355-ship Navy: Big opportunity but big challenges

Hugh Lessig
Contact Reporterhlessig@dailypress.com

When President Trump called for an expanded naval fleet on March 2, he chose the grandest venue Hampton Roads could offer: a nuclear-powered aircraft carrier.

The future USS Gerald R. Ford was pier side at Newport News Shipbuilding. The location was a natural pick: A speech aboard America's most advanced carrier at the only U.S. shipyard that builds them.

But Trump could have traveled a few blocks down 39th Street to visit a different sort of ground zero in the pending fleet buildup. The Hampton Machine Shop supplies the Newport News yard with ladders and foundations and other components turned out by a small group of skilled machinists, welders and other trades workers.

Trump and the Navy want to dramatically expand the fleet from about 275 to 355 ships, the biggest buildup since the Reagan administration. Included in that total would be a 12th aircraft carrier and a boost in nuclear-powered submarine production.

The military needs the Newport News shipyard to make that happen. The yard, a division of Huntington Ingalls Industries, is the sole builder of carriers and one of two yards that builds nuclear-powered submarines.

But it also needs the Hampton Machine Shop and hundreds of other small- to medium-sized businesses that supply everything from pipe elbows to valves to privacy curtains. In military parlance, it's known as the defense industrial base, and its condition has been described as fragile.

The shipyard is hiring 3,000 workers this year, bringing its total to about 23,000, due to a natural uptick in business. If the 355-ship fleet becomes reality, the yard can hire workers faster than Congress can appropriate the money.

Things aren't that simple for the smaller business.

They don't have vast reserves to get through the lean times. Some have an aging workforce and need younger employees to come on board. And yet expansion is difficult. Will the 355-ship Navy become a reality? Will contracts be delayed if Congress dickers to the brink of another government shutdown?

The Hampton Machine Shop typifies the challenges and progress of the supplier base.

"We have been having some problems in the last couple of years with finding qualified people to do the skilled labor jobs," said Diane Beilharz, senior vice president. "I've been doing this for 36 years. We used to get people right out of high school all the time. When school was out, we started getting flooded with applications. That doesn't happen anymore."

The tide has begun to turn, thanks in part to an alliance with Thomas Nelson Community College, which does worker training for new hires such as Andrew Peskopos, a "CNC" machinist, which stands for computer numeric controlled.

Peskopos, 23, took to the skilled trades because he was always mechanically inclined. As a 3-year-old, he took apart his brother's skateboard and couldn't put it back together.

"That's what got me started," he said.

But in some cases, not enough skilled workers are coming through the door. And other businesses are reluctant to hire because they don't know what Congress will do. Consider:

•In Portsmouth, shop foreman Mike Carter at Premier, a subsidiary of W&O Supply, is still looking for a nickel-copper welder for his shop that provides piping products for Navy ships. The job opening is there, but workers with that specialized skill are hard to find.

"I had a guy come in yesterday for a weld test," he said recently. "He's been welding for 20 years. He failed."

•In Norfolk, Davis Interiors is a family business that provides key comforts for living spaces aboard ships has cut jobs because of budget uncertainty. They love the idea of a larger Navy, but they want to see contracts in hand before expanding.

"They announce these grand plans, but then they don't necessarily come to fruition within the amount of time they originally proposed — or not at all," said Whitney Weireter, who holds down several jobs at Davis Interiors.

•In rural Buckingham County, Bill Yancey of H-Test Laboratories has seen employment drop from roughly 60 to 30 people as budget cuts and delays have cut into business. Asked about the coming Navy buildup, he responds with a can-do attitude that also points to his problem.

"We've downsized to the point that ramping up ought to be easy," he said. "All the facilities are still here. We just don't have the people."

Outside of Virginia, the story is the same.

"Over the years, it's been extremely difficult to try to talk up a not-so-glamorous business, said Steve Dobos, president of Butler Weldments Corporation in Camerone, Texas. "It's not an air-conditioned facility. It's tough labor. It's very difficult to convince the younger folks out there that there's a high-earning potential in a skilled position. The work starts at 6 and ends at 4:30 and there's overtime on Friday and sometimes on Saturday."

The stories are familiar to Bryan Clark, a former submarine officer who led strategic planning for the Navy as special assistant to the chief of naval operations until 2013. He is currently a senior fellow at the Center for Strategic and Budgetary Assessments.

The small to midsized suppliers to larger shipyards don't rely on automated processes or hundreds of workers. In some cases, specialized items "are made in an artisan sort of way," he said.

That makes it more difficult for them to ramp up when, for example, the president and the Navy call for a 355-ship fleet. When it comes time to hire, they compete for a limited number of skilled workers with larger companies that can offer advanced training, tuition assistance and job stability, Clark said.

"The workforce," Clark said, "ends up being the most concerning limitation on the industrial base."

The concerns are not insurmountable, he said, but will acquire attention. For Congress and the Navy, it's not simply a matter of approving budgets and awarding contracts.

"I think they will be able to gear up," he said, "but it will require a lot more industrial base management on the part of (Navy) program executive officers and program managers. They will have to work with them, not put unreasonable demands on that, don't pressure them to deliver on unrealistic schedules."

Specialized and worldwide

W&O Supply in Virginia Beach supplies pipes, valves fittings and related products to the Navy. It has a manufacturing facility in Portsmouth called Premier, which makes piping products for W&O's branches, such as 45- and 90-degree elbows and T-shaped fittings.

Phil Jiannine, director of sales for W&O's business unit, said work related to Newport News shipbuilding accounts for about 70 percent of Premier's backlog but it also does work for other shipyards.

The 39 workers at Premier include engineers, welders, machinists, fabricators and those who work in shipping and receiving.

Its copper-nickel pipe products are valued on Navy ships for anti-corrosive properties, standing up to saltwater, lube oil and other substances. Welding with it takes a special skill because it's relatively soft.

"Everyone we've tried to hire are experienced welders, but not in copper-nickel," Jiannine said. "If you talk to any of the contractors, they're looking for them. Those guys are naming their price when it comes to wages, because there is such a limited supply and it's a such a high-demand trade."

And like other suppliers interviewed, he's concerned about his aging workforce.

"Every time you turn around, we're having another 15- or 20-year anniversary celebration," he said.

Jiannine remains bullish about the long-term future. At the congressional lobbying blitz conducted by the Aircraft Carrier Industrial Base Coalition earlier this year, he noticed an optimism and energy that hasn't been seen in years. At last, he said, a majority of voices are pushing for an expanded Navy.

So does W&O expand its Premier facility and get ahead of the game? Does it wait for Congress to do its thing? They could add a second shift if shipbuilding turns into a tidal wave of business. Being too cautious could mean losing out on work. Expanding prematurely could create extra costs.

"That is the fine line right there," he said. The increased business "is going to come. It's just a matter of when."

The company's strategy is to be proactive, but not get too far in front. Make some capital investments, and invest more when activity starts to ramp up.

Jiannine is watching Washington on other issues besides the defense budget. He's concerned about the future of NAFTA, the controversial trade agreement that has drawn scrutiny from the Trump administration.

Some of W&O's raw pipe comes from Mexico. If the trade posture between the U.S. and Mexico changes, he's worried what will happen to his supply chain.

"That creates a problem for us because there are not that many copper-nickel tubing manufacturers in the world, period," he said. "There's none in the United States."

Flexibility required

At first glance, Whitney Weireter's business card could be mistaken for a misprint. It lists her job title as "administration, quality management, safety and health, OSHA training."

It's accurate. She has four jobs. Make that five — media spokeswoman — and you get an idea of what's required to work at Davis Interiors, a family-owned business where a couple of friendly dogs greet visitors who arrive.

The company makes furnishings and related products for living spaces aboard ships. Its workers build furniture from scratch, starting with bending aluminum to fashion a frame. They paint and upholster. They provide curtains for berthing compartments.

When Clark, the defense analyst, talks about small businesses doing artisan-type work, that description fits Davis Interiors. And if a business like Premier is challenged to find specialized workers, Weireter's business card is evidence of an opposite challenge: They need workers who are versatile.

"We rely on people who can be a jack-of-all-trades," she said.

Its workforce stands at 22. Before federal budget caps limited defense spending, employment was in the mid-30s. As spending has ebbed and flowed, the company has had to cut jobs, then scramble to find workers when orders arrive.

Budget uncertainty and threats of government shutdowns are "part of our everyday lives," she said.

"The biggest problem we face is finding young skilled labor," she said. "A lot of young people don't want to get into, for lack of a better term, blue-collar work and being a skilled tradesman."

Weireter, who is 32, said, "we could get into a whole conversation about about how my generation was faced with a lot of pressure to go to college." She says manufacturing jobs should be put on a higher pedestal, something she tries to do for Davis Interior's younger workers.

"We have employees in their 20s," she said. "I try to instill a sense of pride in what they're doing. You may not be doing something that's necessarily hipster or something you'd find on Pinterest, but you're doing craftsmanship when you're building these pieces of furniture or when you're installing decking systems."

Davis Interiors can't afford to be proactive when it comes to expansion. They'd like to, "but it's not a risk we are willing to take," Weireter said.

Predictability problems

David Architzel is a retired Navy vice admiral who touched nearly every corner of the sea service over a career that spanned four decades.

He commanded the aircraft carrier USS Theodore Roosevelt. He was the Navy's program executive officer for aircraft carriers, which put him in charge of purchasing and acquiring the ships. He was a top deputy to Sean Stackley, the Pentagon's chief weapons buyer who is now serving as interim secretary of the Navy.

How well does he know the Beltway? Architzel was interviewed for this story one week before an April 29 deadline for Congress to fund the government to avert a partial shutdown of public services.

"We will not shut down the government," he predicted. "You'll see a CR (continuing resolution) go for a few more days, then an appropriations bill, and you'll have a 2017 budget."

That's exactly what happened. Congress passed a CR that lasted a week, then a budget.

If only reading the tea leaves in his current job was that easy.

Architzel has taken on the challenge of leading the former Davis Boat Works in Newport News, now Fairlead Boatworks. Just down from the sprawling Newport News shipyard, Fairlead is a small ship repair yard that does mostly military work, although it has diversified into the commercial sector.

"There is a perception that small business has the same issues as a large business," he said. "There are issues, but they're not the same."

Consider the cyclical nature of shipyard work. It happens to big and small companies. The Newport News yard laid off hundreds of workers in 2015 and 2016; now the company is hiring again.

But a smaller yard has a tougher time riding that roller-coaster. It doesn't have the reserves of a corporate giant like Newport News.

Fairlead must bid against other companies for work. It takes time — and expense — to prepare the bid, then wait for a decision. This year has been particularly tough because government spending was an autopilot from October through the end of April. That limited the amount of available work.

If and when defense spending ramps up, the company will have multiple opportunities to bid for work.

"So that's good, right? You're happy," Architzel said. "But it's all going to come out together. You're going to have to bid all of it. How do you know what you're going to get and what you're not going to get? It's a nice problem to have."

If companies such as W&O are taking a measured approach to expansion while companies like Davis Interiors can't afford to be proactive, Architzel is an example of the more aggressive strategy.

"You want to get those people now in advance of new business," he said. "I'm doing a little hiring now even though I don't have work in the yard, and I'm doing that so I have the ability to increase our workload."

Even though a 255-ship Navy will take billions of extra dollars and years to accomplish, contractors will feel the effect much sooner. Consider that the Navy already embarked on an ambitious, expensive initiative — replacing its aging fleet of ballistic missile submarines with new Columbia-class boats — which will create more for Newport News.

As work on the Columbia class ramps up in the coming years, the Navy could also decide to purchase aircraft carriers two at a time, which has happened in the past.

"It's not as long a lead as you think," Architzel said. The effect "can be pretty quick."

Like other suppliers interviewed for this story, Architzel is looking forward to the proposed buildup, even with the challenges of finding skilled labor and keeping a level workload.

"I'm very optimistic," he said. "I know one thing: Boats need repair, and there's a lot of boats here. It's just a matter of waiting it out and being ready at the time it happens. You can only be pessimistic so long."

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

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