Bath Iron Works plays catch-up on ship delivery after years of upheaval

BATH, Maine — 2020 was a bad year for Bath Iron Works, one of two shipyards that builds the Arleigh Burke-class destroyer, the workhorse of the U.S. Navy fleet.

Already facing workforce challenges years in the making, the yard then encountered a global pandemic and a nine-week strike by its largest labor union.

Perhaps unsurprisingly, the shipyard fell further behind in its already delayed deliveries of U.S. Navy destroyers.

But yard leaders say they took steps this year toward restoring the relationship with the union, and they see opportunities in 2022 to lower attrition and hire new employees as they strengthen the next generation of shipbuilders.

During a recent visit to the shipyard, Bath Iron Works President Dirk Lesko told Defense News it’s still “speculative” whether those changes — coupled with investments in facilities and tooling to boost efficiency — will be enough to reverse years of delays in the production line.

Lesko said the shipyard has transformed what’s directly under its control: the tooling used to make ships, the facilities where work is done, and the processes that direct the flow of both materials and people around the main shipyard as well as its six satellite locations in the Bath and Brunswick areas.

“What we’ve tried to do in a very logical way is work through beginning to end of the process, [making] investments in reliability, productivity and then the environment that the workforce operates in,” he said in a Nov. 16 interview.

Ultimately, however, the shipyard must grow the size and skill set of its workforce if it wants to get its backlog of work on schedule and remain competitive as it pursues an upcoming, and somewhat unexpected, multiyear procurement deal for more Arleigh Burke-class destroyers.

A deteriorating workforce

In the late 1980s, Bath Iron Works, which boasts a 133-year shipbuilding history, began to dramatically increase its workforce after the company won the contract to design and build the first Aegis Combat System-equipped Arleigh Burke-class destroyers.

In the late 1990s, the shipbuilder’s workforce nearly regulated itself. The Navy’s demand for surface combatants fell as the yard became more efficient in its shipbuilding processes, and the natural attrition rate among staff matched the rate of decline of the yard’s required workforce size.

But over the last decade, the workforce has become increasingly imbalanced. Nearly 60% of the company’s employees have been on the job fewer than five years. Ray Gauthier, Local S6 chief steward of the International Association of Machinists and Aerospace Workers , told Defense News the situation led to delays. With green managers giving less-than-precise orders to inexperienced shipbuilders, the amount of rework needed on ships grew and the pace of deliveries fell behind, he said.

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And in recent years, that wave of hires in the ‘80s, which has made up the core of the company’s workforce for decades, is retiring in large numbers, often without master-level replacements on deck.

To address this issue, Bath Iron Works in 2020 sought new hires from out of state with shipbuilding or manufacturing experience, enticing them to come to the yard and start at a higher level of proficiency, Lesko said. That didn’t pan out well, as many struggled to find places to live nearby and ultimately quit BIW within months.

The relationship with Local S6

In March 2020 — before the pandemic took root — the yard delivered the destroyer Daniel Inouye to the Navy. It was 10 months and five days late from the re-baselined schedule, and about three years late from the original schedule.

And the situation quickly worsened. In June, about 4,300 members with Local S6 of the International Association of Machinists and Aerospace Workers left the shipyard for the picket line, protesting several clauses in the new contract offered by Bath Iron Works.

Specifically, Gauthier said, union members were most concerned about a provision that would allow the shipyard to bring in subcontractors. The yard wanted to use the subcontractors to get back on schedule, but the union viewed it as a threat to both employment and overtime.

The strike, which lasted 63 days, shined a spotlight on the shipyard’s delays, and it generated broader concerns about whether Bath Iron Works could continue building destroyers on time for the Navy.

Navy sources, who spoke on condition of anonymity because they were not authorized to speak publicly on the subject, confirmed last year that the service awarded a contract option for a destroyer to Huntington Ingalls Industries’ Ingalls Shipbuilding rather than Bath in June 2020 because of Ingalls’ ability to deliver on a more reliable schedule.

Lesko told local media in May 2020 that BIW was about six months behind in building destroyers; within months, that figure expanded to a year or more due to the compounding effects of the strike and the pandemic.

Gauthier was a key union representative during the mediation that ended the strike, and he helped draft the initial language to set up a Joint Schedule Recovery Committee meant to help management and labor get back to building ships on time within three years.

The basic idea was to “work collectively to try to make sure that we don’t need subcontractors in our shipyard going forward,” he said. This meant establishing weekly meetings with Lesko and other top yard officials to build quality ships on cost and schedule for the Navy — a goal to which Gauthier said both sides agreed. Many of the other issues fell into place once the committee was established.

“We’d rather take the resources that the company has, make them successful, and not argue over a decent general wage increase or health care package,” said Gauthier, who joined Bath Iron Works in 1987. “If we can make them more viable, and they make money and they can pass that onto our members, we believe it’s a win-win for everybody.”

The 400-plus grievances filed in 2020 — mostly from IAM Local S6 members — were resolved, the shipyard and Gauthier told Defense News. In 2021, there were no filed grievances thanks to a new process that regularly addresses small issues before they can become big problems.

Lesko and Gauthier pointed to a training effort as one of the important outcomes of the Joint Schedule Recovery Committee’s work. With highly experienced employees retiring and taking institutional knowledge with them, the union is helping the company share those lessons with the new shipbuilders.

“We ... are working quite constructively with our unions to share that experience of those that are going to retire with the new people we’re hiring,” Lesko said. The union facilitated sending some of the most experienced shipbuilders to BIW’s Training Academy to teach students new to the shipbuilding trade — that’s in addition to on-the-job training.

“We’ve broken this down to, I mean, the basic ABCs of what are the identified jobs that certain skilled mechanics do that might be leaving, and make sure that we get younger folks trained — which seems like a simple concept, but we were overlooking it prior to this Joint Schedule Recovery [Committee],” Gauthier said. “I believe that, on the horizon, [there] is a lot of success that’s going to be coming. It just, right now, takes a lot of hard work because we didn’t break it overnight, and we certainly cannot fix it overnight.”

Added Lesko: “The goal was to get new people in here and to give incentives for the people who are here to share their experience; I think we’ve done that.”

“We have not retained as many of those [new hires] as we had hoped, for a bunch of different reasons,” he noted. “So we are farther behind that plan than we would like, but we’re certainly making forward progress.”

Despite the improved relationship, Lesko would not say whether he thinks the yard is on track to reach on-time delivery status by 2023, which is the end of the three-year plan.

“We can go as fast as we can hire and train new people,” he said, noting significant challenges remain.

Making investments

While hiring, training and retention is key to the yard getting back on track, Lesko told Defense News, the yard’s facilities were improved and expanded, and are now larger than when BIW delivered three ships per year to the Navy.

General Dynamics has spent $800 million improving the yard since it purchased BIW in 1995, and $300 million in the last four years to support Flight III Arleigh Burke destroyers and to increase worker productivity.

Lesko said the entire front end of ship production was revamped: The burn tables that cut raw sheets of metal are new and contribute to a cleaner and healthier environment. The assembly building for pre-outfitting at the main shipyard was renovated with better ventilation, with a $15 million investment in cleaner air currently undergoing study and set to be applied to other shops in the coming years.

The company upgraded the dry dock where hulls come together and are eventually launched into the waters in the Kennebec River, extending the structure’s life by 15 years. And much of the machinery was replaced with newer and more reliable systems, letting the staff move as fast as their training and workforce sizes allow, rather than facing roadblocks or delays related to tooling.

But asked if the current backup of the global supply chain has hindered work, Lesko said a year ago there were typically no late orders of materials to worry about at any given time. “What had historically been the zero might be 200 to 300 things today that we wind up putting extra effort into finding an alternative or workaround for,” he said.

Still, he said, it’s hard to calculate how much that might add to the yard’s delays.

“Imagine the challenge of trying to figure out how many people you’re going to have, how many of those people you have to train, and then matching that with timing around the supply chain. On any given day, one of those things creates scheduled pressure. No raindrop feels like it’s responsible for the flood. [It] becomes harder and makes schedules less predictable,” he said.

Lesko said performance at the shipyard was better in 2021 than 2020, but that BIW will continue to use all available levers to increase production rates.

This year, the company is on track to hire and train 2,000 new employees, which is in line with its goal. But the firm has been unable to rein in attrition, and that number of new hires will further tilt the workforce balance toward those with fewer than five years of experience.

On top of that, retirements spiked in 2021 due to a pension rule. Some of the employees hired in the 1990s are eligible to retire and receive pension benefits after 25 years of employment, but will lose that ability if they don’t retire this year.

Jon Mason, the vice president of human resources at BIW, told Defense News that after this retirement spike, the company will need to hire about 500 workers a year for the foreseeable future to keep up with retirement rates and other attrition.

The future of the yard

Bath Iron Works has years worth of labor on its hands. One Arleigh Burke destroyer, Carl Levin, is in the water, with John Basilone and Harvey C. Barnum Jr. more than halfway structurally complete on land, and four more are in some stage of fabrication, with two more on contract but not yet in production.

Even so, the company has had a couple bidding losses in recent years that could have filled the gap left behind when the Arleigh Burke program ends. Bath Iron Works bid on the U.S. Coast Guard’s Offshore Patrol Cutter program, but lost to the family-owned Eastern Shipbuilding Group in 2016. The company also paired with Spanish shipbuilder Navantia to pursue the U.S. Navy’s guided-missile frigate program (otherwise known as FFG(X), but lost to Italian builder Fincantieri in April 2020.

Though BIW struggled through the Zumwalt destroyer program, which caused delays on the Arleigh Burke production line, Lesko said any issues had more to do with how the Navy set up the program and less to do with the yard’s ability to simultaneously manage two shipbuilding programs.

“I’m not worried about whether or not we could build or manage two programs; I think we could manage two programs,” he said. “The real issue there is: What programs are available, and are those programs structured to be successful?”

And that’s the rub. With the third and final Zumwalt-class ship, the Lyndon B. Johnson, preparing to sail away from Bath this winter for its combat system activation process and eventual commissioning into the Navy, BIW will be down to building about one and a half Arleigh Burkes a year, from a peak of double that earlier in the yard’s history.

The Coast Guard re-competed the Offshore Patrol Cutter competition this year, but Lesko said BIW did not bid. Instead, he explained, the company is eyeing the Navy’s plan to award a second contract for a frigate “follow yard” that will build Fincantieri’s FFG(X) design. However, he wouldn’t say whether BIW will bid on that, given that the company has not finalized its plans.

Lesko also described plans for a next-generation surface combatant — dubbed DDG(X) and set to follow the Arleigh Burke program — as too speculative for BIW to devote much staff or thought to that effort. Instead, he’s fully committed to the “robust backlog” of destroyers and the upcoming multiyear procurement contract for more.

The Navy previously planned to cease Arleigh Burke acquisitions in 2022 and begin procuring DDG(X) in 2023. The service has waffled for years over the ship’s design, capabilities and cost, delaying the program by years and forcing a more recent announcement that the Navy will award another multiyear procurement contract for Arleigh Burkes for 2023 through 2027. BIW and Ingalls Shipbuilding are the two destroyer builders who compete for ships within the multiyear procurement contract.

“Each of these people we’re hiring takes four or five years to train; knowing how many we need and when and what trade is a huge, huge investment in energy,” Lesko said. “Right now, we’re gearing that toward [Arleigh Burke] DDG-51, and a multiyear [contract] is welcome news there because it’s a target we understand pretty well.”

The sooner the Navy can settle on DDG(X) plans, the better, he said.

“Because the requirements aren’t really set yet on the DDG(X), it’s hard to know what we should go focus on other than what we’re doing right now,” he added. “So our focus is very much in getting good at DDG-51 because, frankly, those will be the most transferable skills you can have for whatever follows.”