Earlier this year, Northrop Grumman combined its two shipbuilding sectors - Newport News and Ship Systems - into one entity: Northrop Grumman Shipbuilding, led by Mike Petters. Formerly the head of operations at Newport News, Petters, now is in charge of the world's most diverse naval shipbuilding company.
His purview includes the nuclear-capable yard at Newport News, Va., which builds aircraft carriers and submarines; the Ingalls yard at Pascagoula, Miss., building destroyers, amphibious ships and Coast Guard cutters; the Avondale shipyard at New Orleans, where amphibious transport dock ships are built; and a small yard specializing in composites at Gulfport, Miss.
Petters talked to Christopher P. Cavas in Washington.
A. We're calling it a realignment. We are taking the operations on the Gulf Coast and in Newport News and looking at how we deploy the people, the assets, the technologies, to more efficiently support our customers.
We think there is opportunity to do more with that kind of deployment. For instance, what do we want the three major facilities involved in this to look like in 15 years? Can we create centers of excellence in particular areas, instead of reinvesting in a particular facility three times over? Let's say we want to build a pipe shop. Do we need to build a pipe shop in all three facilities or can we build one pipe shop that would support all three?
We will look at how we balance our workloads so we're not hiring in one place and laying people off in another. Laying people off is always costly.
The technology piece is very interesting because there are really two parts of it. You have a business [Newport News] that is primarily a nuclear shipbuilding business with its own set of protocols and technologies and tools and training. You have another business that is primarily surface combatants and amphibious ships and they have there own sets of protocols and tools and things like that. Each of the organizations developed tools and technologies supportive of their programs. They each already can learn from each other things about the technology that they did not choose.
We have, for instance, Catia design tools that drive our manufacturing processes. We have one version of the tool in Newport News and a different version on the Gulf Coast. It doesn't make sense to move one to the other, but it would make sense to take the two organizations and have them think strategically about where they want to be at some point in the future and then start moving their development in that direction so that we can get to a consistent set of drivers.
A. Five years from now I'd like the operations to think of each other as shops. So if I have a center of excellence say at Avondale for a particular expertise, I'd like for the guys in Newport News to know about that and be able to say a job is going to originate in Avondale and it's going to come to Newport News this way. I have no illusions about how hard that's going to be. That's a major, major undertaking, but if five years from now we're sitting here still with stove-piped shipyards that are not well integrated, then I haven't really done what I've been asked to do.
A. We're looking at where the resources are. We have workload issues in Newport News over the next couple of years in terms of how many people we need. We've got issues on the Gulf Coast about how much work we have and how many people we can get there. Are there ways that the yards can operate with each other? Can they coordinate to relieve pressures both are feeling? We're doing some testing of that on the LHA 6 program right now. But we're working with the Navy to help them understand what it is that we're trying to accomplish because they certainly have a role in all of this.
A. Our ambition is to have a single integrated operation with three sites. What I won't be doing is moving to Washington. I'm going to locate inside the shipyards and operate and execute from there. So yes, I'm the guy the Navy can call that would be the single point of contact for Northrop Grumman shipbuilding. But I'm headed down a path where I want to make the shipyards shops to each other to where it's just a normal course of business.
A. I've been in the job now for just a few weeks. Every single time I walk into the [Gulf] shipyards I shake hands with shipbuilders who've had to rebuild their shipyard, rebuild their careers, rebuild their homes, rebuild their families. I am absolutely in awe of what the folks on the Gulf Coast have done in the last two and a half years. I think that there also is an opportunity now to build on what we have already done and provide some focus and leadership and direction.
What's the direction we're going to go? Where are we going to take this? I think it's in the nation's interest. I think it's in the Navy's interest and I think it's in the corporation's interest that we find the most efficient and effective way to build the ships that we need to go build. There are not enough people at the shipyard in Newport News to do all of the work that Northrop Grumman has to do. There is not enough people on the Gulf Coast to do all the work that Northrop Grumman has to do for the Navy and the Coast Guard. How are we going to make all that work? I think the folks that I have interacted with are ready to go take that on now. I think that they are still are working their way through a host of issues, but I think they're ready for the next challenge.
A. First of all the bargaining units are represented differently. In Newport News the Steelworkers represent all of the crafts. On the Gulf Coast you have the Metal Trade Council, which then represents the individual unions that represent a particular craft. I look forward to working with the leadership of their units. I have a track record of having done that at Newport News. I'm pretty straightforward with the union leadership about intentions and plans and how do we get from here to there and I've had a pretty good relationship with those folks. I would expect that that will continue in this way. Relationships take time to build. As they get to know me better they will understand that I'm somebody that they can work with.
A. There is a whole host of issues that have to be worked out. One is the scope of work. Another is how much risk is there? On some programs when you're in serious production, the amount of risk is well understood, easily quantifiable by all parties. On other programs, like lead ships where lots of new technology is being inserted, there can be honest differences of opinion about how much risk there really is. Who's going to bear the risk and how are we going to allocate that? What kind of contract? What kind of incentives are you going to put on there?
I came to the DDG 1000 piece of this very late, but it looks to me like the discussions were very constructive.
A. The infrastructure at Pascagoula is still being put together. At Gulfport there is significant investment for the deckhouse, which will be built there. Several investments made since the storm are just now coming on line - like the panel line is just now getting ready to be completed. So I wouldn't say all the investments have been completed in anticipation of that ship, but they are sequenced so that they will be ready to execute the ship.
A. Certainly the DDG 1000 program is a big focus over the near term. But this whole carbon fiber composite technology is something that's going to take off. There now are actually ships at sea with these composites and they're starting to generate track records of durability and life cycle maintenance and weight savings, and those are becoming part of the record and not just part of the business case. That's going to get folks to start thinking more and more about how we take advantage of this technology. We're making the investment to support the DDG 1000 program in a big way, but certainly if things were to change that would call into question the investment.
A. We think LPD 26 is pretty important. Our ambition was to start on this last year. Our ambition now is to start on it this year. I don't really want to be in the position of saying to the Navy you need this ship because it's the only way to keep the industrial base going. In this particular case, both the commandant of the Marine Corps and the chief of naval operations have articulated that the requirement is 11 and they have put their acquisition of the 1oth ship on their unfunded list, saying we have a requirement, we don't have the money, we need help with this, here is something that you can help us with. We believe that that's also good for the industrial base and we're working hard to support that.
A. It sounds to me like the folks at NASSCO believe they have worked some tough issues. They've got a long production run. They have eliminated a lot of the churn in the engineering piece by getting the design and material piece of it. So they have tried to make that program as much of a serious production program as they possibly can. We'll see how that works. I'm not terribly interested right now because I've got a lot of things to do for the United States Navy. I'm not terribly interested in going out and trying to do commercial shipbuilding. I think there are a lot of potholes in that road.
A. I don't know today exactly how all that's going to play out. I'm probably more than a casual observer. It will drive decisions about programs and investments and resourcing. The way those decisions get made will drive the decisions we make about how to go forward, how to pursue things.
A. Northrop Grumman's commitment is pretty clear. They've put several hundred million dollars of capital into each of these shipyards to allow them to be more efficient. This reorganization is all about trying to increase and improve on the efficiencies that are there. So I think the question for me and for any of the corporations starts at the very beginning: Does the nation need a Navy? The answer to that is yes, and next is: what is the best way to provide it? You don't get to Navy's stated requirement of 313 ships unless you have a healthy industry.
So what's a healthy industry look like? A healthy industry is one that attracts people. It attracts technologies and it attracts investment. How do you do that? You help each other make the kinds of decisions to attract the talent you need to keep the industry healthy.
The challenge with capital investment is that over the past - pick your timeframe - the returns in this business have not necessarily been the kinds of returns that would attract a whole lot of capital. I think that you could argue that one of the values, one of the benefits of this alignment, certainly one of the things that I'm going to be focused on, is how you more efficiently and effectively deploy the capital that you get.
There's another piece to this that industry has responsibility for. It needs to be recognized that the industry has operational integrity. That you are doing the quality work that taxpayers expect, that you are being stewards of the investments that are being made and you're producing the kinds of platforms that can go in harms way.
The other part is there needs to be some financial predictability around this so you can predict where your program's going to go, how it's going to turn out. You can have that conversation not only between the Navy and the industry, but between the Navy, industry and the taxpayers.
So my focus inside the yard is we want to have operational integrity and financial predictability. I want to have a solid interchange with the Navy over what's healthy for the industry, what's healthy for the Navy. And we need to be talking to the nation about why we need a Navy.
A. Maybe. It's interesting that we are now on the front edge of this [new] maritime strategy. You look at the things you want to accomplish and what the platforms are to do that. Or if you build all high-end platforms to handle high-end missions there are going to be times when you're using a high-end platform to handle a mission that is not high end.
Is that cost-effective? Is there a different mix that would allow you to meet your high-end missions but also give you better, more efficient and affordable coverage on some of the lower end missions? I think that's a great discussion for us to be having.
A. You might convince yourself that that made a whole lot of sense if you did not want an expeditionary Navy or a carrier battle group kind of Navy. The nation today believes we need to have the ability to put high-performance aircraft at sea. We need the ability to take Marines and put them anywhere in the world. And we need to support those platforms when they are deployed.
I think that as long as the commitment is there to have that kind of forward-deployed capability there will also be an understanding that it probably needs to be domestically supported. It becomes a security issue.
I also believe that if you don't do anything and you just let things atrophy or proceed along their natural course, it wouldn't be hard to find yourself in the position that the United Kingdom has found themselves in. You could see that declining supplier base, declining capability on the part of the industry to support the requirements.
The Army's Future Combat Systems (FCS) program is ready to test a few components that soldiers may have in their hands by 2010.
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