Photo credit: Avonda/e Shipyards, Inc. Contents Page Table No. Page Overview . 85 32. Method of Wage Payment . 103 33. Estimated Hourly Compensation Characteristics of the Shipbuilding of Shipbuilding Production Workers Industry . 87 in 16 Countries . 104 General . 87 34. Definition of the U.S. Shipbuilding Shipbuilding Cost Increases, 1975-80. 105 35. Industry . 87 Unions in U.S. Shipbuilding Yards . 106 36. The Markets of the U.S. Shipbuilding CGRT Measure of Productivity Gains Industry . 89 in Private U.S. ASIB Shipyards . 108 37. Value-Added Measure of Productivity U.S. Shipbuilding Industry Orders . 91 The Capabilities of U.S, Shipyards . 94 Gains in U.S. Shipyards . 109 The Technology Level of the U.S. Shipbuilding Industry . 96 The Labor Force of the U.S. Shipbuilding Industry . 100 FIGURES Demographic Characteristics of the Figure No. Page Shipyard Work Force . 102 29. Shipbuilding and Repair, Trends Shipyard Workers’ Hours and Earnings. 102 in Value of Work Done . 89 Organization of Shipyard Labor . 104 30. Merchant Ship Construction in Shipbuilding Productivity . 106 U.S. Yards 5-Year Average, 1930-80 . 91 The Determinants of Productivity . 106 Productivity Trends in the U.S. 31, Merchant Ship Construction in Shipbuilding Industry . 108 U.S. Yards, 1973-82 . 92 Improving U.S. Shipbuilding 32. Historical Trends in Ship Deliveries From U.S. Shipyards . 92 Productivity . 110 33. Major Private Shipyards and Summary . 112 Navy Programs . 94 The Physical Facilities Problem . 112 34. Value of Shipyard Work on The Management Problem . 113 Order, U.S. Private Shipyards . 95 The Labor Force Problem . 113 35. Private and U.S. Naval Shipyard Employment Levels, 1960-80, and Projected Through 1990 . 100 TABLES 36. Shipbuilding and Repairing Employment in Private U.S. Tablt’N’o. Page Shipyards, 1978-82 . 101 27. Shipyards Comprising the U.S. 37. Mobilization and Optimum Active Shipbuilding Industrial Base . 88 Employment Estimates and 28. Proposed 5-Year Navy Shipbuilding Current Employment Levels in Program . 4 . 90 the Major Private Shipyards . 102 29. Orderbook in Major U.S. Shipyards . 93 38. Shipbuilding Industry Workload 30. U.S. Shipyard Work Experience . 95 Forecast . 103 31. Examples of Projects That Transferred Technologies to Korean Shipyards, 1971-82 . 100 Chapter 4 The U.S. Shipbuilding Industry: Status and Trends in Technology and Productivity OVERVIEW This chapter examines the productive capacity ● obtaining the best combination of inputs, in- of U.S. shipbuilding. It traces the historic develop- cluding skilled but low-cost labor, a strong ment of the industry and describes its present situa- work ethic, advanced technological capabilities tion. It analyzes the status of technology employed (universities, technical institutes, etc.), finan- and the level of competitiveness for construction cial means, qualified management, and many of today’s major merchant ships. Finally, it presents new facilities; possible approaches to maintaining and improving ● tenaciously pursuing the largest volume ship the health of the industry, markets in recent decades, particularly liquid- and dry-bulk vessels. This has allowed them Over the past two decades, the United States has to ‘ ‘go up the learning curve, making per- only built major merchant ships when Federal sub- sonnel and technical improvements, enabling sidies were used to pay a large portion of the cost them to build ships much more cheaply than or when laws, such as the Merchant Marine Act their rivals. A key aspect of their improvement of 1920 (’Jones Act), required that the ship be built program has been standardization and integra- in a U.S. yard. The United States has, therefore, tion of processes, to achieve efficiency; and been isolated from international competition for ● integrating ownership of major yards with these types of vessels. large industrial groups operating allied busi- In many other major maritime countries, ship- nesses such as steel, machinery, electrical ma- building is viewed on a global perspective. This is chinery, and trading. not the same in the United States, where only 1 Part of the reason for Japan’s success in ship- to 2 percent of the world merchant fleet is now built. building is that a large base of demand has come The U.S. shipbuilding industry is basically quite from Japanese ship operators who purchase their different from that of Europe, Japan, and Korea. Those countries have built most of today’s modern ships from Japanese shipyards. Thus, the yards have had consistent, long-term contracts and have shipping fleets and compete for orders in a world often been able to offer incremental prices to buyers market. The United States does not. from the rest of the world. However, the United States does have a large While there is no Japanese law that requires ship and diversified shipbuilding industry. Its total operators to build in Japan, a review of world ships employment (175,000 in 1982) is even larger than on order in 1983 shows that all those under con- Japan’s. The U.S. industry has some very produc- struction for Japanese owners are being built in Jap- tive and technologically innovative segments, in- anese yards. cluding those who build barges, tugs, supply boats, and offshore drilling rigs. Moreover, U.S. ship- Volume is the prime factor in a highly produc- yards are foremost in construction of large, com- tive shipbuilding industry. Without large numbers plex, and sophisticated naval warships. of ships to build, it is not possible to hone the pro- ductive process to a sufficient degree to reduce costs. In commercial shipbuilding, the Japanese, and —.————— more recently the Koreans, have based their recent ‘See ‘‘Fairplay Shipping W’cckly-World Ships on Order, April 1983—Japan has under construction for Japanese owners 4,7 million success on responsiveness to developments in the deadweight tons (dwt), which is more than for an}’ other flag except international shipping arena. They did this by: Liberia, and represents about 9 percent of world orders 85 86 ● An Assessment of Maritime Trade and Technology This is why the Japanese and Korean strategies of chant ships, primarily caused by the elimination concentrating on building large numbers of relative- of Federal funds for construction subsidy programs. ly simple bulk vessels were so important to their While the U.S. Navy has embarked on an ex- success. panded building progam, it will not require much additional shipyard capacity until the mid-1980’s, Many other factors have played a role in the high and only the few yards that specialize in warships productivity of Japanese and more recently Korean will benefit substantially. The trends in the industry shipbuilding. These yards have developed their are thus toward more U.S. Navy work, more con- technology to an advanced degree, beyond that centration in fewer large firms, and hard times for found elsewhere in the world. The investment-per- those firms that have, in the past, depended on worker in Japanese and Korean yards surpasses that commercial shipbuilding subsidies. Although U.S. of almost all other nations, Their technology is yards have made recent strides in improving pro- broad-based, and they have adopted technologies ductivity in the construction of merchant vessels, that complement each other; i.e., they have pur- the primary focus of the industry is still on U.S. chased machinery and adopted production proc- Navy work where high-technology, custom work esses that are carefully interrelated to achieve a is the rule. smooth and highly efficient work flow. Two different approaches to improving U.S. In comparison to many other major shipbuilding shipbuilding productivity appear possible. One nations, the United States has not installed the level would concentrate primarily on Federal support or of modern shipbuilding technology necessary for assistance to the industry combined with incentives high productivity in the construction of today’s ma- to enhance productivity. Several other maritime jor merchant ships. countries appear to be adopting such an approach. In contrast to the Japanese and Korean model, Another approach would focus on developing some major problems with U.S. shipbuilding tech- other emerging markets for U.S. shipyards, assum- nology have been: ing that there is little chance that the U.S. industry ● long delays in introducing new technologies; can reduce costs of conventional merchant ships ● a reluctance to adopt foreign technology, and below the level of the low-wage countries. The U.S. a reluctance to enter into-joint ventures, licens- shipbuilding industry is geared to custom work and ing, purchasing, or other arrangements for the the integration of highly technical with conventional speedy, effective transfer of technology; systems. Markets for such skills may develop in ● a minimal exchange of technology among U.S. fields like Arctic- or deepwater-resource extraction. shipyards; and A challenge for industry and the Federal Govern- ● minimal evaluation of technologies in other ment would be to cooperate to identify and develop areas (aerospace, electronics, etc. ) that have the most promising markets. potential applications to shipbuilding. It is noteworthy that the problem of low output of labor from U.S. yards cannot be traced in any part to worker skill. U.S. shipyard workers are as skilled as their Japanese or Korean counterparts. Rather, the problem is related to work organiza- tion and the production tools available. Briefly stated, U.S. yards have never had sufficient volume of merchant ship orders to specialize, to become truly expert, or to develop high efficiency. Flex- ibility to build many different varieties of ships and other marine equipment has been maintained in U.S. shipyards. Thus, the economies of mass pro- duction have seldom been adopted. Photo credt: Lockheed Shlpbulldlng Co. Construction of U.S. Navy warships such as the above The U.S. shipbuilding industry is facing a severe is expected to dominate the U.S.