POLITICO Pro Q&A: Huntington Ingalls CEO Mike Petters
Mike Petters, president and CEO of Huntington Ingalls Industries, the nation's largest military shipbuilder, is concerned about the Navy's new class of ballistic missile submarines. But not for the usual reasons.
Petters, whose Newport News Shipbuilding arm has a role in constructing the Columbia-class submarine, is not worried about the workload or delivery schedules. Instead he fears the replacement for the aging Ohio class will be so costly it will "crowd out other shipbuilding."
The program "is going to get funded, it's going to happen, it's going to be on schedule," Petters says. "If we don't find a way to pay for it, we're going to pay for it with other ships and that's a bad situation for the industry."
Petters is also facing mounting pressure to deliver a trio of aircraft carriers in 18 months beginning with the new USS Gerald R. Ford in November, the first in the new class. The Newport News shipyard has completed more than 98 percent of the Ford but is grappling with final technology installation and testing challenges that have caused a two-month delay in the delivery schedule, he said.
Huntington Ingalls is similarly racing to overhaul the Nimitz-class carrier USS Abraham Lincoln and deactivate and defuel the retiring USS Enterprise before sending it to be scrapped.
"Every one of those ships is a challenge," he acknowledged.
He said the company is also pressing Congress to fund an additional amphibious assault ship to build a "bridge" between the current class and the next one - and hopes Congress and the next administration can fix the "mess" that is is the across-the-board budget cuts known as sequestration.
Petters spoke with POLITICO at at Newport News, Va. offices. Here are some edited excerpts:
When you took over in 2011 did you have a vision for where you wanted to take the company?
When we spun out of Northrop Grumman in 2011, it was kind of a strange time to be spinning, frankly. There was a lot of budget uncertainty and turmoil in the environment. Our Newport News business was pretty steady, but the Ingalls business was still recovering from [Hurricane] Katrina. There was a lot of - skepticism might be too strong a word - there was a lot of concern about whether we could actually get Ingalls to a place where they were operating as well as we were operating at Newport News and how long that would take.
When we spun the company out in 2011 we said it was going to take us through the end of 2015 to do that, which was kind of surprise, I think, to Wall Street because they're used to thinking about next quarter. I said, "We're not going to do that, we're not going to tell you where we're going to be in a quarter, we're going to tell you where we're going to be at the end of 2015."
The good thing about that is we actually got there. So my view of the business in 2011 was that we would have a healthy shipbuilding business in five years and we did.
What are the opportunities going forward?
First of all, you have to continue to execute. Executing in our shipbuilding business is kind of central to what we have to do. Programs coming along are really exciting for us. The carrier program - we just signed a contract for the [new] Enterprise, which will be delivered in 2027. Our business is very long-term and we have to think in terms of decades sometimes. That's the first of many contracts on the Enterprise that we'll get.
We are building the [Navy's LPD amphibious ship]. The Navy has made a decision to transform the LPD class to the LX(R) class by using the same hull. We're very excited about that. The program plan is 2020.
We have a really solid, some would say hot production line on LPDs. The question is on [LPD] 29. LPD 27 was going to be the last one. The Navy then made a decision that they like what the LPD does. They made a decision that the LX(R) program ... instead of going off and doing a whole new design for that ship, we're going to use the LPD as the basis for that. The problem with the program is that it wasn't going to start until 2020, and LPD 27 was going to finish well before that.
Once the Navy made the decision that we're going to connect the two programs from a technical standpoint, the Congress stepped in and said, "Well, if you're going to connect those two programs then we need to build a bridge so we can take advantage of the industrial base it's there to support, otherwise we'll be starting up new anyway."
Congress funded [LPD] 28 to be part of that bridge. It doesn't get you all the way to where the LX(R) program is. You either have to bring the LX(R) program in or you've got to put an LPD 29 in to do that. Either one of those works for us, but the current plan right now, the bridge is not finished.
Is that something you're working on the Hill to try to move forward?
Oh yeah, very aggressively.
A lot of companies have started to look internationally for business. Is Huntington Ingalls doing that?
No. We're not going to be building ships for other countries, typically. Most of the time when it comes to shipbuilding, most of the countries want to build those ships in country themselves because of all of the manufacturing and jobs and everything that that would create. It's an anomaly where there's a country that might actually come to us and say: "Would you build us a ship?"
On the other hand, the U.S. Navy is a very international organization. We support the Navy wherever they are. To the extent that our international footprint will help the U.S. Navy accomplish its mission, we'll be very interested in that. But we're not going to be taking ships off our production line and selling them to another country.
Is there anything in the Fiscal Year 2017 National Defense Authorization Act bill that particularly concerns you, as it's written now?
No. There's always lots of stuff in those bills. There's certain things that we'll have more interest in than others but the ships that we're building are for the administration after next. The puts and takes in any particular bill are things we care about, things we work on, but whatever happens this year will be right back in there next year doing it again.
What are some of the things your lobbyists on Capitol Hill are trying to push?
Getting the bridge done on the amphibs is really important. Keeping the momentum in shipbuilding in general is important. Our view is that more ships are better for the industry, even if we don't build them, but more ships are better.
Our No. 1 concern is that you can't allow the Ohio replacement program funding to crowd out other shipbuilding, so we're kind of into the more ships are better for the industry. ORP is going to get funded, it's going to happen, it's going to be on schedule. If we don't find a way to pay for it, we're going to pay for it with other ships and that's a bad situation for the industry.
You combine that with this environment where we don't really even know what sequester looks like. To me those are the two overriding issues for the industry, at least the shipbuilding industry. Not withstanding the things that are happening in any of the given bills. But those two things have to be sorted out. And that's where my real concern would be.
Who do you think would be better for defense spending, Hillary Clinton or Donald Trump?
Like I said, we're building platforms for the administration after next. A friend of mine one said that whatever you think about defense spending, the challenge is that that real world often intrudes. We've worked with Republicans; we've worked with Democrats. National security is a pretty bipartisan effort. Everybody wants to be secure.
Which candidate do you think really emphasizes the strategic nature of what you do here?
The ships we build are for the administration after next. The day after the election we'll still be the largest employer in Virginia and the largest employer in Mississippi. The day after the election we will still be the largest supplier to the U.S. Navy in terms of their combat ships. However the election turns itself out, that's where we'll be the day after the election.
In the six years you've been head of this company, what's been the biggest disappointment?
I think sequester has been a huge disappointment. This country is too good to turn over our budget system to a formula. We're a much better people than that and I just think we've got to find a way to get ourselves out of this mess.