School of War - Ep 172: Eric Chewning and Tom Moore on the Warship Production Crisis

Episode Date: January 28, 2025

Eric Chewning and Thomas Moore of HII join the show to discuss America’s military shipbuilding challenges, and their potential solutions. ▪️ Times      •      01:32 Introduction  ��  •      01:55 Origins      •     07:08 An eroded defense industrial base      •      10:20 Shipbuilding in 2025       •      17:11 Deindustrialization       •      21:46 Learning curves     •      27:00 Contract economics      •      32:26 Japan and South Korea       •      37:39 Thinking about the whole problem        •      39:03 Manned and unmanned        •      42:25 Force protection      •      45:06 Soft kills and hard kills Follow along on Instagram or YouTube @SchoolofWarPodcast Find a transcript of today’s episode on our School of War Substack

Everyone agrees that we have a crisis with America's defense industrial base. There isn't enough of one, and the hour it seems maybe getting late. The problem is particularly acute in the realm of shipbuilding. What does it take to build a warship in America in 2025? And what needs to be done to fill the alarming gaps that exist? Let's get into it. A date which will live in history. The bloody experience of Vietnam is to end in a state.

We continue to face the great situation in the ground. We'll fight on the beaches, there's a fight on the landing grounds, and in the fields and in the streets, which will never surrender. For more, follow School of War on YouTube, Instagram, substack, and Twitter. And feel free to follow me on Twitter at Aaron B. MacLain.

Hi, I'm Aaron McLean. Thanks for joining School of War. I am delighted to welcome to the show today. Two very distinguished guests, Eric Chuning and Thomas Moore. Eric is Executive Vice President of Strategy and Development for HII. Thomas Moore is corporate vice president of customer affairs there. He's also a 39 veteran of the United States Navy or vice admiral there. Eric was chief of staff to the U.S. Secretary of Defense. He was in the Army, done a lot of other things. Gentlemen, thank you so much for joining the show. Great. Well, hey, Aaron, thanks for having us on. I'm a real big fan of the podcast, and it's a treat to be on with you and my friend Tom Moore, particularly since we're going to discuss what it takes to make American shipbuilding great again. That's our subject for today. Tom, you spent a lot of time on board ships. Tell us a bit about your career, the kind of commands you had, the kind of experiences you had, and how that gives you insight to the kind of work you do today. Sure, thanks. Thanks for the question. I started as a nuclear trained officer interviewed with Hyman Recovery back in fall in 1980. That's his right stories there. It's not the first 13 years of my career on nuclear cruisers, nuclear aircraft carriers. We actually had nuclear-powered cruisers back then in those days. And lateral transferred over what's called the engineering duty community. I went to MIT, got a degree in nuclear engineering, and then spent really the next 25 years doing ship acquisition, ship design,

and principally in the aircraft care world for most of it. And the last four years was the head of the Naval Sea Systems Command, which owns a ship design, ship construction, life cycle management, of all the Navy's ship, submarines, and combat systems. Since you raised it, I have to ask you about your Rickover interview. I taught at Navy for a few happy years. There was a Rickover Hall. Yeah. I assume there wasn't one in the time we're talking about.

No, Rickover, I'm not that old. We had a Rickover Hall is the Engineering Hall back then. It's a fact that's a little dilapidated right now. We probably need to update it a little bit. Yeah, I mean, it's an interesting day. He was an interesting and a figure. And, you know, if you think about as we get into shipbuilding and talk about shipbuilding today, you know, from design concept to delivering the Nautilus, it was six years. So from the time he thought about building a nuclear-prud submarine to actually putting and operating a nuclear-prone submarine back then.

So really, it kind of set the bar for a lot of what we should be thinking about today as we need to accelerate shipbuilding. But, yeah, the interview was he spent most of the day with his staff doing technical interviews asking you things like to drive the area of circle. things of that nature. And then you, they put you in an outer office and you wait, and then his inner office and you wait, and then eventually his secretary comes and gets you, and you go in for this interview. And before they have a handler that goes in with you, some Navy commander at the time who's supposed to be there to help you. But basically, it's there to just make sure that any commitments you made to the admiral, they write down. So when you come back five years later, they conceive you kept your promises. And so, you know, I went in, my interview was very short.

In hindsight, I wish it had been longer, but I was so terrified that I was happy to get out of there. He just asked me three questions. Why do you want to be in my program? Are you getting married, and do you study enough? And then he said, that's all. And when he said, that's all, it was like the Wizard of Oz and the lion just coming out of that. Amazing. Going out of the hall.

And I bolted for the cover. Because these are famous, aren't they, for sort of unconventional questions and kind of off-the-wall stuff? It sounds like you must have met him in a soft moment or something like that. Yeah, it was the end of the day. You know, you go in. At the time he was 82. He's got this massive desk, this massive oak chair. And he was in this gray suit, kind of a shriveled up 82-year-old man.

And he put you in this chair that they had sawed off the front of the legs. And she kind of leaning forward. And I just remember sitting down and looking up at him. And my first reaction was almost to, you know, I was almost laugh because he was so small. And he's just shuffling paperwork around. And the next thing, you know, he starts, you know, firing those three questions. But, yeah, I got off easy. You know, a good friend of mine, roommate of mine, didn't answer.

So one of the questions where I got sent into one of the broom closets to sit and think about what he had said wrong for a couple hours before he got called back in for his interview. So you could read some of the books about Rickover, but he was famous for if somebody called in that was a senior officer handing the phone to some midshipman saying, you know, you know, a lot about leadership. Aren't you tell this, Admiral, what leadership's all about and, you know, put you on the spot? But to your point, he just was really interested in seeing how you were going to think on your feet. And that was really kind of the hallmark of his program. I mean, you could train you well, and you wanted decisions to be made at the lowest possible level, and people that were willing to make decisions, and that's what he wanted to challenge and see if you could do that. Eric, tell us a bit about your time in Iraq, and then, you know, as your career extended, you started to work on these industrial-based questions while you were at the Pentagon.

So just tell us a bit about your side. Yeah, no. Well, so I guess I entered this ecosystem a bit differently than Tom. So I started off as an investment banker. So I was doing M&A and corporate finance of Morgan Stanley, and then September 11th happened, and then I enlisted in the Army. So, listed in the Army went to Oxford Candidate School, was commissioned, ended up serving with the First Calvary Division out of Fort Hood, was deployed to Iraq for all of 2004, first part 2005, as the intelligence officer for the unit. And it was remarkable time to be in Iraq, so just the tail end of OEF1, kind of start up to OEF2.

And you could begin to really feel the Army beginning to transition itself from that initial high-intensity fight to what the counter-surgency was going to expand and evolve into. And so I had a very innovative Italian commander that gave me a lot of freedom to kind of kind of set up what we were doing in the area. And we were in the Northwest Quarter of Baghdad in the County of the District. And we actually used that to pioneer a lot of concepts, really relearning how to do counter resurgence that we then codified myself and our battalionusory later for an article, military review that then became kind of the basis around which was used for the surge planning in 2007. Got it got it got it. So when you were at the Pentagon, I think it was 2018, you did a review of the defense industrial base. I think there's more conversation about it now in the public sphere, perhaps, than there was then. What did you discover when you looked under the hood?

Yeah. So it's interesting, right? So just to fill in the 11-year gap. So when I got out of the Army, you went to business school. And then after business school went into management consulting, it was a partner in McKinsey, and then got asked to join the Trump administration as the deputy. Assistant Secretary of Defense for Industrial Policy. And one of the first things I did was partner with the White House, Peter Navarro at the time, was writing his Office of Trade Manufacturing Policy.

And the Trump administration's instincts initially were we're going to have to do a lot to address the decline in U.S. manufacturing that occurred over the past 20 years. We can talk a bit about the policy choices that were made to deindustrialize the country. But there was an instinct of recognition that we needed to re-industrialize America, and that a way to do that was to focus on the impact we'd have on on the defense industrial base. So I led that review. It was the largest review of the defense industrial base since the Eisenhower administration. And the thing that I found was so surprising was we did not have a strong sense for what was going on in the sub-tier of our industrial base, right? So everyone thinks about the large primes, and there's a very clear path

between the department and management of large defense primes. But once you get into the tier three, tier four, tier five, the defense industrial base, the fragility of that defense industrial base, how tied in it was with the broader U.S. manufacturing economy and as U.S. manufacturing eroded, how that erosion caused weakness and fragility in a lot of social supply relationships, and then increasingly how Chinese state-sponsored activity was effectively incorporating itself into very important and very nefarious ways into the sub-tier of our industrial base, right? and that you could see Chinese policy, whether it was through their, you know, Chinese made in 2025 or civil military fusion programs, as really trying to go in and see

where they could develop dependencies within our system on China. So one of the things I had the opportunity to do as we got that 1306 report finished was then begin to work on policy actions to address some of these things. One of the primary ones we drove was Ferma, which is the Foreign Investment Risk Review Modernization Act, which was an update to Sipheus, because at the time we were, recognize that, you know, Chinese policy was we're going to go and buy U.S. companies, and then we're going to use that as we call it sort of an investment-driven technology transfer and that the Sipheus legislation at the time was strong enough to stop that.

So we got Sipheus modernized. We worked to expand the Defense Production Act, and the authorities of the Defense Production Act, so we could begin to use that in a meaningful way to begin to address some of these single points of failure, like rare earth processing is one that folks talk a lot about. But there are, you know, hundreds of others that systematically we have to go and try to address. And I think so often, like it is in the Pentagon, once you're in a job and you really feel your momentum underneath you, you're putting to do a new job. And so that's when I got pulled up in 2019 to be the chief of staff initially for Pat Shanahan. And he was the acting Defense Secretary,

and then stayed on through a couple of, we had a couple of acting. So, Dr. Asper, when he was the acting, Richard Spencer when he was the acting, and then stayed on as Secretary Esper's Defense Secretary until January of 2020 when I returned to the private sector. So Eric, Tom, either, both of you, what's it like to build ships in America in 2025? Yeah, maybe let me kind of paint the picture about how we got here first, because I think that's probably an important perspective. And then Tom can certainly come in and help provide his view. But if we rewind the tape back to the last time, we were in a position of great power competition, right? So think about us versus Soviet Union.

And the Reagan buildup in the late 80s, you know, we had U.S. industry marching towards, or sailing towards, right, a 600 ship fleet. Okay. Then the geopolitical context changed. And then in the early 90s in the 2000s, there were a series of policy decisions that had cascading effects that were living with today, right? So, for example, right, the U.S. Navy went on a procurement holiday and stopped procurement of submarine. So effectively, we were in the Seawolf production at the time and did Seawolf. But it wasn't just the Defense Department's procurement holiday. It was also then the trade policies that the country was pursuing, right? So you had stated policy where we effectively were deindustrializing the American economy

and then promoting manufacturing growth in lower-cost countries like the People's Republic of China, right? I mean, China is at the sent to the WTO in 2000. And so as a direct result of this, you saw the domestic manufacturing base that our industry that was supporting the military, again, not just at the prime level, but importantly, the workers in the sub-tier significantly erode, and then you saw the commensurate demand signal from the military also go down. So you effectively saw the Navy's fleet shrink to about 271 ships in 2015. Okay. So then you say, all right, those profound industrial-based impacts resulted in things like six of the 12 major shipyards closed. When you close a shipyard, you trigger a cascading

reduction investment in supply chain workforce to technology modernization. The supply base shrank, So it's 5A's for submarines, for example, shrank by 80%. So 80% of the suppliers in the industry left, right? You saw about 50% of the workforce go away because there just wasn't anything for them to do. And then because the business case has gone, those that stayed in the industry weren't making capital investments to upgrade their manufacturing technologies because it wasn't a business case to do it because it wasn't demand sick. You began to see the movie change a little bit in the later 2000s when the geopolitical environment began to change some in like in 2008. when we did the Ford procurement, and then you saw the doubling of Virginia, the demand signals

of double the Virginia-class submarine production in 2011, and then Columbia class SSBN productions during in 2020. And that demand signal began to help revitalize the industrial base. But then you had COVID happened in 2019, and then the impact of COVID effectively has brought us back to the point where we've got to rebuild because the impact it's had on our workforce, most importantly, but also on our supply chain. Yeah, the numbers that you gentlemen both have talked. about are pretty harrowing in terms of the rates at which things were built. You cited if you just now, Eric, but I've got them here somewhere, but, you know, going from what?

Producing something like four Los Angeles class submarines a year towards the end of the Cold War, now we're at about one Virginia class attack submarine a year. Right. And that period at the end of the Cold War, you know, it wasn't a hot war. We were just keeping up with what we felt were the competitive demands of the Cold War. You know, I saw a report this morning. that the Chinese are building five mulberry harbor style, you know, piers essentially, or barges, or call them what you want.

You know, mulberries are the, as you gentlemen know, these are the harbors, the artificial harbors that we built in World War II to do the Normandy landing. These ships look to be pretty similar. I mean, I can't think of too many uses for these things besides an invasion scenario. Something that's about 40 miles off their coast. Exactly. You know, you could have concerts on them, you know, floating homeless shelters. But, you know, we could have.

a shooting war here, at which point, and obviously your company builds very high quality products and we have an excellent Navy to operate them, but some of that stuff's going to go poof. Like the enemy will get a vote and the enemy will score some points. Yeah. And the numbers that we're talking about are not just numbers to compete. They are theoretically the numbers, the capacity we have available to fight. And that's a concerning thought. Yeah, I think, you know, the shipbuilding is a long-term endeavor. You know, when I first started early in my Navy career and was at Newport New Shipbuilding as a naval officer, and I provide you some of that. We built from the keel to delivery, we built five aircraft carriers in 17 years, and the next four we're going to build,

are going to take 28 years. The difference was when we're in serial build on things that we knew, this is at the end of the Reagan buildup, and we had a workforce that was very mature. And I I remember being at New Pernet Shipbuilding and remarking how many times you would see, you know, a father that was working there and his son was working there. And it became, it was really kind of a badge of honor in Newport News. It was a generational thing that people worked in the shipyards. And so, you know, we, they were very productive. We had stable signs. We were able to churn things out pretty quickly. You mentioned, you know, Los Angeles class summaries. And then we, we turned the spicket off. And the other thing that happened during that period of time that we turned the spickickick at

through, you know, the analogy of the timeline that Herkinstead talked about is, you know, the manufacturing makeup of the United States started to change. And so if you go to the shipyard today, you don't see generational, you know, families there. It has not become like it used to be. Where you worked there, your father worked there, your grandfather worked there. And today, it's different. So we've lost some of the manufacturing capability just about the same time we need to ramp back up on building the ship. So not only we have the challenge of having to grow a more productive workforce, but manufacturing by itself is not nearly as, I don't know what you're just sexy,

but it's a different country today than it was 25 years ago when blue-collar workforce was really valued. And I think some of the things that we're trying to address with saws is to really get back to addressing that imbalance. And that imbalance is not just in chip-earning. I mean, look at Boeing, look at Intel, look at, you know, manufacturing giants in this country, General Electric that have really, you know, are struggling today for the same reasons that shippling is, you know, has challenges today as well. I want to talk about solutions, but just to linger on the problem for another minute or two, you know, what's going on here? Because, you know, if you pay attention to the policy conversation in Washington or honestly the political

conversation nationwide, people decry industrialization. Yeah. They're upset about it. They want, every politician wants good manufacturing jobs back in the United States. And, and yet, where we actually have them, there's a struggle to fill them. What is actually going on here? There's a lot of stuff going on. So I think maybe just to pull on the China threat a bit because it's part of the problem here. So, you know, we talked about what happened to U.S. shipbuilding during that period of time. Compare that what the Chinese have done, right?

So the Chinese have, as we all know, state capitalism. So the economy is driven by government injected investments because they haven't transitioned to a consumption-driven economy yet. Okay. They come out with their five-year plan, right? consistently their five-year plan is prioritized shipbuilding, right? So they're made in China 2025 plans when they're still laboring under prioritized commercial shipbuilding. Now, shipbuilding for the Chinese makes a lot of sense. It's an export-driven economy, right? So if they can subsidize transport ships, it helps the exports, right, to then all the other economies that are importing

Chinese goods, right? So it has that knock-on effect to the other parts of their policy. 63% of Chinese shipbuilding capacity is government-owned facilities. So when you, when you, when you hear statistics thrown out there about how much larger Chinese shipbuilding capacity is than the rest of the world is, yes, the Chinese intentionally created that capacity. And it's gotten so large now that it has distorted global shipbuilding economics for everybody, so that other countries that want to have domestic shipbuilding industries, the Koreans and the Japanese, most notably, because they're also export-driven economies, to stay somewhat competitive with what the Chinese have done, they have to do massive state subsidization

as well. So that's what's happened with erosion around commercial shipbuilding. When you look at commercial shipping, I'll talk about military shipbuilding, minute, there. When you talk about commercial ship building, just to do as a bit of a point of comparison, right, if you were to build a transport ship in the United States, it's going to cost like 6x more than it would if you did it in, say, an Asian, like a Korean or a Japanese shipner, right? Because the factors of production that we're working with here,

and that gets to your point around what's going on more broadly. Let's just talk labor as an example of one of the inputs that we're all struggling with now. We've seen in the post-COVID economic space an over 20% increase in manufacturing wages. Okay. You see that across the board in different manufacturing ecosystems, right? Issues Boeing was having, for example, with their machinist union. As a country, we have prioritized sending folks to college through various state subsidizations for four-year degrees, and we have underinvested in having people go to trade schools to learn a trade.

Right? So you think about a Pell Grant, if you wanted to go learn music at a university, the government will give you money to go learn music. Greek philosophy in that case. Exactly. And across the street, the name will give me. Yeah, right. If you wanted to go learn to be a welder, right, you couldn't use a Pell Grant to get a two-year associate's degree to be a welder. And so companies like ours, right, have stepped into the breach, right? We have an apprentice school that was founded in 19. 19, right, we'll go in and recruit folks. It's a degree giving school, right? And they have multiple courses of study across NICS-19 shipbuilding trades that are two, five, or eight-year courses of study, right? You can go through that program. It's an apprentice, it's a wonderful apprentice school program, we'll pay you to go to school, we'll give you a job in the shipyard. We use that because it's a significant investment for us per individual. That's what we do to sort of fast-track folks to be like foreman. Separately, we maintain a relationship.

with 80 different trade skills across the country to try and generate, right, this trade manufacturing interest at two-year-degree schools we can bring folks in. But at the end of the day, there is a significant manufacturing workforce shortage in this country. And until you get that equation fixed, you're not going to be able to re-industrialize. Now, there's ways to limit the amount of manufacturing workforce you need through automation and other things. But at the end of the day, you need the workforce. In other words, it's not just flipping a switch. Like Congress in the Navy and everyone can kind of get on board today and say,

here are the resources, go build, and you would struggle. Well, and for some of these more exquisite, you know, think about like the work in Newport News, right, with nuclear shipbuilding, you know, to be a nuclear welder, right, it's going to take eight years of training. So to your point around flipping the switch, I may be able to flip a switch and get someone into a program so they can start to be to learn what it's like to be a nuclear welder. that proficiency is going to have to be acculinated over years. Can I, this is sort of a in the weeds, nerdy question, and maybe nobody here is qualified to answer it.

I'm the furthest from it. You may be the closest to it with your Rickover interview, but what takes eight years? I mean, what are you learning as a nuclear welder? Well, I mean, the specs and the, you know, the precise nature of what you've got to do to meet the welding specs we have in the nuclear world, it's an art.

And, you know, there's a proficiency issue here. Just like, you know, playing the piano. It takes you a while to get really, really good at it and to be able to do it solo without a bunch of supervision on top of it. So, you know, what we're finding today is, you know, you go hire somebody. You can go give them training at the apprentice school, but it'll take them five years or so to get to the point where they're proficient enough that they could go off and do something that's really critically important from a reactor safety standpoint on their own. And so we'll start using them immediately, but there's an overhead cost associated because you're going to provide more supervision. And so, you know, as we ramp back up, there's an element that's going to tell you that, look, initially, there's actually your productivity levels were probably going to go down a little bit. But that's the price you're going to have to pay green labor, as we call it, in order to reestablish an efficiency.

And the problem with the way we have ordered chips over the last 25 years is, you know, industry has responded rationally. If you have the demand sales drops, it only takes you one to three years to downsize the work. workforce. And then once you've lost them, you've lost them. And it'll probably take five to seven years to recreate that workforce. And so to your analogy on the flip the light switch, when people said, hey, we all of a sudden we need more ships, it wasn't that simple. You couldn't say overnight, hey, you need you to build 4.9 submarines a year like you did in the 90s when you had this mature, very productive workforce. And that's some of what we're struggling with today. And then you add on top of that the fact that, you know, where does that workforce exist? A lot of people like to talk about

author Herman's book, you know, about the industrialization during World War II, Freedom's Forge, as if, you know, all we have to do is recreate that. But if you read the book, you'll notice that, by the way, that wasn't a light switch either. It took him several years to be really ramped up. And by that time, the war was almost over. But we also did that during a period coming out of the Depression where there was plentiful workforce that people wanted to work. And we had a, you know, we had a massive amount of investment. So it's different today than it was, you know, back in the 40s. And the other thing is, we don't have the luxury if we were getting to a fight with China of having all of our allies do the fighting while we ramp up the industrial base. We're going to fight

with what we have today. And so I think, you know, we're at it today. But it, you know, it's going to take us five to seven years to really get to a point where we can start cranking these things out at a productive level and start changing, massively change the size of the force from the 290 to 300 we have today to the 381 that the Navy would like to be at tomorrow. And the other point along that side is everybody says, hey, we got to 600 ship during the Reagan buildup. Yeah, but we started at 490. So we only had to go 100 ships, and we had stable designs of the productive, mature workforce. We have to go about the same number of ships today, but we're starting from a deficit in terms of where we are from a manufacturing standpoint.

That's a harrowing historical reflection that occurred to me as I was thinking about our conversation today was, you know, with the industrial base that our country had in the early 1940s, which was pretty robust. all the cars we were building, you know, just across the board. After the disaster at Pearl Harbor, took the Navy, what, about two years, really, before it was able to properly go on offense. I mean, we were down in the Solomons and operating down there, but, you know, to really make that cut across the Central Pacific and take the fight to the Japanese, that's the end of 43 into 44. So two years, and that's with that industrial base.

And people forget that, you know, the ships that were building back then, They didn't have air conditioning. Sayers were sleeping in hammocks. The common systems were not nearly as. We didn't have networks. We didn't have fiber optic cables. And a lot of people would like to talk about, hey, we took Yorktown in 45 days and her back out to sea.

And she was sunk later. So, you know, I don't think the, you know, the ships that we build today are a lot more complex, a lot more battle-hardened to take a look. And so it's not the same type of shipbuilding that we had back of World War II is the other thing. And these ships, you know, we were probably a lot more well. willing to take losses back of World War II than we would be today. I mean, a lot of the, if you listen to the wargaming, people say, well, geez, I got into a wargame with China.

We eliminated a lot of the ships, but I lost two carriers. Oh, my God, I can't afford to lose two aircraft carriers. I spent $14 billion for them. I'm like, okay, if you're going to get a fight with China, you better recognize you're probably going to lose some ships, but, you know, is the nation willing to go have that discussion? Yeah. Yeah.

And, I mean, this has a procurement dimension to it as well, of course. I mean, I think we're all familiar with them with the other. Elon Musk's comments about the F-35, I mean, there's an analogical, you can apply that reasoning to the, to the maritime space in the same way and ask, you know, whatever your conclusion is, ask, you know, what is the value of these very high-end platforms? And maybe that's, there's two ways I'd like to go from here and we can do it either. I want to keep talking about the workforce and the solutions there in the SOS plan, you guys mentioned.

But I also, I do want to talk about this idea of, like, what role does mass production of things that are less exquisite? Yeah. whether they're unmanned or maybe, you know, just more or less good stuff, but we need it. It's got the core stuff that you need, but nothing else. You know, so Eric, Tom, how are we? Yeah. So why we talk a little bit about the solution?

So, because I do think there is a story of redemption here. And then we can talk a bit about how we think about force structure kind of going forward because you may not be aware, but we're also the largest producer of UVVs globally. So in addition to producing high-end capabilities like aircraft carriers and submarines, we're also the largest producer of autonomous on crew vehicles. So we've got, I think, a unique perspective both on kind of how they can play an important role, but then also the integration of the manned, unmanned teaming capability and say an undersea environment and what that could look like going for. Sure. So maybe just on that kind of like how do we how do we put out of here to a place where, you know,

we're executing at a rate the country needs us to. You know, as we think about it, there's really five, five areas we've got to focus on. The first is. is growing and retaining that world-class workforce. And the biggest piece of that problem for us right now is wages. So when you think about kind of the economics of shipbuilding, economic and shipbuilding are driven by a handful of very large multi-year contracts. The vast majority of contracts that we're currently operating under, and this would be true for other U.S. shipbuilders, we're all established pre-COVID. That means all the contract economics were established pre-COVID. These are firm fixed price incentive contracts, right? So they were not, they do not have.

have the protections in place that you'd expect for, you know, what we saw from the pandemic, which was the shock around, you know, 20% plus labor increases. And so as a result, we need innovative contract contracting methodologies to kind of get us out of this problem so we can give that workforce a wage and stem some of the double digit attrition that we're seeing in the shipyards because, you know, a machinist or a welder is a highly fungible skill set that if they're not doing it for ships, they can do it for a variety of other manufacturing things, right? And so we find this position where we're training the workforce and that workforce will leave. And what we need to be able to do is provide wage increases to help support that. Tom mentioned saw, as I'll just touch

on it now briefly, that's all right, Aaron. So, you know, there was an initiative that we had worked with the Navy called the Shipbuilder Accountability Workforce Support Initiative, which was an innovative approach to contracting for a service and support costs. So the way it works now, when the Navy does a block by, let's say on submarines, they'll appropriate money for submarines that you're currently not building. What Saas would enable us to do is access some of those funds as really to service and support costs and pull that forward to make increases in capital investments to improve productivity and do wage increases to keep the workforce working. And then that would enable productivity gains throughout the block, right? So you'd make up for the investment associated with that.

We think that's an important element of getting us to the build rates that we need to be to be competitive with China. The other things that we need to focus on, right, investment in new technologies drive deck plate performance. One of the big differences than sort of the Freedom Forge era was this advent of industry 4.0 technologies, right? Additive manufacturing, digital design tools, you've seen radical adaption to these technologies and say the automotive industry or commercial aerospace. Shipbuilding is further behind an adaption of those technologies. So what are we doing to drive those technologies to drive those technologies to drive? to drive deck plate efficiencies. The third thing we're focused on is modernization

of infrastructure and expansion of capacity, right? So in some areas, there are the need for additional capacity. What are we doing to expand capacity and then modernize that infrastructure? You know, you go to the Newport News Shipyard, for example, was built in 1883. It's laid out like a Victorian shipyard. You know what I mean?

You know what I mean? The big castings house we have there actually predates the shipyard, right? That's still being used for one-of-a-kind castings that you can't do anywhere else in America. So being able to modernize and invest to modernize the infrastructure. The two final pieces are rebuilding the supply chain. So I talked about the consolidation of the supply chain that occurred because of the drawdown

that happened as part of the Last Supper. It's to the point now where we think about our material spend on sequence critical items, so things that if they don't show up in sequence will delay the construction of a ship, 70% of our material spend on items like that are to only one supplier because there's only one supplier left who can meet that spec, right? So systematically we need to go through, and this is something that the 13806 report talked about, to then expand industrial capacity in that tier two, tier three, the supply chain to help increase throughput because that's where we had bottlenecks and those were disrupted during COVID. And then the final piece to this is how do we think about

integration of the allied industrial base. Ocas has gotten a lot of of attention. I think Ocas plays an important role as we think about integration of the submarine industrial race across the United States and the United Kingdom. But there are other places in Australia, of course, but there are other places where we can work with allies and partners to help to help expand. Well, can we stick with, I want to get to the unmanned stuff in that area, but can we stick with this for a second, the allies side of things? I mean, I was, you know, it's striking to China's the world's biggest ship builder. But then they're followed by the Japanese and the

Koreans, right? Right. It's sort of embarrassing sitting here in the United States. States of America, these great countries, big economies, close allies, but smaller countries than the United States by a pretty significant margin. And yet there they are building significant numbers of ships. President Biden's ambassador to Japan, Rahm Emanuel has been pretty outspoken in his views about co-production and things like that. What is all this look like from your point of view in terms of ally capacity partnership? Maybe let me touch on the commercial dimensions of that and then Tom could probably talk about the military specific stuff. So, you know, as I talked about earlier, it comes back to industrial policy, right, that Japanese and the Koreans as export-driven

economies had significant state subsidization of their shipyards commercially because, again, as an export-driven economy made sense for them to subsidize the cost of the things that were that physically moved the goods from Japan or Korea to the United States or European markets. So they maintain commercial subsidization of commercial shipbuilding applications, right? Tompkins speak at great lengths, the difference between building sort of a transatlantic a commercial transport ship versus a destroyer, right? And the approach is taken very generally about how that's done. The other thing to kind of think, focus on this conversation is requirements for military shipbuilding as opposed to commercial shipbuilding, right? Because investments that the

Japanese and the Korean governments have made in their commercial shipyards wouldn't necessarily translate to certain military applications. Yeah. Well, I think there's two dimensions to it. I mean, I've been paying pretty close attention to what Ambassador Emmanuel was talking about. First, was talking about, hey, we could do more maintenance over in Japan and doing maintenance over there. We leave our shipyards and allow us to build more submarines. He's kind of mixing apples and oranges. He's talking about repairing non-nuclear power surface ships.

We do a lot of that in the ship repair facility in Yookusa. We have the capacity here in the United States to do surface ship repair. But taking work over there would not relieve the two problems we have today, which is building enough new construction submarines. and then to maintaining the ones that we have. And you've probably seen reports that, you know, up to 40% of our current attack submarines are in maintenance at any one time. So we only get used 60% of the fleet.

So I think we ought to look carefully at anything that would improve our capacity in the short term. But I think it's an over-simplistic view of how you would fix the problem. The other part is, you know, commercial shipbuilding is completely different from military shipbuilding. I've watched pretty closely the ships for America Act that Representative Walz, who's going to be the NF Security Advisor, has put out in conjunction with the senator from Arizona. And I think there's merit in us improving our commercial shipbuilding. From a policy perspective, there's things that we probably have to go look at. But, you know, Eric has alluded to most of it. The reason that we don't build commercial ships in this country, despite even if you set aside if we had the workforce, is because the cost is 6x.

and so nobody wants to build commercial tankers here. In fact, the last time we tried to build commercial tankers in the early 2000s at New Purdue Shipbuilding, we did it at a significant loss. So there's not a business case to build commercial shipbuilding, and some of them, I think, what we're doing in the ships for America Act would do that. On the military side of the house, you know, we build these ships to be pretty robust for a reason, and I can give you a laundry list of ships from Cold to Princeton, to McCain, to Fitzgerald, to San Francisco, to Connecticut,

United States, submarines, surface ships that in the last 20 years, you've either taken a hit in a military environment through a mine or they've run into, and the two submarine cases run into under-sea mounts or had collisions with most recently with Fitzgerald and McCain. And in each and every one of those cases, ships were able to make it back into port. And I can tell you, from being the commander in the Navy C-Sysos command, the way we build and design these ships is done for a very specific reason, and it's to make sure they can get back to port if they're. were to get, you know, in battle damage. And I don't mean to disparage at any of the other shipholders around the world, but they don't build ships to the same specifications that we do. We do that for a good reason, and I don't think we will want to, you know, relax those design specifications. You know, when we get into the unmanned world, which I know you want to get into next, that's a completely different error. And, you know, you can build things that are attritable, you know,

can throw them away. And I think that's a perfectly good way to go reduce some of the requirements and get us the numbers who we want. But in terms of the things, you know, the ships, military warships we build today, and we build them that way for a reason. And I can only imagine, you know, if we were to get into a fight after relaxing the specs and we were to lose a bunch of sailors or lose a ship, the recriminations would be pretty loud. Yeah. Yeah. I think we're all going to have to get ready for that.

I saw Admiral Paro make some comments six weeks ago, maybe, something like that. It was really heroin. Talked about it on the show here before. Someone was asking him at a public event, you know, about the replicator initiative and are these solutions that are applicable in the straight, and I will paraphrase his response as being something along the lines of, yeah, yeah, yeah, it's all great, fine. I'm for drones. It's great. Like, I have to get the stuff from here, the United States, to there, the Western Pacific. And this replicator thing, my word, is not his, but his meaning, it doesn't do anything for me on that front. It's a, you're not

thinking about the whole problem. You're thinking about the tactical application in the last hundred meters, as it were. And so there, it's hard to imagine scenarios when you're thinking about the whole problem where we simply go unmanned, where where where there isn't a role for for larger platforms. I think that's true. Like that's an opinion that I have. Can you like an example? So one of the so when you think about our, our, our, our, the H.I. portfolio broadly, right?

So obviously I'll pick two of our divisions. So Newport News, which would be responsible for, you know, part of our Virginia class submarine fleet. Then we have a mission technology's business. That mission technology's business is the largest producer of UVs globally. So what we've created is a solution called Yelamore, which is with the fleet today, which is our ability to do a torpedo tube launch and recovery of an unmanned system off of a Virginia Classup. So when you think about that kind of capability, right, you're beginning to address sort of the warfighting challenges that, you know, however Paro indicated, right, which is how do I take a capability that can get to the fight, but then I get the benefit of that manned unmanned teaming when I can then launch a very capable UV platform. that has significant range to it, go do things that I may not want the submarine to do,

expose itself to things that I may not want the submarine to expose itself to, and then get recovered back by the submarine, right? If you liken that a bit to say like a collaborative combat aircraft relationship between, say, an F-35 and the CCA, like that capability won't be with the Air Force till 2030, right? We've got that capability undersea today. What does this all look like, and I'll pick a number here, 20 years? Like, what is the technological balance between man and unmanned at sea look like? What are the future operating concepts that you think about?

Well, if you look at the Navy's most recent shipbuilding plan, it's about 25% unmanned and about 75% man. So they're calling for a battle force of 381 ships and about 134, a mix of 134 unmanned. Undoubtedly, unmanned is going to play a key role going forward. Some of what Admiral Papar talked about is spot on. But we're not going to get to the point where unmanned is. going to completely replace what we do in the military. It can take some missions away from us. For instance, today, you know, we have to use super hornets to tank to get the more extended range on our plane. So we take fire jets and we put tanks on them and we send them out and they act as a

tanker. Now, you can envision an unmanned tanker just loyering out there that any plane could go on to and I think you're going to see that happen. So I think if you look at where we are today, The unmanned aerial is pretty mature. You can see where we're using it in the Middle East. You can see where we could use that fighting. Unmanned undersea, as Eric alluded to, is pretty mature. We already are using it on missions. You may have seen an article today on that talked about the USS Michigan,

one of our SSGNs that had notably used some unmanned technology, do some pretty interesting stuff in some parts of the world. And we're going to go expand that out even more. Unmanned surface is kind of the, I think, kind of the weak link right now, where the Navy has struggled, we've figured out with the concept of operations and has really not decided, you know, what do we want this to be? Do you want it to be really large ship? You know, 10,000 tons that carries a bunch of missiles, or do we want it to be a super small ship? You've got to get to the fight. It's a long way to go. Are we comfortable with putting munitions on an unmanned vessel that could somebody could then come attack? Or are we comfortable with unmanned platforms using AI, deciding when to shoot munitions? I think those are all elements of the fight that we're working our way. through today that, you know, Amble Pahar has probably alluded to. Another question that's as much to do with operating concepts as with manufacturing, though, it's about operating concepts at import, so relevant to your guys' day to day.

You know, we've seen the Ukrainians who, I don't know, the numbers, I couldn't give you an overview of their order of battle at the start of the war, but we've seen them do a lot of damage to the Russian Navy without much of a Navy of their own to speak up. It's really interesting. And a lot of the hits they've sort of been with Russian, ships by the pier and I expect if we went back to you know the 1940s here in the United States you went to the you know if he went to San Diego you went to the port of

San Diego you would have seen security nets watches patrols like you would have seen some pretty intense port security the Chinese pretty clearly I have in mind broad operating concepts strategic concepts maybe if the balloon goes up in the Western Pacific that affect the American homeland they have that as an option I How do you guys think about securing stuff import, securing what you're manufacturing? I mean, obviously, don't divulge anything. Anyone can listen to this podcast. I don't divulge anything you shouldn't.

But, like, as an issue, you know, are we taking that? Not H.I. We'll put you in the business to ask you. Is HIA taking it seriously? Is America taking that issue seriously? Because it seems to me like a lot of the scenarios that could come in the Pacific involve, things happening in the United States. And not just on the West Coast, on the East Coast.

Well, force protection is always, you know, a key element. And, you know, unfortunately in the world that we live in, you've got to be, you know, to get, you know, to get it right every day, you get a sea. And if you have one hiccup, you know, you get a ship sunk. So I think it's an evolving element. I think the Navy is focused on it in the right ways. But with the advent of unmanned technology and a lot of the other things that's going on, it is going to continue to be a challenge for us going forward and something that we're going to have to continue to focus on. Yeah, I think. I just say it is public.

There was the public case where there was a Chinese student who was flying a drone outside of our shipyard. And obviously the FBI was involved in prosecution of that as potential espionage case. We're mindful of the issue, right? And then we're taking this time said in coordination with our Navy customers. All objective measures think are necessary for that. I think you raise a good point, Aaron, that says this is all part. I think the mindset that we're revolving to going forward as we're facing great power competition. and it's as mindful here as it is overseas.

You know, and it's interesting, you know, you can extend this out to a lot of areas you've seen recently. A couple of, you know, the Chinese drag, had a commercial ship dragging an acre up in the North Atlantic to damage the Sosis cables. And so, you know, some of what we're doing with unmanned vehicles today is to build on-man vehicles that can actually, you know, go very deep and can look at cables and make sure that they're intact

and then make sure that people are tapping into them in ways that they shouldn't be tapped into. So that's another area where I think on the unman side of the house, it's going to be a capability that we really need. It's something that's very much on my mind, and I want to be respectful of your gentleman's time, so this comment can be, in effect, my last question, so respond however you see fit.

But taboos about great power confrontation seem to me to be weakening substantially and what, you know, 10 or 20 years ago would have seemed shocking to contemplate, you know, one nuclear power, attacking targets on another nuclear powers homeland. It's like, well, that's, you know, probably no one's going to try that because of the obvious possibility of escalation. In 2025, I'm just not so sure I'm as confident in the strength of that taboo. And it strikes me

that there are things that the Chinese, for example, could attempt in our shipyards, whether through cyber or whether through means that may not generate that many casualties, but would generate a lot of problems for us and our operating concepts that would likely or could very well occur in the first few hours. And again, not just in the West Coast. I mean, there's no reason you couldn't try it in the Atlantic as well. If your tools are cyber, your tools are cheap, unmanned stuff, you know, whatever. And the world feels a lot more dangerous in 2025 than it did in 2015.

Well, I think in the spectrum of warfare from soft kill, cyber, you know, some of the things are all the way up to hard kill, yeah, that if you rewind the tape 20, 30 years ago to the Cold War, you know, everything was focused on the hard kill side of the house, backfire bombers, aircraft carriers, et cetera. And I think, you know, today the primary focus is on the soft kill side of the house because some of it you can do anonymously. And, you know, from, you know, I think the Chinese and the Soviets would prefer, you know, where we're going to dominate as a hard kill side of the house. Our weapons are better or people are better. And so they really don't want to get into a hard kill fight with us. I think that's where we're at a significant

advantage. On the other hand of the side of the house, a soft kill, and they've got a lot of time and effort in that, I think, is where you're going to see, you know, both sides was focusing today where there are some vulnerabilities. And there's a little bit of anonymity that goes along with the two that would prevent you from, you know, potentially getting yourself in big, you know, trouble for doing something to another country. Yeah, I think the subtext of the question, and really the point, Aaron, I think is a good one, which is, listen, whether it's in the context of the great power competition, it's lessons learned from what we're seeing in Ukraine or less or if we're seeing with the Israeli actions, the Middle East, like the defense and

industrial base is a critical component of our ability to project power and deliver advantage to the warfighter. And so we're very focused on our role in execution and delivering ships for the Navy so they could be successful and what they need to keep us all safe. Yeah. Yeah. I think we should take great care to make sure that in the Pacific we are the Israelis and not has flopped in terms of that, in terms of what happens. Is that a beeper on your waist? Quas it from the from the from the from the from the beeper to the knee and then we'll be free. Yeah, that's what I enjoy. There are so many good ones.

There was a cartoon of Passing. This is before Nasrullah was killed. There was a cartoon of a Nassarala looking person in his bathroom staring at his electric tube. Like, wearily. I know. But that also gets to the point earlier about the need to understand the providence of microelectronics in our supply chain and subterre. Right. So.

Eric Cheney, Tom Moore of H-I-I, really interesting conversation. Thank you. to both of you gentlemen. I really appreciate it. Absolutely. Thanks for having us. This is a nebulous media production. Find us wherever you get your podcasts.