Despite a wider focus on the Pacific and an active maritime challenge from China, the mid-term outlook for U.S. ship repair is grim. Though some conventional shipyards have, essentially, bet the farm on ship repair, plowing millions for new facilities in San Diego and other already-oversaturated markets, the U.S. Navy is pulling back from long-planned, long-signaled refit and repair strategies, leaving shipyards in the lurch.
In Washington, the Navy’s inability to stick with long-expected refits is often dismissed as a cost-savings measure or a symptom of the Navy’s inability to settle upon a long-term strategy.
The truth is considerably more prosaic. The Navy, as long-term observers know, rarely carries out comprehensive, class-wide modification programs—or spends a lot of effort on maintenance—when a newer, more exciting ship is on the horizon.
The Navy’s fickle inconstancy—or its continuous devotion to buying the shiny, new thing—has led to an unhealthy waterfront. At some point, to save conventional ship repair enterprises, the Navy must follow through, carrying out some large, class-wide refit and maintenance plans.
Beware The Conventional Naval Repair Market:
For conventional—non-nuclear—repair and maintenance-oriented shipyards, the Navy is an unreliable industrial partner.
The Navy’s Ticonderoga-class cruisers, a deep and costly class-wide modernization effort has been rolled back, and now those ships—of the original 27-ship fleet, only 14 ships remain—will likely leave service by Fiscal Year 2028.
With the Navy retiring up to four Littoral Combat Ships a year, a full, class-wide implementation of a long-signaled propulsion repair for defective sixteen ship Freedom-class Littoral Combat Ship fleet seems unlikely. Lethality and survivability refits are unlikely to happen, either.
While the story is better for the Independence-class Littoral Combat Ships, the originally expected fleet of 19 ships are still heading to the boneyard early, and the Navy seems reluctant to maintain their Spearhead-class Expeditionary Fast Transports, with rumors circulating the original 16-ship fleet is slated for future cuts. Two are already listed as inactive.
For all of these vessels, the Navy is falling short on long-held, highly-detailed or already awarded maintenance and refit plans. Plans do change, but for each of these vessels, new platforms waited in the wings. Flight III Aegis Destroyers will step for the Ticonderoga-class on an interim basis, and the Constellation-class Guided Missile Frigates will eventually shoulder aside the Littoral Combat Ships. Spearhead-class transports are likely to be replaced by the Navy Medium Landing Ship.
Shipyards that move too quickly to support unpopular ships—posing a threat to the Navy’s preferred narratives—do so at their own peril. Take San Diego. In early 2022, just four months after Austal finalized a deal to invest over $100 million in a new San Diego repair yard, orienting itself to better manage Littoral Combat Ship maintenance, the Navy announced it was going to retire two San Diego-based Independence-class ships, cutting the San Diego-based Littoral Combat Ship squadron by almost 12 percent. And now, after getting a brand-new, turnkey dry dock in place, Austal is struggling to find business as a cash crunch looms.
After the Navy awarded billions in sustainment awards for littoral combat ship mainteance in mid-2021, both BAE Systems and Fincantieri have invested hundreds of millions to reinvigorate shipyards near the Freedom Class LSC base near Jacksonville, Florida. But, again, with the Navy subsequently deciding that many Freedom Class Littoral Combat Ships were to head into retirement, those awards—coined an indefinite-delivery/indefinite quantity, multiple award contract—may never pay out to anywhere near the maximum ceiling value.
A similar story may hit shipyards hoping to exploit the wholesale refit of the Navy’s aging fleet of 72 Arleigh Burke-class destroyers. With nineteen more “Flight III” Arleigh Burke-class ships contracted or under construction, and the Navy’s heart set upon a new, next-generation destroyer, support for a long-planned Arleigh Burke-class service life extension program is likely to vanish.
With the Navy estimating the effort to modify the original 33 Flight IIA Arleigh Burke destroyers will cost somewhere around $17 billion and likely take up to two years apiece, the Navy’s waterfront has no choice but to pin their futures—again—on an aspirational modernization effort. But industry hopes will likely be dashed in the Navy’s rush to build a business case for the Next Generation Large Surface Combatant Program.
There’s only so many times the Navy can do this before companies throw up their hands in disgust and just retreat from the business. While the waterfront relied upon the Navy’s somewhat lax and industry-friendly approach to maintenance contract oversight helped maintainers overcome the Navy’s fickle stance on big, class-wide maintenance projects, the Navy’s shift to fixed-price maintenance contracts made the conventional repair business unsustainable.
BAE Systems has retreated from ship repair, closing ship repair ventures in San Francisco, Hawaii and Alabama. While expanding operations in Mayport Florida, BAE Systems’ San Diego yard is shrinking and suffering layoffs.
Titan Acquisition Holdings, a shipbuilding conglomerate welded together by a hedge fund-driven merger of the once-vibrant Vigor Industrial and MHI Holdings, has been bought by Lone Star Funds, a collector of distressed assets.
Smaller players, like Alabama Shipyard, Detyens Shipyards and Mare Island Dry Dock, LLC, have moved into the vacuum, but they are struggling with old infrastructure and choppy business prospects. In South Carolina, Detyens is busy but struggling to manage the yard’s safety culture after a spate of four workforce deaths. Alabama Shipyards, in Mobile, is trying to figure out how to recapitalize aging and obsolete infrastructure. And, in California, Mare Island Dry Dock is awaiting Federal help to get more business.
On the waterfront, there’s just not that much more juice to squeeze, but the Navy seems set to try. A newfound focus on offshoring naval repair work to Japan, Singapore, the Philippines and India—while strategically useful—suggests that even leaner times are ahead for America’s conventional domestic ship repair yards. It is a tough message, but the lesson is clear for America’s aspiring waterfront. Enter these waters at your own peril.
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