National Security Assessment of the U.S. Shipbuilding and Repair Industry and DOC-USCG Deepwater Cooperation Pacific 2002 U.S.-AUS Maritime Cooperation Conference Sydney, Australia January 31, 2002 Brad Botwin Director, Strategic Analysis Division U.S. Department of Commerce 1
DOC-NAVSEA Carderock U.S. Maritime Industry Study Coast Guard Deepwater Program: Partnership w/doc 2
United States Department of Commerce Bureau of Export Administration (BXA) Office of Strategic Industries and Economic Security MISSION: BXA is the focal point within the Department of Commerce for developing, promoting, and implementing policies that ensure a strong, technologically superior defense industrial base 3
DOC Maritime Industry Assessment Sponsored by NAVSEA Carderock, NSWC BXA and Carderock established four study objectives: 1. Illustrate the relationship between the maritime industry, national security, and the U.S. economy 2. Identify opportunities for increased sharing of maritime science and technology between public and private entities 3. Expand the use of public maritime capabilities toward advancing private industry competitiveness 4. Encourage cooperative efforts within the maritime industry among government, industry, and academia 4
BXA Maritime Assessment Partners Carderock Naval Surface Warfare Center Sponsor Office of Naval Research (ONR) Department of Transportation s Maritime Administration (MARAD) Consortium for Oceanographic Research and Education American Shipbuilding Association Shipbuilders Council of America United States Coast Guard Pennsylvania State University Others 5
BXA Maritime Assessment Survey 1 U.S. Shipbuilding and Repair Industry 199 Surveys sent to industry All major shipyards responded Interviews with government and industry experts Site visits to major shipyards 13 largest firms account for over 80% of all U.S. shipbuilding revenues 6
Report Findings: Industry Revenues $10.2 billion in 1998 70% from military market Big Six $6.7 billion (2/3 of total 95% from military market) $12,000,000 Shipbuilding and Repair Revenues, 1996-2000 (In $000s) $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 1996 1997 1998 1999 2000 Commercial $2,132,095 $2,494,560 $2,955,137 $2,955,407 $3,464,136 Defense $6,922,519 $6,545,983 $7,012,627 $7,205,754 $7,758,980 7
Report Findings: Employment U.S. private shipbuilding industry employs nearly 89,000; another 23,000 work in public yards 60% of labor hours are attributed to production work Since early 1980s, industry workforce has been cut in half 200,000 180,000 160,000 Total Employment 140,000 120,000 100,000 80,000 60,000 Production Workers 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 8
Shipbuilding and Repair R&D, 1996-2000 Basic research only about 1% of total R&D spending Development spending more than all other stages combined U.S. shipyard R&D avg. 1.23% of revenues from 1996-2000 Big Six account for 80% of industry R&D with an average of 1.5% of revenues (U.S. industry avg. is 3%) $90,000 $80,000 $70,000 R&D Expenditures in $000s $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 1996 1997 1998 1999 2000 Basic $400 $525 $1,225 $1,025 $1,825 Applied $8,223 $5,817 $8,768 $30,796 $27,188 Development $77,151 $71,886 $75,092 $73,555 $72,181 System/Process Studies $24,542 $28,346 $38,257 $36,997 $27,164 9
Report Findings: Productivity Shipbuilding productivity increased 1.4% from 1987-1995 and 12% from 1995-1998 3 of Big 6 shipyards reported gains over 15% in the last 5 years American shipyard productivity lags behind international shipbuilders and considerably lower than other domestic manufacturing industries 190 180 170 Aircraft Assembly Plants (3721) 160 150 Auto Assembly Plants (3711) 140 130 120 Shipbuilding and Repair (3731) 110 100 90 3711 3721 3731 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 100 109.9 110.2 108.7 103 116.1 115.6 117.2 114.7 117.8 129.8 145.1 100 105.8 107.5 112.9 131.4 141.7 142.5 131.8 131.4 142.6 142 184.2 100 100.9 102 110.7 104.7 106.4 109.3 108.3 100 103.4 108.2 112.2 10
Report Findings: Financial Conditions Military shipbuilding work relatively profitable Big Six profits were 7.47% of total revenues; other yards averaged 5.16% Total for all U.S. manufacturing is 8.31% $700,000 10.00% $600,000 $500,000 Big Six All Others 9.00% 8.00% 7.00% $400,000 6.00% 5.00% $300,000 4.00% $200,000 3.00% $100,000 2.00% 1.00% $0 1996 1997 1998 1999 2000 0.00% Big Six $430,972 $288,625 $540,273 $581,734 $604,560 All Others $71,006 $142,098 $145,927 $183,174 $228,629 % Big Six 6.72% 4.81% 8.45% 8.86% 8.20% % All Others 3.22% 5.38% 4.67% 5.52% 6.26% 11
Report Findings: International Issues U.S. ranks 10 th in the world with a 1% share in construction of commercial vessels over 1,000 gross tons Exports accounted for less than 2% of 1998 revenues 97% of U.S. world trade is carried on foreign-flagged vessels U.S. constructed vessels can cost 2-3x more than similar ships built overseas S. Korea Japan China Germany Italy Poland U.S. 1% 3% 3% 3% 7% 26% 43% 0% 10% 20% 30% 40% 50% Share of Gross Tonnage 12
U.S. Shipbuilders in the International Market U.S. shipyards sourced 4% of their total purchases overseas in 1998 - this is rising over time Of the largest yards, over 1/3 show a willingness to team with international partners Cooperation increasing; joint ventures between U.S. Australian shipyards are most prominent Bender (Alabama) Austal (Perth) Bollinger (Louisiana) INCAT (Tasmania) 13
Report Recommendations Review current maritime legislation focusing on possible changes that balance long-term security needs with sound economic planning Congress needs to ensure stability and predictability in DoD ship procurement budgets Look for opportunities to enhance industry productivity Evaluate current Navy procurement practices Promote cooperation between government and industry Monitor international shipbuilding producers and products Deepwater international partnering/joint venture opportunities 14
Maritime Report: Next Phases Maritime Research, Development, and Education (Completion FY 02) Over 150 surveys collected from leading colleges and universities Study focuses on educational infrastructure for maritime industries and trends in government, private spending on maritime-related R&D Shipbuilders Supplier Base (Completion FY 02) 4,000+ surveys sent to U.S. firms who supply goods or services to shipyards Study focuses on health and competitiveness of subcontractors and suppliers to shipyards 15
Genesis of DOC Interest in Deepwater Benefits U.S. maritime industrial base Jobs Improves business for shipbuilding and aircraft industries Use of leading-edge technologies, designs International Partnerships Promote interoperability and cooperation with allied nations Unique Program Features Assets can be utilized for many non-national security missions (Fisheries, environmental protection, immigration) 16
DOC/USCG Deepwater Cooperation In March 2001, the U.S. DOC and the U.S. Coast Guard signed a 5-year Memorandum of Agreement to: Jointly promote the Deepwater Program internationally Develop partnerships and joint ventures Assist U.S. industry in its efforts to globalize DOC will bring its own worldwide staff and resources to the partnership 17
DOC/USCG Deepwater Cooperation - Cont. Possible Cooperation Focus Points Government-to-Government Defense cooperation and interoperability Joint training and exercises Economic policy (protection of economic zones) Industry-to-Industry Sharing of technology Industrial participation Increased business opportunities for all parties 18
DOC/USCG Deepwater Cooperation DOC s Actions to Date: DOC Deepwater article was published in December s issue of the Commerce Department s Export America magazine Letters sent to 91 Foreign Commercial Officers in U.S. embassies educating them on Deepwater Positive responses from Colombia, Denmark, India, Qatar, South Africa, Sri Lanka, Sweden, and others Trade shows and conferences Discussions with local companies in interested nations regarding business opportunities 19
United States Department of Commerce Bureau of Export Administration Office of Strategic Industries and Economic Security (SIES) Contact Information: Brad Botwin, Director Strategic Analysis Division U.S. Department of Commerce 14 th and Constitution Avenue N.W. Room 3876 BXA Washington, DC 20230 Web:http://www.bxa.doc.gov/OSIES E-mail: bbotwin@bxa.doc.gov Telephone: 202-482-4060 Fax: 202-482-5650 20