Newport News shipyard looks to cut costs

Hugh Lessig
Contact Reporterhlessig@dailypress.com
NN shipyard memo does not rule out layoffs

Anticipating a drop in workload, Newport News Shipbuilding executives are planning unspecified cost-cutting measures "to preserve jobs to the maximum extent possible," according to shipyard President Matt Mulherin.

Three aircraft carriers are undergoing work in the yard, but work on all three will be completed over the next 18 months. Employees will finish defueling the USS Enterprise. The midlife overhaul of the USS Abraham Lincoln will end, and the first-in-class Gerald R. Ford will be commissioned and delivered to the Navy.

Even though construction will ramp up on the aircraft carrier John F. Kennedy, the conclusion of those three projects creates a drop in workload that will force Virginia's largest industrial employer to reduce costs.

Mulherin outlined the issue in a memo sent to employees Thursday and obtained by the Daily Press. Spokeswoman Christie Miller said she could not provide further details.

Mulherin will "hold town hall meetings with the entire leadership team next week," the memo states.

"As these discussions are taking place, I realize there is a lot of speculation across the shipyard about what cost reduction measures are going to be made," the memo continues. "As decisions are finalized, my intent is to communicate the changes to keep you informed."

The concern over the drop in workload is nothing new. Mike Petters, president of shipyard parent Huntington Ingalls Industries, noted the same issue in May during a conference call with Wall Street analysts to discuss first-quarter financial results.

He talked about the challenge of maintaining a balanced workload, but with three carriers leaving the yard in a relatively short period, it would be "a bumpy ride" over the short term, he said. However, he was optimistic about the company's overall financial performance.

The aircraft carrier USS George Washington is scheduled to arrive at the yard in 2017 for a midlife refueling, a job expected to cost $4.7 billion. Meanwhile, work will continue on the Virginia-class submarine program.

Newport News is the sole builder of nuclear-powered aircraft carriers for the U.S. Navy, and one of two yards that builds nuclear-powered submarines.

In January 2015, about 450 employees reportedly took advantage of early retirement deals. The entire shipbuilding division employs more than 23,000 people.

Arnold Outlaw, president of United Steelworkers Local 8888, said he hoped the shipyard would not be forced into layoffs. Skilled welders, pipe fitters and other tradespeople will find jobs elsewhere, and Newport News will lose that experience.

"The shipyard takes a risk of losing people," he said. "The majority of (layoffs) won't come back."

Lessig can be reached by phone at 757-247-7821.

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