BATH, Maine — Bath shipbuilders will take to the streets Thursday for a “solidarity” rally as Bath Iron Works navigates its way through the company’s largest labor unrest in decades.
The action follows a March 24 event where nearly 1,000 members of the International Association of Machinists Union Local marched the length of the shipyard at midday to rally support and to protest a variety of changes proposed by BIW President Fred Harris.
Harris assumed the helm at Bath Iron Works, a subsidiary of General Dynamics, in 2013 and continues to oversee the National Steel and Shipbuilding Company in San Diego.
As caps on defense spending result in fewer Naval contracts, Harris said the changes, including outsourcing work and cross-training employees, will increase the shipyard’s efficiency and keep the costs of building destroyers competitive.
With two major bidding wars on the horizon, however, a disagreement between management and the shipyard’s largest union over just how to cut costs has resulted in accusations, third-party arbitration and, most recently, a federal lawsuit charging BIW with violating its contract with workers.
Best known for building Arleigh-Burke class DDG-51 destroyers, three Zumwalt-class “stealth” destroyers are also underway at the Bath shipyard.
Bath Iron Works has built Arleigh Burke-class destroyers since the late 1980s, and currently competes with Huntington Ingalls Industries shipyard in Pascagoula, Mississippi, for contracts for the ships, which cost approximately $1.5 billion to build.
BIW officials announced at the time of the initial award that winning four versus five for Ingalls “sent a strong message about where BIW stands relative to its competition. Although BIW was awarded four ships, the inescapable fact is that BIW was not the winning bidder.”
“In order to improve our competitive position to win future work, BIW must reduce the cost of building ships in Bath, Maine, to a level the Navy can afford and at a price which is lower than our Mississippi competitors,” officials said, not for the first time.
Bath Iron works currently is building three DDG 51 destroyers. The DDG 115, the future USS Rafael Peralta, has been under construction since November 2011 and is slated to be christened this fall. Work on the DDG 116, the future USS Thomas Hudner, began in November 2012 and is about 45 percent complete, according to the company. Construction of the future USS Daniel Inouye, the DDG 118, began in April 2015.
The shipyard has four additional Arleigh Burke-class destroyers under contract and may snag another one depending on the Navy’s interpretation of a 2002 memorandum of understanding among the Navy, BIW and Northrop Grumman, which was at the time the lead yard for the San Antonio-class amphibious transport dock ship ( LPD-17).
That year, the Navy transferred contracts for four LPD 17s scheduled to be built at BIW to Northrop Grumman-owned Ingalls and Avondale shipyards in exchange for four DDG 51 destroyers contracted to Northrop Grumman.
The memorandum of understanding states that a fourth DDG-51 class ship “or equivalent workload” would be awarded to BIW preceding any award of a 12th amphibious transport vessel. In April, the Navy added that ship to its latest 30-year shipbuilding plan, DefenseNews reported.
BIW will also bid against Huntington Ingalls in 2016 on another multi-year contract for destroyers.
Bath Iron Works continues work on all three Zumwalt-class “stealth” destroyers, a line touted as the “most complex surface combatants the U.S. Navy has ever developed.”
The high-technology Zumwalt class originally was planned by the Pentagon to replace the DDG 51 class. In 2008, however, the Pentagon scuttled that plan because of concerns about the cost to build the Zumwalt. But more recently, analysts have said the line may be extended given the Navy’s investment in the Bath shipyard and hints by Chief of Naval Operations Admiral Jonathan Greenert that the Zumwalt is even better than expected.
In March, Bloomberg estimated the cost of the three ships at $12.9 billion, or about $4.3 billion per ship.
Before it changed course, though, the Pentagon had agreed to construction of three Zumwalts, all of which are being built in Bath.
The first-in-class DDG 1000, the future USS Zumwalt, is now scheduled for sea trials later this year; the DDG 1001, the future USS Michael Monsoor, is approximately 79 percent complete and slated for delivery in December 2018, according to BIW officials. Work on the the DDG 1002, the future USS Lyndon Johnson, began in April 2012 and is about 25 percent complete.
Most recently, in February 2014, BIW secured a $21 million design contract for a new class of U.S. Coast Guard offshore patrol cutters.
In competition with two other shipyards, BIW also will bid next year to build the cutters, scheduled to begin construction in 2017. Among the company’s competitors for the contract is Bollinger Shipyard in Lockport, Louisiana, which in late 2008 edged out BIW in a competition for new Coast Guard cutter contracts worth up to $1.5 billion.
But to win the Coast Guard contract, as well as be successful in the next multi-year procurement of DDG 51s, BIW must reduce costs, according to both analysts and management.
“If it were just about quality, Bath would probably win,” Industry analyst Loren Thompson of The Lexington Group said of the Coast Guard contract. “But it’s at least as much about cost, and that’s where Bath is challenged.”
In 2013, BIW undertook a $32 million project including a 51,000-square-foot, 11-story outfitting building. At the time, officials said improvements would add to approximately $500 million of investment by the company in the last decade and would bring nearly all shipbuilding processes inside, thus eliminating the largest disadvantage of shipbuilding in Maine: the weather.
Harris told the Bangor Daily News in January that BIW must win those bidding wars in order to keep up with employment, noting that securing the Coast Guard contract would avert laying off about 35 percent of the shipyard’s manufacturing workforce — about 1,200 employees. Of increasing efficiency, he said, “We’re not going to pay people less, but we need to do more per hour than we’ve done.”
Harris has proposed a number of changes, including outsourcing and cross-training employees, known as “additional functions.”
Union officials object to both, and successfully argued against some outsourcing. They say “additional functions” is a way for management to force employees to work out of classification, pitting one group of union members against another.
Jay Wadleigh, president of Local S6, which represents about 3,000 of Bath Iron Works’ approximately 5,700 workers, said cross-training was “a disaster and a morale-breaker” when it was in place from 1994 to 2000, and was one of the reasons for a 55-day strike in 2000.
Since November, Harris has on three occasions proposed outsourcing certain components of its ships from other vendors instead of making them at the shipyard, leading union leaders to suspect he is less willing to collaborate with unions than some of his recent predecessors.
In 2014, when Harris sought to outsource pipe hangars for the destroyers to NASSCO, his San Diego company, Sen. Susan Collins, R-Maine, intervened after the union discovered NASSCO bought parts for the pipe hangars from Mexico.
The union successfully argued against some of the other outsourcing, and has filed a grievance and filed for accelerated arbitration regarding other outsourcing proposals.
In early March, Harris also sought to temporarily bring in 16 electricians from NASSCO until BIW could train enough new hires. Instead, the union negotiated an alternate plan in which current employees worked extra hours for months to accomplish the work themselves.
Most recently, on April 22, Local S6 filed a suit in U.S. District Court charging the company with violating its contract with the workers by seeking to modify job descriptions outside of a formal contract negotiation, which won’t occur again until May 2016. The union also objects to the company’s demand to resolve those changes before a third party in arbitration.
Union officials say increased efficiency is necessary, and agree that “some level of flexibility” could work. But they suggest greater savings could be found through other changes, such as ensuring workers have materials to do their jobs when they need them.
Thompson said Friday that while BIW still makes the best ships and is considered “a very efficient operation,” changes such as cross-training are essential to keep it competitive.
“BIW doesn’t have the luxury of maintaining these artificial distinctions in terms of skill sets and work boundaries,” Thompson said. “If Bath is going to remain [competitive] for the long run, it needs the flexibility to get the greatest productivity out of each employee … the notion that people shouldn’t be allowed to cross-train even though their skills might be underutilized belongs to another age.”
Craig Hooper, a former vice president at BIW competitor Austal USA who writes about the defense industry at NextNavy.com, said in January that BIW “is one of the most endangered shipyards out there.”
“It hasn’t built a commercial ship since the early 1980s, and it’s entirely dedicated to developing and building large surface combatants,” Hooper wrote. “It builds great ships, but in that constrained budget environment, it’s an asset that might get sacrificed.”
Still, other analysts say the Navy is best served by two competing shipyards, and is unlikely to allow one to falter.
Meanwhile, as union officials ready for Thursday’s rally outside the south gate of the shipyard, and prepare to join management for arbitration before the American Arbitration Association on May 29, Congress continues to move forward on the 2016 National Defense Authorization Act, which funds the shipyards’ contracts.
The U.S. House of Representatives pa ssed a nearly $612 defens e bill on Friday, just as the Senate Armed Services Committee also passed its version of the bill. The bill authorizes almost $4 billion for Navy destroyer programs, including $433 million for the construction of DDG 1000s and $3.1 billion for two DDG-51s, one of which will be built in Bath. The bill also includes $400 million in incremental funding for an additional DDG 51 that the Navy could procure in the next three years, potentially at Bath Iron Works, according to U.S. Sen. Angus King, I-Maine.
The House version of the defense act still must be reconciled with a Senate bill and adopted by both chambers before being sent to the president.
BDN writer Darren Fishell contributed to this report.