With potential strike looming at Bath Iron Works, large order book masks long-term threats to its survival

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Bath Iron Works’ largest union in Maine has reached an impasse in negotiations with management for a new three-year contract and is holding a strike vote this weekend. If two-thirds of the members of the International Association of Machinists and Aerospace Workers, Local S6, vote to exit, a strike could begin as early as Monday.

The local represents 4,300 of the 6,800 construction workers, so a strike has the potential to cripple production. Bath, a unit of General Dynamics based in Virginia

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, is already several months behind in building destroyers for the US Navy, and the last time the yard went on strike, workers were out for almost two months.

With shipyard operations already disrupted by the coronavirus pandemic, a strike is the last thing the Navy needs from one of its main suppliers. Bath shares responsibility for the construction of all Navy destroyers with Ingalls Shipbuilding in Mississippi, including the DDG-51 Arleigh Burke class of guided missile warships that are ubiquitous in the surface fleet.

Burke destroyers house the Aegis combat system, the world’s most advanced air and missile defense system. Aegis is essential in protecting other U.S. warships, troops stationed overseas, and other military forces as the United States enters a period of heightened competition with China and Russia. He is also ready to take on a greater role in the defense of the American homeland against nuclear attack.

However, this is not a story of military strategy or combat technology. This is Bath Iron Works, an industrial gem that has overcome 130 years of challenges in the booming shipbuilding industry.

A casual observer looking at Bath’s backlog of a dozen billion dollar destroyers could easily conclude that the shipyard is in great shape for the future. It recently hired new workers at a rapid pace and even turned to out-of-state contractors in an attempt to speed up late production.

The union is clearly not worried about the future of the site. What worries it, and what has led to the deadlock in contract negotiations, is the job security and benefits of its members, including health care benefits. He fears that the massive use of outside contractors will force union members to withdraw from their shipbuilding jobs prematurely, or even break the union if the practice becomes too common.

General Dynamics contributes to my think tank and over the years I have had the opportunity to visit the shipyard on several occasions. It is a well-run operation with a deeply rooted work culture that produces world-class warships. But it’s also a holdover from the high tide line in New England shipbuilding, a tide that began to decline many years ago.

I am not going to question the validity of the union’s position on external subcontractors or health services. But one issue I would like to address is the negotiators’ implicit assumption that Bath Iron Works is safe for the foreseeable future. Like unions in other industries that have weakened (automobiles, steel, etc.), there is a tendency to frame expectations on the assumption that the business will continue indefinitely, and the main question therefore is who what gets from a current business.

I do not believe that the long term survival of Bath Iron Works is assured.

After all, the shipyard has avoided bankruptcy many times since it began building ships for the Navy in 1890, and it no longer has the ability to produce commercial ships or pleasure craft as it does. used to do. He is building a type of warship for a client. If this business is compromised, there is no Plan B. The Navy will continue, as will General Dynamics, but Bath could become one of the many victims of America’s deindustrialization.

Here are five threats to the site’s survival that illustrate the lack of management leeway to try to remain competitive.

Weather. Bath Iron Works is located up a river in a cold climate. A climate where water tends to freeze most of the year. Bath might have been a logical place to build ships back in the days when they were small and made of wood, but those days are long gone. Its main competitor is located on the Gulf Coast, where water never freezes and industrial infrastructure is more conducive to building large steel ships.

Climb. Ingalls Shipbuilding, the other shipyard where destroyers are built, is an 800 acre shipyard that produces four different classes of warships. Bath is a 60 acre yard that could fit in one of Ingalls’ parking lots, and it only builds one type of warship. This provides Ingalls with economies of scale and opportunities for the effective application of skills that do not exist at Bath Iron Works.

Costs. Everything costs more in Maine than in Mississippi and near Alabama. Partly it’s the climate, but beyond that, Maine is simply a richer place than Mississippi. In 2019, per capita income in Mississippi was $ 39,400, compared to $ 51,000 in Maine. Additionally, the base salary in Bath is 22% higher than typical for production workers in Maine. So, at a time when the Navy is extremely cost sensitive, Bath Iron Works must compete with a Gulf Coast shipyard that is likely paying less for everything from perks to electricity.

Workforce. Ingalls Shipbuilding has several unions, as does Bath. The difference is that Mississippi is a right-to-work state and organized labor therefore carries less weight. Maine confers benefits on unions that do not exist anywhere on the Gulf Coast, which inevitably contributes to the cost differential between the two shipyards. It probably also helps explain why Ingalls management seems to get along well with its unions. No one would say that about Bath.

Logistics. Most of the shipyards that build warships in the United States are located near major naval bases. You can actually see the naval bases of other GD shipyards. But no Bath. It is far from the Navy’s home ports, and far from where industrial inputs like steel are produced. The shipyard manages to spend over a million dollars a week on suppliers in Maine, but these are mostly small businesses. If you had to set up a shipyard in a location convenient for suppliers and end users, Bath wouldn’t be the place to be.

These considerations are overlooked in the labor relations coverage at Bath Iron Works, but ultimately they could determine whether the yard survives or follows the path of other New England shipyards. Whatever the merits of the union’s position in contract negotiations, it is important to keep in mind the constraints on what management can offer if it is to remain competitive.


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