, Development & Acquisition (RDA) said in an interview in Proceedings in 2013.
Aside from the carrier contracts, HII had a positive outlook with 39 percent increase in profit from the same quarter last year — from $69 million to 96 million, reported The Daily Press of Newport News, Va.
Pretty hard to be concerned about the feelings of investors whose profits depend on the largesse of the profits to be earned feeding at the public trough.
You are confused, the public trough is where democrats buy votes from the welfare state voters.
I second that. The large deck carrier has been a locked in revenue source which has stifled ANY innovation or economy in our major shipyards.
If the lapse is long enough they have to actually start firing people the ripples could effect the Virginia class boats as well depending on the union rules for hiring and firing of the yard workers. Considering the VA class is consistently being delivered early and under budget the Navy might want to spend enough on carriers to make sure we don’t screw that up.
Negative economic impact seems to be what this administration is about. Growth policies are not in the mix. Can wait for a conservative approach and growth policies that have worked every time they were tried in every recover prior to this one.
I find it pretty hard to understand that the President of the United States, in light of the current unrest around the world, would allow the Navy to cut back to the point of decommissioning USS GEORGE WASHINGTON (CVN-73) and possible curtail the completion of the USS JOHN F. KENNEDY (CVN-79). It is already abundantly clear that we cannot cover the missions we already have with the number of carriers that are currently commissioned and available to the CNO.
Can’t pin this all on the President, it is also the just as much the fault of both parties and both houses of congress for enacting Sequestration as a way to force themselves to come to a comprimise before the Sequestration cuts actually kicked in. Now instead of worrying more about country they are more worried about party and politics.
I beg to differ with you. The Congress went to sequestration due to the fact that the President would NOT negotiate a budget that made sense and which forced the Congress to take action to curtail spending which was getting completely out of hand.
With the turmoil currently going on throughout the world, increasing the defense budget significantly should now be a priority!