Politicians can yammer all they want about “creating” new jobs, but do they have the backbone to save the few remaining good jobs that exist? Two major shipbuilders (Northrop Grumman, with two first-tier yards in the Gulf Coast one in Newport News Virginia; and Aker Philadelphia Shipyard) are issuing layoff notices that will eventually hit as many as 12,000 or 13,000 workers. The ultimate job casualties will be ten times that total.
For every direct shipyard job, there are three additional jobs in the shipbuilding supply chain that depend on shipbuilding activity as a customer; and seven more in the immediate community where the shipyard operates— the vendors, suppliers, contractors, grocery stores, bars, and gas stations that will evaporate when the jobs go away.
In New Orleans—when 5,000 shipyard jobs disappear, the support network collapses—35,000 jobs lost. Businesses in 43 other states provide materials, equipment and supplies to Avondale’s shipbuilding—subtract another 15,000 jobs. The decision to padlock a business that supports 5,000 good jobs expands to a loss of 50,000 jobs. America can’t afford that.
Our national economy has become so fragile that when Northrop Grumman issued layoff notices at Avondale, real estate prices in the immediate area dropped 40 percent overnight.
Shutting down Northrop Grumman’s two Gulf Coast shipyards represents a loss of $12.6 billion dollars a year to the region. The combined value of the entire Gulf seafood and tourism industries is $4 billion dollars a year.
The federal government created the problems in the shipbuilding industry through its decades-long neglect. Taxpayer costs involved in buying a little more breathing time for the shipbuilding industry would be negligible. The immediate threat could be allayed if the Navy simply put a little front loading in its shipbuilding schedule. The cost of doing nothing is huge.
The proof of the economic value of shipbuilding is in the statistics: China, Korea and India have aggressively pursued shipbuilding as a cash cow and a strategic industry. Korea currently leads the world in shipbuilding with 50 percent of world output; China is a close second. The U.S. accounts for less than 1 percent. Those nations recognize the employment bonanza that a vigorous shipbuilding industry provides. No nation can be a world power if it lacks a shipbuilding industry.
Congress and the White House have failed to fund loan guarantee programs that would help owners and operators finance new ship construction—despite the growing need for double-hulled tankers to replace aging tankers that carry environmentally volatile cargoes such as oil. Unlike direct appropriations, loan guarantees are typically a bookkeeping transaction reserving funds to be used if a shipbuilding loan defaults.
For years, our friends in Congress have told us, “don’t worry, we’ve got laws on the books to require the Department of Defense to buy only American-made ships.” How’s that working out? In 2008 alone there were 67,000 Buy American waivers requested by DOD and granted by Congress. There are at least 11 foreign-built vessels operated by the strategic Military Sealift Command under five year leases routinely renewed without question. The Gulf Coast shipyards specialize in building the kind of ships that could replace those foreign vessels.
When the Congressional Research Service broached this topic with the DOD, they got this circular argument: “Unfortunately, very few commercial ships with high military utility have been constructed in U.S. shipyards in the past 20 years,” as if these ships are ordered and built by some unseen hand in the market. The DOD explanation argues that imposing stricter limits on leasing ships for this purpose would make leasing more expensive. Yet, DOD goes on to say, it has a plan in effect to greatly reduce long term leasing by 2012. If that’s true, why haven’t we seen any indication that the Navy or DOD have plans to put a few such ships in the order books?
If the government fails to act, the U.S. shipbuilding industry will shrink to just three or four first-tier yards over the next year. Where will the U.S. Navy go to find efficient shipbuilding and competitive pricing? Will America be forced to rely on Australia, Europe, or Asia?
Lawmakers concerned about jobs, those concerned about America’s defense industrial base, those concerned about the economic health of America’s Gulf region need to act now to sustain the two imperiled Gulf Coast shipyards.
Ron Ault is president of the Metal Trades Department of the AFL-CIO