Senator INOUYE. Thank you very much, Mr. Campbell. Just as a matter of clarification, I do not believe the committee submitted questions to either one of you gentlemen. I believe your Washington representative had a chat with some of my staff, and they must have suggested the thrust of our meeting here. SURVIVAL THREATENED First, may I begin by quoting your statement. In one page you said that there is no reason that any decision must be made this year to put either shipyard out of the submarine construction business. And on the next page, you indicate that if the submarine is not awarded, you are not awarded the 22, the effect will be that Newport News will most likely go out of the submarine business as our 688 backlog is completed. Is that contradictory? Mr. CAMPBELL. I do not think so, sir. If you make the decision this year to not award us the SSN-22, or the Navy makes that decision, we will go out of the submarine business by default. We will not be able to compete effectively on the Seawolf thereafter. Electric Boat will have had two boats under construction with their learning curve. We will have had none, and we will not be able to compete effectively on No. 3 or No. 4, whenever they may be awarded. We will continue, obviously, to phase out the 688's until our contracts are fulfilled. So, theoretically, we are remaining in the submarine business until that is done. Senator INOUYE. Considering the fact that Newport News is the only manufacturer of aircraft carriers and one of the two nuclear shipbuilders, would the employment picture be as drastic as Electric Boat if the award is not made to Newport News? Mr. CAMPBELL. Would the employment picture be as drastic? Mr. CAMPBELL. Yes, sir; they would. Our employment would go down percentagewise at about the same ratio as would Mr. Turner's. We would be out of employees in 1997; he would be out in 1998, with no further contracts awarded to either one of us. To say what it would truly be at that time, I do not know. It would be mere speculation as to what awards would be made over the next x years by the Government to either one of us or each of us. If we were awarded another aircraft carrier in the interim, that would be a different picture than if we are not awarded another aircraft carrier. I have three partially built now; one will be delivered next year, one in a few more years, and one in 1998, early in 1998. But I cannot count on business I do not have contracts for. Senator INOUYE. I asked Mr. Turner about the possibility of going back to the 688. Can Newport News do that? Mr. CAMPBELL. Sir, we built the Seawolf facilities because the Seawolf was so much larger than the 688's. We could effectively build the 688's in the Newport News facilities; yes, sir. DESIGN CONTRACT Senator INOUYE. I believe at this time there is contractual arrangement between Newport News and Electric Boat on the design of the 21? Mr. CAMPBELL. That is right. Senator INOUYE. What would happen if either one of you got the exclusive? Mr. CAMPBELL. On the design contract, sir? Senator INOUYE. Yes. Mr. CAMPBELL. We are the lead design yard. We subcontract part of our contract to Electric Boat on the portion of the ship that we have the responsibility for. The nuclear portion of the Navy has its own contract with Electric Boat on the propulsion plant, on the nuclear portion of the propulsion plant. I would assume Electric Boat is perfectly capable of designing the complete ship. We have been fortunate in that we are the lead designer of both the 688 and the Seawolf. We won those in open competition with Electric Boat, but I have no doubt about their qualifications to design the total ship. Senator INOUYE. You indicated, as did Mr. Turner, that an award of one submarine every other year is better than nothing. With that arrangement, do you believe that both shipyards could continue on competitively? Mr. CAMPBELL. Sir, my charts would show you that I believe I can stay in business with one-half a Seawolf every year. In other words, one every other year. I will maintain an employment of at least 4,000 people. It will keep me going until something else comes along. Senator INOUYE. Thank you very much. Senator Stevens? Senator STEVENS. Mr. Chairman, that touches, I think, the question that I wish we had the jurisdiction to get into, and this is one of the great problems about the bifurcation in the Senate, the authorization committee deals with the overall question of the industrial base, but it seems to me that that is the basic question here. To what extent is there a national interest in preserving an industrial base? YARDWIDE CONCEPT Let me ask you this. When you have the aircraft carriers, you are able to split your overhead between carriers and submarines, are you not? Mr. CAMPBELL. That overhead which is yardwide, sir, that which is specific to the carriers, goes to the carriers. Senator STEVENS. But you have a yardwide concept. If you were down to just submarines, you would have to assign all of that with the submarine? Mr. CAMPBELL. That is correct. Senator STEVENS. But for some period, now, you have sort of an overhang of the finishing up of the carriers. You still have three underway? Mr. CAMPBELL. Yes, sir; I do. Senator STEVENS. It has been, I gather, the same situation in Electric Boat in regard to the Tridents and their work on the attack submarines. They had the ability to share the general overhead between separate contracts. We are coming down to the point where each of you have to look forward, for at least a period of time, to having the overhead be absorbed by continuation of the submarine. The 21 is going to be the only game in town after awhile. Mr. CAMPBELL. After 1995; yes, sir, on submarines. Senator STEVENS. Right. So, if we are going to maintain an industrial base, we have to find a way to absorb at least the general overhead so that you can have an ongoing base of two organizations capable of building submarines. You are the last two left in the country; is that right? Mr. CAMPBELL. I believe that the country would be in desperate condition if it did not have two shipyards building submarines. MAINTAINING AN INDUSTRIAL BASE Senator STEVENS. Mr. Chairman, I believe that is a task we ought to talk to our authorizing committee about, but it does seem to me that there must be a new approach in peacetime to the maintenance of an industrial base. If the Nation wants to maintain an industrial base, we are going to have to face up to the cost of maintaining two, and not just in terms of the submarines, but in terms of other types of equipment we will have to have if things turn around in the Soviet Union. I happen to believe that the ongoing production of [deleted] submarines as opposed to one, still indicates that the Soviets have not come on board yet in terms of arms control. It is time for us to review that matter. I do not think we have the jurisdiction, I must tell you, but the Congress as a whole has the duty. Thank you. Senator INOUYE. Senator Rudman. Senator RUDMAN. I was just listening to my colleague from Alaska. I do not think we adopt the Russian planning purposes as a role for our economy. That may be part of their problem. They do not know how to convert their facilities to anything else and they are just going to keep building what they have to build because they have nothing to build. Senator STEVENS. Would you yield there? What about when we get to the point where they have nothing else to use except to put them to work. AIRCRAFT CARRIER SITUATION Senator RUDMAN. That is true. Mr. Campbell, I was struck by your statement that you think it would be a national tragedy if it goes to only one yard building submarines. You could put the shoe on the other foot. There are a lot of people who have thought that it has been a semitragedy that they have only one yard building aircraft carriers. Mr. CAMPBELL. We would welcome competition in building aircraft carriers, sir. Senator RUDMAN. Say again? Mr. CAMPBELL. We would welcome competition in building aircraft carriers. Senator RUDMAN. You would welcome it, but you know perfectly well that with the enormous investment that that requires and the relatively low number, you are not going to get people who can put that kind of capital in. You have been in the business. You do a superb job at it. You build first-rate carriers, and unless we are going to start building four or five a year, no one else is going to put that kind of money into it. I just ask you this question. If you go out of the submarine business-and I am not sure you are going to but if you do go out of the submarine business for any reason whatsoever, long-term prospects for Newport News as a viable part of the industrial base of this country are fairly solid, are they not, in terms of what we will be doing here, replacing carriers, and building other carriers to keep our fleet modern, assuming that is what we are going to do? I think that is a valid assumption; am I correct? Mr. CAMPBELL. I think we are in a better position for the future than is Electric Boat who has invested far less money than have we in their facilities; who have specialized in one product line. We have made ourselves flexible. We have trained our people to be flexible. We have all the procedures in place to do multiple jobs. We are not just doing one thing. So, therefore, in times of recession, depression, we are in a better position to go seek other types of work. OVERHAUL OF SUBMARINES But there are all kinds of things that Electric Boat can also be seeking that will fit their facilities perfectly well. They can do overhaul of submarines, for example. They can go on the international market and sell submarines to other countries with the permission of our U.S. Government, which, I think, if they were not supplying any orders to us, we would have the perfect right to go elsewhere. Senator RUDMAN. There are some folks up in Portsmouth, NH, who are not terribly anxious to have Electric Boat get in the overhaul business, I will tell you that. Mr. CAMPBELL. I thought of that as I said it, and I assume they would come from Charleston or some other place. Senator RUDMAN. Let me just point that the chairman, you know, has just passed a note, which I was reminded. There is a carrier in the fiscal year 1995 budget, and I think based on what is going on in the world, I would think we are going to keep the carrier force modern. We have a tough decision. The Secretary has a tough decision. I do not think the question is so much with specificity, well, it is. It is not a general, broad question of keeping an industrial base. We are going to have the question of how are we going to do that? It looks to me sitting here that if we lose Electric Boat for whatever reason, then we have lost something pretty important. If we lose your company, that would be tragic, because we would lose, essentially, two capabilities, really more than two. I do not know what the Secretary is going to do, but I surely would not want to |