December 7, 2022

Salvage Jobs

Only the finest business

Huntington Ingalls considers industrial base investment, as sub construction lags behind

This article has been updated to include additional information regarding the capital investments being considered.

WASHINGTON — Huntington Ingalls Industries is planning an investment in its submarine-industrial base to help stabilize production as demand for sub components increases.

This comes as the parent company reported optimism for getting back to on-time delivery, even as its Newport News Shipbuilding yard missed two submarine milestones at the end of 2021.

Chris Kastner, HII’s chief operating officer and soon-to-be CEO, said Feb. 10 during the company’s quarterly earnings call that Block IV Virginia-class submarines Montana and New Jersey were nearing milestones that were expected to take place by the end of 2021.

Montana launched in March, but it was meant to complete sea trials and be delivered to the U.S. Navy by the end of the year. Instead, the shipyard announced Feb. 7 that the submarine had completed its initial round of sea trials, which will be followed by further at-sea activity before the Navy takes ownership of the boat.

New Jersey was christened and achieved pressure hull complete during 2021, meaning all hull sections were joined as a watertight unit. But it didn’t achieve float-off as planned. Kastner said that would happen soon.

“While we did not achieve our projected end-of-year milestones, the [Virginia-class submarine] program continues to improve its progress towards a consistent two-per-year cadence,” he said in his opening remarks during the call.

Later, in response to a question, he added that Virginia-class production “is pretty stable. Missed milestones at the end of the year related to Montana and New Jersey, but those will happen here momentarily. But they’re pressing towards getting back to a two-a-year cadence; the team is very focused on that.”

Newport News Shipbuilding and General Dynamics’ Electric Boat shipyard each build certain modules of the submarines and take turns conducting the final assembly and delivery of the vessels to the Navy. The service has been buying two a year, and at this point industry should be delivering two a year as well. However, the last general-purpose submarine to go to the Navy was Vermont in April 2020.

Still, Kastner expressed optimism.

“It’s pretty encouraging from a modules standpoint at Newport News last year. They met their commitment on modules, so they’re getting some stability in the manufacturing organization at Newport News,” he said.

But the challenge will grow tougher as production levels increase. Today, the submarine-industrial base is asked to build two Virginias a year, plus work on the first-in-class Columbia ballistic missile submarine. Going forward, the two-per-year Virginia rate will remain, but industry will be building a larger variant of the Virginia sub with more missile tubes in the middle, as well as bumping up Columbia production to a consistent one-per-year rate — creating an annual workload that the modern submarine-industrial base hasn’t ever come close to achieving.

The Navy has tried investing in industry and is looking at additive manufacturing, or 3D printing, for some components to relieve industry of some burden, though work remains to shore up critical suppliers in the submarine-industrial base.

HII is talking to the Navy about how to support the industrial base as it tries to increase capacity in the coming years, and the company may make investments in its suppliers if the Navy does so as well.

Chief Financial Officer Tom Stiehle said during the call that the company this year plans to make capital expenditures of between 2.5% and 3% of sales — or “modest incremental capital expenditures above our prior guidance, related to investments in infrastructure and tooling to support the submarine industrial base. We are working with our Navy partner regarding the shared investment in capital infrastructure and believe these critical investments will have minimal impact on our overall free cash flow generation.”

HII spokesman Danny Hernandez later added that the capital investments would be made to suppliers’ tooling and infrastructure at the Newport News shipyard, and that subcontractor support could also be included in the investments.

Later in the call, Stiehle added that capital expenditures were already down from recent years, where the company invested 3.6% in 2020 and 3.3% in 2021. The plan had been 2.5% for 2022, but the company is now planning for a potentially larger investment, pending ongoing talks with the Navy.

Based on planned work for the remainder of the Virginia Block V contract and the Columbia program, as well as looking ahead at the Block VI Virginias, Stiehle said there’s a need in the industrial base for more infrastructure and tooling to keep manufacturing on track.

“We would only go forward with the [Navy’s] assistance, and to be clear, we would only move forward if the investment made sense and had an appropriate return,” he said.

Kastner added this would only take risk out of the 2-plus-1 construction rates.

If the Navy were to ask for three Virginia submarines in any given year — as the Trump administration did in its final Navy strategy, the Battle Force 2045 plan released in October 2020 — significant further investments would be required.

Megan Eckstein is the naval warfare reporter at Defense News. She has covered military news since 2009, with a focus on U.S. Navy and Marine Corps operations, acquisition programs, and budgets. She has reported from four geographic fleets and is happiest when she’s filing stories from a ship. Megan is a University of Maryland alumna.

https://www.defensenews.com/naval/2022/02/10/huntington-ingalls-considers-industrial-base-investment-as-sub-construction-lags-behind/