As US Navy rethinks its fleet, Ingalls Shipbuilding faces uncertain future

WASHINGTON — As recently as three years ago, the U.S. Navy’s long-term shipbuilding plan laid out a stable path for Ingalls Shipbuilding.

The Navy planned to buy two or three Arleigh Burke-class guided-missile destroyers each year, splitting the work between the Pascagoula, Mississippi-based Ingalls shipyard and General Dynamics’ Bath Iron Works in Maine.

The service was also set to purchase San Antonio-class amphibious transport docks well into the future, initially at one every other year but eventually moving to one per year.

While the next America-class amphibious assault ship, LHA-6, would be stretched over a longer-than-ideal construction timeline, the Navy would eventually buy one every three or four years. And though the Coast Guard’s Legend-class National Security Cutter program was coming to an end, there were several options for the Navy to replace that work.

But over the past three years, the service has tightened its budget and changed its requirements, making the future look far less rosy for Ingalls Shipbuilding, a division of Huntington Ingalls Industries.

The Navy has started moving to a distributed maritime operations mindset, prioritizing small and unmanned ships to distribute the fleet’s firepower in more places — compared to the traditionally large ships that concentrate firepower among fewer hulls. And it’s prioritizing readiness over fleet size, limiting the number of new ships it buys.

This strategic shift raises questions about the Navy’s future interest in what served as the workhorses of the surface fleet, and what that means for the hot production lines at Ingalls — the sole builder of the nation’s largest conventional warships.

“On paper, there are a lot of issues facing Ingalls,” said Byron Callan, managing director at Capital Alpha Partners.

Ingalls Shipbuilding declined to directly address questions about how the Navy’s changing priorities could affect its workload and workforce. But Sen. Roger Wicker, a Republican from Mississippi vying to become the party’s leader of the Senate Armed Services Committee, called the shipyard in his state “indispensable” to national security and the economy. He said the yard must be protected — potentially putting the Navy and lawmakers at odds over what the service should buy and how industrial base concerns should weigh on that decision.

Amphibious ships

Just a few years ago, the Navy’s support for amphibious transport docks seemed clear. The Marine Corps loved using them, and the Navy was happy enough with the program to select it as the replacement for aging Whidbey Island-class dock landing ships, ensuring the production line would continue for years to come.

Now that those Whidbey Island ships are beginning to retire, it’s unclear whether their replacement will continue as planned. That’s because an amphibious ship requirements study currently underway could upend the ship quantity.

The Navy currently has 31 amphibious ships — the amount the Corps needs for “timely global response and day-to-day peer competition,” Lt. Gen. Karsten Heckl, deputy commandant of the Marine Corps for combat development and integration, said in January.

But the requirements study, set to wrap up this spring, appears likely to set the Navy’s requirement for those vessels lower than 28. For Ingalls, this means the Navy wouldn’t need to replace the retiring dock landing ships on a one-for-one basis, meaning a slower acquisition rate for new amphibious transport docks.

The Navy’s fiscal 2020 long-range shipbuilding plan put that procurement at one per year, but that will likely change in the next shipbuilding plan released this year. Depending on how low the amphib requirement dips, the production line could be slowed to what the yard would consider an inefficient production rate.

Asked how the ongoing amphib requirements study might affect the industrial base, Chief of Naval Operations Adm. Mike Gilday offered few specifics.

“We need to follow the facts,” he told Defense News. “The amphib force brings a certain important capability that the naval force can’t dismiss. The question is, how much of it do we need and what that mix needs to look like in conjunction with expeditionary advanced base operations” — a new operating concept that calls on the Navy to pursue a light amphib to supplement traditionally large amphibs.

Today, the Navy says it needs nine amphibious assault ships to haul around fixed-wing planes for the Marines. But the Navy hasn’t prioritized funding for these ships in recent budgets, despite losing the amphibious assault ship Bonhomme Richard to a fire in 2020.

The service previously had LHA-8 and LHA-9 set seven years apart, though Congress worked to accelerate that to six years. Ingalls says the ideal build rate for its workforce and suppliers is four years apart. The Navy’s upcoming shipbuilding plan will reveal its target schedule for the time between LHA-9 and LHA-10.

Congress has tried to push the Navy to commit to buying more amphibs, twice passing the authority for a multi-ship, multiyear contract with Ingalls. But the Navy has not awarded any amphibious warship contracts since April 2020, saying it wants to defer remaining decisions until the FY23 budget cycle.

Congress also tried to push the Navy to evolve the amphib transport dock design to better match how the sea service wants to fight under distributed maritime operations. The Senate Armed Services Committee in the FY22 National Defense Authorization Act asked the Navy to consider “San Antonio-class lethality and survivability upgrades” that would give the ships enhanced radars for better offensive and defensive engagements, integrate at least 16 missile launchers and potentially add the Aegis Combat System.

The Navy submitted its report as required, but has not discussed it publicly.

Destroyers

Arleigh Burke-class destroyers were the most-used surface combatant in the fleet in recent years, but they’ve fallen victim to a crowded shipbuilding budget.

In FY22, the Navy asked for a single destroyer, despite shipbuilding plans calling for the Navy to buy two or three each year — and despite the fact that buying just one breaks the terms of a multiyear procurement contract, triggering a financial penalty.

The lower procurement rate creates an issue because two yards build the destroyers: Ingalls and Bath Iron Works. Buying just one per year means one of the yards has an unexpected gap in its workload.

It also “impacts affordability by disrupting efficient production lines, not only at the shipyard but throughout the supply chain as well,” Ingalls Shipbuilding spokesman Danny Hernandez told Defense News.

Several sources, who were not authorized to speak about negotiations until the budget request is released, told Defense News the Navy has again struggled to find room for a second destroyer in next year’s budget. The service considered a range of unappealing trade-offs, including decommissioning existing surface combatants, to pay for a second.

Bryan Clark, director of the Center for Defense Concepts and Technology at the Hudson Institute, told Defense News that “shipbuilding is likely to be constrained — as it was in the FY22 budget submission.”

“The Navy and [the Office of the Secretary of Defense] may be hoping Congress will again add ships into the budget,” Clark said. But absent congressional intervention, “Ingalls and Bath Iron Works will face an uneven demand for DDGs, and it will be hard to plan workforce and infrastructure investments when they have to depend on congressional plus-ups to sustain a stable demand signal.”

The Navy is expected to sign one more five-year destroyer procurement contract with Ingalls and Bath Iron Works. This contract would cover Flight III destroyers from FY23 to FY27 and would be followed by a transition to building the next-generation destroyer, dubbed DDG(X), in FY28 if the Navy’s plans come to fruition.

The service said it wants to keep the industrial base stable ahead of the transition from Burkes to the DDG(X). Surface warfare director Rear Adm. Paul Schlise even committed in February to buying two destroyers per year. But the one-ship request in FY22 raises doubts about the Navy’s ability to follow through.

Rep. Mike Gallagher, a Republican from Wisconsin who sits on the House Armed Services Committee, said in January: “We’re caught in a triangle of distrust between the Navy, industry and Congress.”

“The Department [of the Navy] should commit to funding two large surface combatants a year for, let’s say, 10 years, during which the transition from Flight III Burkes to DDG(X) occurs,” he added. “Congress, in turn, would commit to fully funding the DDG(X) program. From there, the Navy should provide a plan to both Congress and industry to move forward from two Flight IIIs per year to two DDG(X)s per year over a three- to five-year transition.”

Some lawmakers want more, with the Mississippi and Maine delegations writing to Navy Secretary Carlos Del Toro in February to ask for a 15-ship block buy and funding for three ships a year.

Ingalls also contends industry would be in a stronger position to transition to DDG(X) if the Navy buys three destroyers annually in the coming years.

“Nine-month centers are an efficient cadence, which requires more than two ships a year,” Hernandez said, referring to the period of time between ships. “This experienced industrial base will add stability and contribute significantly as the Navy transitions to … DDG(X).”

Buying two or even three a year will continue to be challenged by the large shipbuilding bill the Navy faces for its undersea fleet. The service included just one destroyer in its FY22 request because of hefty bills for submarine construction, and those tabs will only grow in the coming years as the Navy shifts to buying Columbia-class ballistic missile submarines at a faster pace.

National security cutters

The Coast Guard’s Legend-class National Security Cutter program is also coming to an end. Its last two ships are in production, Hernandez said.

To refill that production line, Ingalls wants another Coast Guard program: the offshore patrol cutter. Eastern Shipbuilding won the contract in 2016, but after the yard was devastated by Hurricane Michael in 2018, the Coast Guard decided to recompete the bulk of the program.

Eastern is working hard to keep the program, while Austal USA wants it to fill the company’s soon-to-be-established steel shipbuilding production line. And Ingalls hopes the offshore patrol cutter can fill the forthcoming gap.

“The National Security Cutter is one of the most successful programs we have had at Ingalls, but it is coming to an end in the next couple of years,” Hernandez said. “The Coast Guard plans to award the OPC Stage II contract in 2022, and given our experience successfully building the NSC for the last two decades, we are hopeful that they will view our offer as the lowest risk and most affordable offering.”

Ingalls could also use this production line to build the Constellation-class frigate when the Navy selects a second yard to build the Fincantieri design — though Austal too is pursuing this deal.

Clark said Ingalls will face significant competition as it seeks new work to keep its business and suppliers busy.

“The larger challenge for Ingalls is … it will have to compete with smaller shipyards for new ships like the Coast Guard offshore patrol cutter and Navy light amphibious warship,” he said. “Yards like Eastern, Bollinger [Shipyards] and VT Halter [Marine] may be able to offer a more attractive process to the government for these new ships, although Ingalls would have the capacity to build them at scale.

“Ingalls may have to take on more maintenance work to make up the difference, which creates more challenges for planning and workforce management.”

Funding the fleet

Still, Congress may take steps to preserve Ingalls’ workload.

Rep. Elaine Luria, a Democrat from Virginia who serves as the House Armed Services Committee’s vice chair, said the Navy’s fleet must grow to compete with China and keep the shipbuilding-industrial base strong. As a result, the service should make creative decisions — and Congress should fund them.

“This needs to be the No. 1 priority of the country. It needs to be the president’s priority,” she said.

Wicker, who represents Ingalls’ home state, told Defense News that the company and its workforce are “indispensable in their capacity to build the large vessels that our combatant commanders need to defend our coastlines and project American power abroad.” He’s concerned the Pentagon and the White House aren’t focused enough on protecting the shipbuilder and the rest of the defense-industrial base.

“Beyond Ingalls, it is important that Congress not allow shortsighted budget decisions at the Pentagon to erode our already fragile defense-industrial base further,” he said. “I am working with other members of Congress to advance much-needed funding flexibility and multiyear block buys of large ships to help reduce costs and increase stability for the industrial base.”

Callan of Capital Alpha Partners said “between appropriations and authorization committees, shipbuilding has had some pretty significant support over the years.” He noted that backing could grow if Wicker becomes the next chairman of the Senate Armed Services Committee after Sen. Jim Inhofe retires.

Additionally, Callan said, “when [Senate Minority Leader] Mitch McConnell comes out and says we ought to be funding defense at that 5% real growth rate — doing that, I think, would solve a lot of these issues that the Navy, and frankly the Army and the Air Force, are having to grapple or deal with.”

“There could be a budgetary solution that might take some of these issues off the front burner and put them back in the cupboard,” he added.

For his part, Gilday is prioritizing readiness over the procurement of new ships, arguing it would be irresponsible to buy vessels the Navy could not afford to maintain or crew.

The top naval officer’s focus on rebuilding readiness is driven by its erosion throughout the 2010s: He wants aircraft and ship maintenance completed on time, the right personnel in the right billets, and units with the time and money to train for a more complex future fight.

“Back in sequestration, we flipped [the current prioritization], and we kept the production lines of ships going. And at the time we thought that was a really important thing to do,” Gilday told reporters Feb. 18 at the WEST conference. But the result, he said, was depleted magazines and at-sea personnel gaps.

Gilday said he hopes the new National Defense Strategy will highlight the Navy’s role in a future joint-service fight, directing future budgets to give the Navy more money to grow the fleet. That would address part of Ingalls’ challenge, though the Navy is still moving in a direction that prioritizes small combatants and unmanned vessels, putting the nation’s premiere builder of large warships at a disadvantage.

As Ingalls seeks to prepare for the future, the yard has completed a five-year, $850 million capital expenditure investment program known as Shipyard of the Future, which includes 3D modeling tools, additional covered workspaces that protect employees from the elements, new laser-cutting and robotics technologies, and more.

“These investments will ensure our customers receive the best capabilities and the most affordable prices,” Hernandez said. “Now we need to ensure those production lines remain viable so we can continue delivering ships that are critically important to U.S. national security.”