Major Navy shipbuilder plans to buy up manufacturers to boost submarine production
The nation’s largest shipbuilder wants to buy up additional manufacturing facilities this year to speed up and streamline production of nuclear submarines amid ongoing delays,ballooning costs, and labor woes.
“We’re expanding into Texas, Louisiana. We’ve expanded in Norfolk, Virginia. You see this expansion in South Carolina. We’re going to where the labor is,” Christopher Kastner, Huntington Ingalls Industries’ CEO, told reporters ahead of the Surface Navy Association’s annual meeting. For shipbuilders, “When there’s not enough work, they pull everything in-house. When there’s too much work, they start to outsource. So it’s kind of a natural thing to do, to go where the labor is. Because shipyards, to some extent, there’s a space constraint when you start to maximize the labor footprint, so you have to move it outside.”
Last year, Virginia-based HII announced it was buying a South Carolina-based W International manufacturing facility to build modules for submarines and aircraft carriers. The move is part of a larger expansion plan to increase capacity, which will likely be expensive but should increase production, Kastner said.
“We need to go where the labor is in order to increase throughput,” Kastner said. “I do believe we will increase throughput in 2025 and 2024 significantly. We need to do that while controlling costs. Because my focus in 2025 is to improve our cost and schedule performance on our shipbuilding programs very clearly, and we’re doing that through increasing throughput and maintaining cost control across all of our programs.”
Submarine production has lagged in recent years, putting the Navy’s two major programs—the Virginia-class and Columbia-class—years behind schedule. One reason for that, Kastner said, is an “arthritic” supply chain that creates a backlog of extra work, resulting in longer timelines and higher costs to build and move parts.
And the Navy’s shipbuilding production demands and costs overall are expected to increase significantly in the coming decades—about $40 billion a year, according to a Congressional Budget Office analysis. The Navy’s 2025 plan includes adding 94 ships to the existing 296 battle ships by 2054, including submarines, aircraft carriers, surface combatants, amphibious ships, combat logistics ships, and other support ships. Moreover, President-elect Donald Trump has vowed to increase ship production.
The Navy has been trying for years to coax top shipbuilders into increasing their capacity to build nuclear submarines, said Bryan Clark, senior fellow and director, center for defense concepts and technology at the Hudson Institute.
There has been some success in recent years, including getting Austal to build structural parts for internal submarine modules and General Atomics to build missile tubes.
“And those have been driven in part by the program office, because the primes have been reticent to do that kind of outsourcing,” Clark said. “That was an issue early on, particularly with the missile tube production, because of General Dynamics and Huntington Ingalls wanting to keep it in house and basically keep that work share for themselves. But they could not meet the demand, and as a result, the program office kind of pushed them to, or forced them to, outsource some of those production needs.”
HII’s strategy could signal a tide change, as prime shipbuilders look to acquire the manufacturers they once outsourced work to.
“I think the primes are looking for ways to do this on their own,” Clark said. “You’re going to see Huntington Ingalls and maybe GD buy up these facilities that would otherwise be outsourced targets, and instead bring them inside and say, OK, well, we’re going to bring in new manufacturing capacity, but we’re going to buy it and incorporate into our shipyard or into our industrial base as a company.”
But don’t expect to see a shift away from outsourcing for conventional shipbuilding, Clark said, because severely delayed submarine-production fuels demand for contractors to expand production capacity.
“I think this is definitely a trend. I just think this idea of buying the company and bringing it into the main company is something you’ll mainly see in the nuclear side, just because the incentives are such that you want to keep that new supplier kind of in your sphere of influence, whereas I think what you’ll see with other shipbuilding programs is just tapping into subcontractors that are in other parts of the country that will build parts of the ship and then send those over to the shipyard to be incorporated.”
HII wants all of its shipyards and facilities to adopt enterprise data and AI tools to keep programs on schedule and budget.
“Your engineering, your planning, your supply chain, and your people all have to show up at exactly the right place at the right time in order to execute. And, when something changes, rerunning that to make sure that you are making or delivering ships as efficiently as you can,” Kastner said. Running all of that data through AI tools instead of sending it out for analysis will save time and improve decision making, he said.
“If you have AI tools, you will have the visibility to make the correct decision, versus sending it to a group of people [for analysis], and then by the time you do the analysis and come back, the situation has changed again. So the speed of decision making across all of ship building will be improved, and I believe the quality of the decisions we make will be better.”