The much-anticipated Maritime Action Plan recently released by the Trump administration proposes to usher in a “new Maritime Golden Age by expanding commercial shipbuilding capacity, building a resilient workforce, and strengthening alliances.” It begins by acknowledging some core problems with the American shipbuilding industry and presents several recommendations to address these shortcomings. Initial reactions from the shipbuilding industry, investors, and Marine Engineers’ Beneficial Association, as well as the bipartisan sponsors of the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) for America Act, have been positive. This commentary assesses the critical elements of the Plan within the context of allied shipbuilding and considers the factors that will determine the outcome of this effort for the U.S. shipbuilding industry.
First, while the Plan is correct in highlighting the lack of active shipyards in the U.S., the real problem with the American shipbuilding industry has less to do with the yards than the supply chain. To be fair, the Plan acknowledges this problem as well but falls short of providing a clear solution. Although there is discussion about leveraging emerging technologies and additive manufacturing, these recommendations do not adequately address how the industry can deal with the critical shortage of mid-tier suppliers essential for supporting shipyards throughout the construction process. This is especially important when 70-80% of the final output value of ship production is generated by upstream suppliers.
One of the problems with the American shipbuilding industry, as identified in the Plan, is the lack of demand for commercial vessels. The Plan’s answer is the establishment of a Maritime Security Trust Fund, which would support the financing necessary for a Strategic Commercial Fleet. This is the main element of the bipartisan co-sponsored bill (i.e., the SHIPS Act), which sets the goal of establishing a fleet of 250 privately-owned US-built, US-flagged, and US-crewed vessels by 2030 through the same mechanisms. The bill is still holed up in committees without a floor vote. It seems that this piece of the administration’s maritime plan depends on congressional leadership.
The same can be said about many other initiatives mentioned in the Plan, which relate to spending (e.g., Shipbuilding Financial Incentives Program, extending Capital Construction Fund Program, and increasing federal financing), revenue (e.g., universal port fees on foreign vessels, land port maintenance tax, tax incentives, and income tax exemption for merchant mariners), and preference cargo requirements.
Perhaps the most important problem as it relates to demand for ships is what these vessels would carry. As mentioned by the new Administrator of the Maritime Administration (MARAD) Stephen Carmel during his confirmation hearing in October, “If we do not have cargo, how many ships we have is irrelevant.” To address this problem, the Plan sets out to strengthen cargo preference requirements, but there is disagreement as to whether this type of move will actually end up increasing demand for ships or have an overall detrimental effect on the economy. There also appears to be opposition to any effort towards increasing transport costs through increased fees or restrictive cargo requirements by groups like retailers. Ultimately, some kind of compromise will be needed to resolve this issue.
The most bold and interesting suggestion in the Plan is the recommendation to utilize a “Bridge Strategy,” which would allow multi-ship purchases wherein the first ships in the contract are built in a foreign shipbuilder’s home shipyard while concurrent capital investments are made in a U.S. shipyard that the same foreign shipbuilding firm has purchased. This idea has been contemplated before, especially as it relates to shipbuilding cooperation with allies like South Korea. The problem with deploying this strategy for commercial shipbuilding is that without congressional action, demand for multiple ship purchases through a single commercial contract is unlikely.
The situation is somewhat different if we are talking about vessel purchases for the U.S. government. It is conceivable for the U.S. Navy or the Coast Guard to award a contract for multiple ships with the initial set of this order being filled by a foreign shipbuilding company in their overseas yard while this company continues to invest in its U.S. yard. In fact, the Coast Guard’s recent contracts with Bollinger, Davie Defense, Helsinki Shipyard, and Rauma Marine Constructions utilize this type of approach to build up to 11 Arctic Ice Cutters in Finland and the U.S. A similar arrangement with the Navy or the Coast Guard can be considered as an option for South Korean and/or Japanese shipbuilding firms with investments in the United States.
Finally, another set of issues covered in the Maritime Action Plan is related to labor for both shipbuilders and mariners. The general approach appears to be a focus on recruitment through education and training, which are important, but a more serious problem in the industry is attrition. The shipbuilding industry average for labor turnover is approximately 20 to 30% while first year employee attrition is about 50 to 60%. Again, this reality can be attributed to a lack of stable demand for ships; however, more work is needed to not only attract more workers but also keep good ones from leaving. Better working conditions that incorporate state-of-the-art manufacturing techniques can help, as one executive noted in a recent forum. A more creative compensation and benefit solution should be explored not only for the workers but also their families. Better social service support and affordable housing are all important considerations for any worker weighing his or her choice between jobs with comparable salaries.
The Maritime Action Plan offers an ambitious blueprint to turn things around for the American shipbuilding industry, but its success hinges on moving beyond lofty goals to doing the real work required to fix the underlying problems with supply chain, workforce, and demand. Addressing these issues in isolation will not be enough; the industry requires a coordinated effort through which legislative and regulatory shifts align with the administration’s ambition at the federal and local levels. To turn this map into reality, we must now see that vision backed by decisive leadership and action.
Moving Beyond Ambition: An Assessment of Maritime Action Plan and Its Implications for Shipbuilding
By J. James Kim
Korean Peninsula
While the administration’s new Maritime Action Plan offers a bold blueprint for a “new Golden Age,” success depends on navigating a complex web of stalled legislation, high labor attrition, and a fragile mid-tier supply chain that provides up to 80% of a ship’s value. This commentary moves beyond the headlines to explore “Bridge Strategies” with allies like South Korea and Japan, offering a pragmatic look at how the U.S. can transition from ambitious goals to revitalizing its shipbuilding industry.
The much-anticipated Maritime Action Plan recently released by the Trump administration proposes to usher in a “new Maritime Golden Age by expanding commercial shipbuilding capacity, building a resilient workforce, and strengthening alliances.” It begins by acknowledging some core problems with the American shipbuilding industry and presents several recommendations to address these shortcomings. Initial reactions from the shipbuilding industry, investors, and Marine Engineers’ Beneficial Association, as well as the bipartisan sponsors of the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) for America Act, have been positive. This commentary assesses the critical elements of the Plan within the context of allied shipbuilding and considers the factors that will determine the outcome of this effort for the U.S. shipbuilding industry.
First, while the Plan is correct in highlighting the lack of active shipyards in the U.S., the real problem with the American shipbuilding industry has less to do with the yards than the supply chain. To be fair, the Plan acknowledges this problem as well but falls short of providing a clear solution. Although there is discussion about leveraging emerging technologies and additive manufacturing, these recommendations do not adequately address how the industry can deal with the critical shortage of mid-tier suppliers essential for supporting shipyards throughout the construction process. This is especially important when 70-80% of the final output value of ship production is generated by upstream suppliers.
One of the problems with the American shipbuilding industry, as identified in the Plan, is the lack of demand for commercial vessels. The Plan’s answer is the establishment of a Maritime Security Trust Fund, which would support the financing necessary for a Strategic Commercial Fleet. This is the main element of the bipartisan co-sponsored bill (i.e., the SHIPS Act), which sets the goal of establishing a fleet of 250 privately-owned US-built, US-flagged, and US-crewed vessels by 2030 through the same mechanisms. The bill is still holed up in committees without a floor vote. It seems that this piece of the administration’s maritime plan depends on congressional leadership.
The same can be said about many other initiatives mentioned in the Plan, which relate to spending (e.g., Shipbuilding Financial Incentives Program, extending Capital Construction Fund Program, and increasing federal financing), revenue (e.g., universal port fees on foreign vessels, land port maintenance tax, tax incentives, and income tax exemption for merchant mariners), and preference cargo requirements.
Perhaps the most important problem as it relates to demand for ships is what these vessels would carry. As mentioned by the new Administrator of the Maritime Administration (MARAD) Stephen Carmel during his confirmation hearing in October, “If we do not have cargo, how many ships we have is irrelevant.” To address this problem, the Plan sets out to strengthen cargo preference requirements, but there is disagreement as to whether this type of move will actually end up increasing demand for ships or have an overall detrimental effect on the economy. There also appears to be opposition to any effort towards increasing transport costs through increased fees or restrictive cargo requirements by groups like retailers. Ultimately, some kind of compromise will be needed to resolve this issue.
The most bold and interesting suggestion in the Plan is the recommendation to utilize a “Bridge Strategy,” which would allow multi-ship purchases wherein the first ships in the contract are built in a foreign shipbuilder’s home shipyard while concurrent capital investments are made in a U.S. shipyard that the same foreign shipbuilding firm has purchased. This idea has been contemplated before, especially as it relates to shipbuilding cooperation with allies like South Korea. The problem with deploying this strategy for commercial shipbuilding is that without congressional action, demand for multiple ship purchases through a single commercial contract is unlikely.
The situation is somewhat different if we are talking about vessel purchases for the U.S. government. It is conceivable for the U.S. Navy or the Coast Guard to award a contract for multiple ships with the initial set of this order being filled by a foreign shipbuilding company in their overseas yard while this company continues to invest in its U.S. yard. In fact, the Coast Guard’s recent contracts with Bollinger, Davie Defense, Helsinki Shipyard, and Rauma Marine Constructions utilize this type of approach to build up to 11 Arctic Ice Cutters in Finland and the U.S. A similar arrangement with the Navy or the Coast Guard can be considered as an option for South Korean and/or Japanese shipbuilding firms with investments in the United States.
Finally, another set of issues covered in the Maritime Action Plan is related to labor for both shipbuilders and mariners. The general approach appears to be a focus on recruitment through education and training, which are important, but a more serious problem in the industry is attrition. The shipbuilding industry average for labor turnover is approximately 20 to 30% while first year employee attrition is about 50 to 60%. Again, this reality can be attributed to a lack of stable demand for ships; however, more work is needed to not only attract more workers but also keep good ones from leaving. Better working conditions that incorporate state-of-the-art manufacturing techniques can help, as one executive noted in a recent forum. A more creative compensation and benefit solution should be explored not only for the workers but also their families. Better social service support and affordable housing are all important considerations for any worker weighing his or her choice between jobs with comparable salaries.
The Maritime Action Plan offers an ambitious blueprint to turn things around for the American shipbuilding industry, but its success hinges on moving beyond lofty goals to doing the real work required to fix the underlying problems with supply chain, workforce, and demand. Addressing these issues in isolation will not be enough; the industry requires a coordinated effort through which legislative and regulatory shifts align with the administration’s ambition at the federal and local levels. To turn this map into reality, we must now see that vision backed by decisive leadership and action.
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