Shipbuilders hope new Navy chief will resist budget cuts

The future of Navy shipbuilding will hinge on a series of high-level studies and budget negotiations taking place behind closed doors at the Pentagon, with decisions expected in the next several months about the future of the military's priciest sea platforms.

The Navy's shipbuilding programs have been a perennial target of Pentagon-endorsed budget cuts in recent years, with the number of ships built annually on a rapid and steady decline since the 1980s.

The fiscal 2007 budget is expected to be no different, with ships likely to be among those programs targeted for as much as $15 billion in Pentagon-wide budget cuts, part of an effort to control government spending and trim the deficit.

But the shipbuilding industry appears hopeful that the Navy's new top officer, Adm. Michael Mullen, will shield ships from the same drastic cuts proposed by the Pentagon in a December 2004 document that recommended cutting the aircraft carrier fleet and slashed purchases of the DD(X) destroyer, among other programs.

"We're guardedly optimistic with the new leadership of the Navy," said Cynthia Brown, president of the American Shipbuilding Association. "We believe he wants to fend off any more raids on shipbuilding accounts."

Mullen's plans for the Navy are expected in a highly anticipated study detailing the precise mix and numbers of ships he wants in his fleet. The plan also is expected to inject stability into shipbuilding accounts, which have been erratic in recent years.

The study is due out sometime in the next several months, in conjunction with the department-wide Quadrennial Defense Review, a sweeping look at military plans, capabilities and strategies.

"The Navy is making its case now in the QDR that this is the fleet we'd like to build," said Robert Work, a naval analyst at the Center for Strategic and Budgetary Assessments. "Here are the options; here are the risks involved."

But Work said hopes within the Navy to increase annual shipbuilding budgets by several billion dollars might be unrealistic, particularly as the department makes across-the-board cuts.

The Pentagon requested $8.7 billion for shipbuilding in fiscal 2006. House appropriators increased that to $9.6 billion, while the Senate set aside $8.7 billion. The chambers will begin their conference on the Defense spending bill in the next few days.

"There are very few people outside the Department of the Navy who believe being an optimist in this budget environment [is] a smart way to go," Work said.

But Brown, considered a powerhouse behind the shipbuilding lobby on Capitol Hill, suggested that with so many budget reductions in recent years, the Navy might escape bearing the brunt of the cuts. "It's been the bill-payer for everything," she said.

Ronald O'Rourke, a Navy analyst at the Congressional Research Service, likewise noted that recent cuts -- particularly in the destroyer program and the aircraft carrier fleet -- make "less room to do an equivalent reduction to programs like those this time around."

At Northrop Grumman, one of the nation's two major Navy shipbuilders, executives already are turning to 2007 and arming lawmakers with information on their portfolio of sea programs. "Obviously, we are watching with great interest the '07 budget deliberations and how they're going to fare," said Randy Belote, a company spokesman.

Meanwhile, General Dynamics -- the other main shipbuilding contractor -- is watching the quadrennial review.

"The next thing to watch is the QDR and what it says about the nation's need for ships and then, of course, next year's budget and that, sequentially, will be [what] we need to look at to move along in shipbuilding and then, next, the Congress's response," General Dynamics CEO Nick Chabraja said during an Oct. 19 conference call with investors.