Executive Briefings

Is There a Hollywood Ending for the U.S. Shipbuilding Industry?

Hollywood excels at reviving zombies, serial killers and aging superheroes. Now it's trying to do the same for U.S. shipbuilding.

"The Company Men" stars Ben Affleck, Tommy Lee Jones and Chris Cooper as executives whose lives are upended by a wave of layoffs within a mega-corporation that specializes in transportation, of all things. This fictional business got its start in shipbuilding, and Jones has several scenes in which he laments the passage of a time when Americans actually built things, instead of making their money on stock manipulations. What he fails to address is the decline of U.S. shipbuilding at the hands of foreign interests who can deliver much cheaper vessels because they receive huge government subsidies and don't have to pay union wages. Comes time to bid for another of those massive containerships that dwarf the Titanic, American yards need not apply.

There was a time when U.S. shipbuilding dominated the world; following World War II, the nation had huge amounts of idle capacity and an ample supply of returning veterans to crank out cargo ships in peacetime. (The women who had taken their places during the war were issued aprons and ordered back to the kitchen.) But as the years went by, commercial shipbuilding came to rely on government aid to survive. Construction differential subsidy, which covered up to half the gap between U.S. and foreign production costs, was finally phased out in 1982. Since that time, the industry has suffered a severe contraction. Today it depends heavily on a combination of ships for the military and those that ply the U.S. domestic, or Jones Act, cargo trades. In most cases, federal law bars the purchase of either type of vessel from a foreign yard.

In the movie, Jones's character takes a generous severance - his status in the company ensures a hefty payout and a portfolio of stock options - and sets out to birth a new shipbuilding business. All he has for starters is the crumbling shell of a factory and a cadre of dedicated (actually, desperate) office staffers. That plus, say, 100 unionized workers to begin the hands-on building about which Jones waxed poetic earlier in the story. Exactly what he intends to build there is unclear, but he seems confident that he can make his new venture work with a combination of sweat and American know-how.

I watched that stirring conclusion with a strong dose of skepticism. Never mind Jones's reliance on unionized labor; the real howler, I thought, was the assertion of writer-director John Wells that U.S. shipbuilding is a viable proposition in today's global market. Outside of government-mandated work, does a domestic industry even exist?

The answer, with qualifications, is yes. Granted, U.S. yards are kept busy by defense and government work, says Matt Paxton, president of the Shipbuilders Council of America. But the mid-sized, mostly non-union shipyards that SCA represents are also getting their share of commercial work. A fair amount of business was generated by the replacement of single-hulled oil and chemical tankers outlawed by the Oil Pollution Act of 1990, which was enacted following the Exxon Valdez oil spill in Alaska's Prince William Sound. With that work winding down, the industry is looking to new projects related to renewable energy and the expansion of offshore oil and gas development. (Notwithstanding BP's bungling of the Deepwater Horizon spill in the Gulf of Mexico.) Some of the big defense operations, particularly Louisiana's Avondale Shipyard, are struggling to survive, "but the yards that are inside the SCA are doing well and continuing to deliver great vessels on time and on price," Paxton claims.

Yes, Virginia, there is an American shipbuilding industry. SCA manager of government affairs Ian Bennett quotes a PricewaterhouseCoopers study, commissioned by the Transportation Institute, which puts direct employment by commercial shipyards at around 100,000 workers. Now multiply that by four to account for indirect jobs provided by suppliers, vendors and related entities, for an annual total of $29.1bn in labor compensation, $100.2bn in economic output and $11.4bn in taxes.

Numbers can be slippery things, but let's grant SCA its claim about the vitality of the industry. The question, however, remains: can Tommy Lee Jones start up a new American shipyard from scratch? Even Paxton has one essential condition. "At the end of the day," he says, "a guy has to know how to build a ship." Jones will have to find enough workers, unionized or not, who can handle a welding line and put together the big cuts that make up complex vessels. With the loss of so much commercial business to cut-rate foreign yards, have we hollowed out the core of our industrial workforce?

Paxton believes the skills - as well as the ability to pass them on - are still there. He points to industry training programs that involve two-year apprenticeships and lead to certification as skilled welders and craftsmen. After that, graduates can take their abilities anywhere they want. Assuming, of course, that they can find a job in this economy.

It seems clear that the future of U.S. shipbuilding doesn't rest with the big containerships that will increasingly dominate the worldwide oceangoing trades. One possibility for fresh work is offshore wind turbines and the workboats that service them. Another is small vessels in the coastwise trade. Paxton cites the case of Seattle, Wash.-based Kvichak Marine Industries, a yard that was making fishing tenders and has shifted into the production of boats for the U.S. Coast Guard. That's the kind of contract on which Jones and his team will have to rely for business, if their industry isn't doomed to fade out like the movie they're in.

- Robert J. Bowman, SupplyChainBrain

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Hollywood excels at reviving zombies, serial killers and aging superheroes. Now it's trying to do the same for U.S. shipbuilding.

"The Company Men" stars Ben Affleck, Tommy Lee Jones and Chris Cooper as executives whose lives are upended by a wave of layoffs within a mega-corporation that specializes in transportation, of all things. This fictional business got its start in shipbuilding, and Jones has several scenes in which he laments the passage of a time when Americans actually built things, instead of making their money on stock manipulations. What he fails to address is the decline of U.S. shipbuilding at the hands of foreign interests who can deliver much cheaper vessels because they receive huge government subsidies and don't have to pay union wages. Comes time to bid for another of those massive containerships that dwarf the Titanic, American yards need not apply.

There was a time when U.S. shipbuilding dominated the world; following World War II, the nation had huge amounts of idle capacity and an ample supply of returning veterans to crank out cargo ships in peacetime. (The women who had taken their places during the war were issued aprons and ordered back to the kitchen.) But as the years went by, commercial shipbuilding came to rely on government aid to survive. Construction differential subsidy, which covered up to half the gap between U.S. and foreign production costs, was finally phased out in 1982. Since that time, the industry has suffered a severe contraction. Today it depends heavily on a combination of ships for the military and those that ply the U.S. domestic, or Jones Act, cargo trades. In most cases, federal law bars the purchase of either type of vessel from a foreign yard.

In the movie, Jones's character takes a generous severance - his status in the company ensures a hefty payout and a portfolio of stock options - and sets out to birth a new shipbuilding business. All he has for starters is the crumbling shell of a factory and a cadre of dedicated (actually, desperate) office staffers. That plus, say, 100 unionized workers to begin the hands-on building about which Jones waxed poetic earlier in the story. Exactly what he intends to build there is unclear, but he seems confident that he can make his new venture work with a combination of sweat and American know-how.

I watched that stirring conclusion with a strong dose of skepticism. Never mind Jones's reliance on unionized labor; the real howler, I thought, was the assertion of writer-director John Wells that U.S. shipbuilding is a viable proposition in today's global market. Outside of government-mandated work, does a domestic industry even exist?

The answer, with qualifications, is yes. Granted, U.S. yards are kept busy by defense and government work, says Matt Paxton, president of the Shipbuilders Council of America. But the mid-sized, mostly non-union shipyards that SCA represents are also getting their share of commercial work. A fair amount of business was generated by the replacement of single-hulled oil and chemical tankers outlawed by the Oil Pollution Act of 1990, which was enacted following the Exxon Valdez oil spill in Alaska's Prince William Sound. With that work winding down, the industry is looking to new projects related to renewable energy and the expansion of offshore oil and gas development. (Notwithstanding BP's bungling of the Deepwater Horizon spill in the Gulf of Mexico.) Some of the big defense operations, particularly Louisiana's Avondale Shipyard, are struggling to survive, "but the yards that are inside the SCA are doing well and continuing to deliver great vessels on time and on price," Paxton claims.

Yes, Virginia, there is an American shipbuilding industry. SCA manager of government affairs Ian Bennett quotes a PricewaterhouseCoopers study, commissioned by the Transportation Institute, which puts direct employment by commercial shipyards at around 100,000 workers. Now multiply that by four to account for indirect jobs provided by suppliers, vendors and related entities, for an annual total of $29.1bn in labor compensation, $100.2bn in economic output and $11.4bn in taxes.

Numbers can be slippery things, but let's grant SCA its claim about the vitality of the industry. The question, however, remains: can Tommy Lee Jones start up a new American shipyard from scratch? Even Paxton has one essential condition. "At the end of the day," he says, "a guy has to know how to build a ship." Jones will have to find enough workers, unionized or not, who can handle a welding line and put together the big cuts that make up complex vessels. With the loss of so much commercial business to cut-rate foreign yards, have we hollowed out the core of our industrial workforce?

Paxton believes the skills - as well as the ability to pass them on - are still there. He points to industry training programs that involve two-year apprenticeships and lead to certification as skilled welders and craftsmen. After that, graduates can take their abilities anywhere they want. Assuming, of course, that they can find a job in this economy.

It seems clear that the future of U.S. shipbuilding doesn't rest with the big containerships that will increasingly dominate the worldwide oceangoing trades. One possibility for fresh work is offshore wind turbines and the workboats that service them. Another is small vessels in the coastwise trade. Paxton cites the case of Seattle, Wash.-based Kvichak Marine Industries, a yard that was making fishing tenders and has shifted into the production of boats for the U.S. Coast Guard. That's the kind of contract on which Jones and his team will have to rely for business, if their industry isn't doomed to fade out like the movie they're in.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article