Navigating The Information Fog Engulfing American Shipyards

The adage “what gets measured gets managed” rings hollow for American shipyards, as the U.S. Maritime Administration and Navy fall short of providing the data investors need to fuel innovation and growth in this sector.

By Captain John Konrad (gCaptain) In the sprawling tapestry of the American economy, there’s a sector that exists in a nebulous haze, its inner workings as mysterious as the ocean depths it traverses. This is the American shipbuilding industry, a world where gargantuan vessels are conceived, and the future of maritime competition is shaped. Despite its pivotal role in our national defense and economic infrastructure, it remains largely invisible and misunderstood by a sea-blind public. This is not merely a story about ships, but about the unseen forces that sculpt our world, the invisible currents that steer the course of industries, global trade, and economies. It’s a narrative of sea blindness, of a nation’s struggle to grasp its maritime domain, and of an industry’s fight against the tides of obscurity and this obscurity hinders the ability of the for-profit corporations who build American naval and commercial ships to access smart capital needed to invest and grow.

Our April exposé, “Uncovering The Ghost Admiral Steering The U.S. Government’s Most Secretive Agency,” sent ripples across government circles and the public. This investigative piece nudged the U.S. Maritime Administration (MARAD) to engage with prominent journalists, hinting at a potential shift towards greater transparency. However, this glimmer of hope was fleeting. Last week when MARAD commissioned the first new national training and humanitarian ship in modern memory at Philly Shipyard – a milestone in American ship construction set to influence future generations of sailors – the event was cloaked in relative obscurity, with only a smattering of journalists receiving invitations from MARAD.

The dearth of journalists dedicated to the shipbuilding industry is a significant part of the problem. While maritime publications like gCaptain strive to cover the sector, the number of journalists with a specific focus on shipyards is alarmingly low. Among the few who have plunged into the complexities of America’s shipbuilders are Christopher Cavas and Chris Servello, hosts of the CavasShips Podcast. Their comprehensive survey of the industry stands as a lighthouse in the fog. However, even for them, shipyards represent just a subset of the stories they report on. This lack of dedicated coverage leaves a void in public understanding and awareness of the industry, further exacerbating the challenges faced by the shipbuilding sector. The need for more journalists to navigate these waters, to illuminate the triumphs and trials of the shipbuilding industry, has never been more pressing.

A smattering of other resources exist. One notable contribution to the field is the book “Heavy Metal: The Hard Days and Nights of the Shipyard Workers Who Build America’s Supercarriers” by Michael Fabey, published on June 14, 2022. This excellent work provides an in-depth look at the construction of a single ship, offering valuable insights into the industry. However, its focus on a single project underscores the need for broader coverage that encompasses the entire spectrum of shipbuilding activities, both naval and commercial, across the nation.

The training ship incident and lack of shipbuilding journalism are symptomatic of a broader issue plaguing the maritime industry: “sea blindness.” This term encapsulates the public’s lack of understanding or awareness of maritime issues, particularly in the realm of shipbuilding. This obscurity extends beyond media coverage, permeating the realm of industry analysis and public information. The scarcity of accessible, comprehensive data on shipbuilding activities and the financial health of shipyards has created an information vacuum, hindering potential investors and contributing to the industry’s struggles.

Historically, the U.S. Navy owned and operated public shipyards that constructed capital ships. Today, only four of these shipyards remain, focusing primarily on repair work. The construction of new ships has been outsourced to publicly listed and privately held companies – profit-driven corporations that rely on capital investment to grow and improve efficiencies. However, the dearth of reliable information and guidance about these shipyards has made it challenging for potential investors to make informed decisions.

This information deficit is not just a problem for investors; it’s a systemic issue that affects the entire shipbuilding industry. The lack of transparency and public engagement hampers the industry’s ability to attract investment, innovate, and deliver projects on time and within budget. This, in turn, has far-reaching implications for the industry’s profitability and the broader U.S. economy.

In the world of investment, information is king. Investors rely heavily on platforms like the Bloomberg Terminal, which aggregate news articles, public information, and data to aid in due diligence and identify opportunities. The importance of this information for making investment decisions led Bloomberg to establish an expensive, yet indispensable, news division to fill in coverage gaps. However, when it comes to the shipbuilding industry, these gaps are more like chasms.

Banks, too, depend on teams of analysts who delve into stories and financial reports. Yet, the shipbuilding industry is lagging in this area as well. For instance, NASDAQ lists 18 teams of analysts covering Boeing, our largest aircraft manufacturer. In contrast, our largest shipyard, Huntington Ingalls Industries, is covered by only 8 analysts, most of whom work on HII reports part-time. The majority of other shipbuilding companies in the United States receive even less coverage.

In essence, the absence of high-quality information, articles, and reports deters investors, who possess the capital necessary for shipyards to invest in the future. These investors, in the face of inadequate information, will and do choose to walk away. Without premium investors, a shipyard’s cost of capital surges as they are compelled to resort to less desirable options, such as issuing high-risk junk bonds.

Another potential source of information and analysis that could fill the void is the defense-oriented think tank industry. This sector is vast, well-funded, and teeming with highly educated experts. The exact size and scope of this industry are difficult to quantify, but it’s safe to say that it encompasses hundreds of organizations across the country, employing thousands of researchers, many of whom hold advanced degrees. These think tanks play a crucial role in shaping national security policy and discourse.

However, despite the wealth of intellectual capital in these organizations, only a handful of top think tankers have turned their attention to the financial health of shipyards. Figures like Bryan Clark at the Hudson Institute and Brent Sadler at the Heritage Foundation stand out as exceptions. They have sounded the alarm about the challenges facing the shipbuilding industry and provided in-depth analysis of shipyard troubles. Yet, their voices are few and far between and are often drowned out by the cacophony of aviation and army analysts. This underscores the need for more think tanks to dedicate full-time staff solely to shipbuilding and contributing to the public understanding of its importance and challenges.

The fourth pillar of information valued by investors are government reports. This is where MARAD comes back into play. Since its inception, MARAD has played a crucial role in providing detailed statistics and narratives on the capabilities, health, and opportunities of both newbuild and repair shipyards. These reports were once eagerly anticipated by naval planners, Wall Street investors, shipowners, and Congress. However, despite being required by law, the last shipyard survey conducted by MARAD was in 2004. It’s been almost two decades since we last had access to this vital data and sources inside MARAD tell gCaptain there is little hope another shipyard survey will be published in the next few years.

How important are these surveys? I will quote MARAD’s own website on the value of these reports:

The statistical data accumulated by the survey is an important element in the assessment of the adequacy of the Nation’s shipbuilding industrial base, including ship repair. It also provides critical input in determining which facilities will be used during the reactivation of the reserve fleets maintained by MARAD and the U.S. Navy.

In addition, the survey also provides a database that is used to evaluate the feasibility of proposed shipbuilding programs. From the data obtained, determinations are made as to which existing shipyards might construct proposed ships, consistent with ship size and delivery date requirements.

REPORT ON SURVEY OF U.S. SHIPBUILDING AND REPAIR FACILITIES 2004, MARAD

The absence of these critical sources of information creates a fog of uncertainty around the shipbuilding industry. Investors are left navigating in the dark, with little to no guidance on where to steer their capital. This lack of investment, in turn, stifles the industry’s growth and ability to deliver projects on time and within budget.

The renowned naval architect Tim Colton recognized the importance of this information. Frustrated by MARAD’s lack of information Colton, at his own time and expense, collected and publish basic statistics on his website, ShipbuildingHistory.com. However, with his passing last year, even this basic public service is no longer available.

The famous investor Peter Drucker once said, “What gets measured gets managed.” Without measurement, the shipbuilding industry is left unmanaged and adrift. The result? Shipyards are starved for capital while American-built ships, especially U.S. Navy ships, are consistently over budget and behind schedule.

Some might contend that the U.S. Navy should be the provider of this information, considering they are the largest consumers and beneficiary of shipyard services. However, they are the customer, not an independent and commercially oriented entity like MARAD. Consequently, the value of the information they provide is often discounted by savvy investors. Furthermore, unlike MARAD, the Navy lacks a presence on Wall Street and has minimal interaction with the investors who purchase shipyard bonds and monitor the financial health of shipyards. As a result, they often lack insight into the types of information that are valuable to investors.

Also Read: US Navy Shipbuilding Is Failing Because Admirals Avoid Wall Street

The solution? We need to shine a light on the shipbuilding industry. We need to mandate transparency, encourage journalistic coverage, and promote financial analyst engagement. We need to measure so we can manage. We need to provide Congress with hard information and statistics so they write the laws required to repair the shipbuilding sector. Only then can we navigate the shipbuilding industry out of the fog and into clear waters.

The dearth of press, public information, and data about American shipyards is not just an industry problem; it’s a national concern. The shipbuilding industry is a vital part of our economy and national defense. It’s high time we gave it the attention and resources it deserves. It’s difficult to imagine how the US Navy, MARAD and US Merchant Marine can meet any of their goals if we don’t start by measuring, managing, and ultimately, mastering the art of shipbuilding information.

A scant number of defense industry insiders truly grasp the intricacies of shipbuilding, yet many possess a profound understanding of space. To illustrate this point, let’s draw upon a scene from the film “The Right Stuff.” In this pivotal moment, the astronauts find themselves in the glare of media cameras. It’s here that they succinctly encapsulate the symbiotic relationship between media coverage and funding with the memorable line, “No bucks, no Buck Rogers.” This cinematic moment underscores the crucial role of public awareness and investment in propelling any industry forward, be it space exploration or shipbuilding.

As we dock at the end of our journey, the contours of the mystery begin to take shape. The shipbuilding industry, once lost in the fog of obscurity, emerges as a vital cog in the machinery of our nation, its health directly linked to the pulse of our economy and national defense. The dearth of shipyard press, public information, and data has left this industry adrift in uncharted waters, its potential untapped, its stories untold. But the solution is within our reach. By illuminating the industry with the beacon of transparency, by encouraging journalistic coverage, promoting analyst engagement, and demanding government accountability, we can guide this industry out of the fog.

MARAD and the U.S. Navy’s NAVSEA must be held accountable for collaborating with Wall Street to supply the necessary reports, news coverage, and analysis that are essential for navigating through the prevailing fog of uncertainty.

This is not just about building ships; it’s about building a future where American shipyards are recognized for their true value, where they are not just producers of vessels, but creators of economic prosperity and guardians of national security. The mystery, it turns out, was not in the depths of the ocean, but in our ability to see what was always there. It’s time we cure our sea blindness, encourage smart capital investors, encourage Congress to write laws based on solid reporting, and chart a course toward a future where the shipbuilding industry is no longer a mystery, but a testament to American ingenuity and resilience.