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Mr. HOOD. They mean this, Mr. Edwards: taking into account the available capacity that we have today we could provide jobs for another 60,000 workers.

Mr. EDWARDS. But not with his program?

Mr. HOOD. Providing we had the work, yes, sir.

Mr. EDWARDS. Are there now about 10,000 shipbuilding workers! Mr. HOOD. That is correct, 10,000 engaged on contracts under the Maritime Administration.

Mr. EDWARDS. When you have been referring to shipbuilding you have been talking about the maritime industry as opposed to combining the military and maritime shipbuilding?

Mr. Hoop. I don't know that I understand your question.

Mr. EDWARDS. Mr. Boyd talked in great terms about the fact that we build more ships than anybody else in the world and we finally pinned him down to the point that he was talking about military and merchant marine. When you talk about the capacity of 15 ways, for example, as shown in the Ernst & Ernst report, you are talking about for use in building maritime ships. You are not talking about military ships?

Mr. HOOD. That is correct.

Mr. EDWARDS. You are talking about private yards and not Navy yards?

Mr. HOOD. That is correct. I would have to say, however, that the ways could also be used for Navy work.

Mr. EDWARDS. You would welcome any contracts you would get Mr. HOOD. That is right.

Mr. EDWARDS. Now, then, insofar as modernizing the yards, gearing up for what might be called mass production of some standardizedtype ship, the great help that you could receive would be in the form of research and development funds, building prototypes and this sort

of thing.

Mr. HOOD. And an expanding workload.

Mr. EDWARDS. Because what I see as partly the answer to this thing is a shipyard having a ship that it sells to the operator, not that the operator comes to the shipyard and says, "Here are my plans. I wa you to build this ship"--I can see why that costs a lot of money. If you developed a prototype and if you have your shipyard geared up to build that type ship it obviously can be built a lot cheaper.

Mr. Hoop. You are describing, Mr. Edwards, the type of market environment that exists in Japan where it is the shipbuilder who s endeavoring to sell his product just like it is the aircraft manufacturer in this country who is endeavoring to sell his product to the user. Mr. EDWARDS. Are the American shipyards ready to take that an proach or is there some fear of taking that step? That is a departure that requires some guts, perhaps.

Mr. Hoop. I think the answer I should make to that question, Mr Edwards, would be this: Until very recently we discerned strong op position among the shipping operators to standardize vessels. T:: attitude is beginning to change. There are still strong feelings ab the necessity for special ships to serve particular trade routes and I am not prepared to say that I disagree with that concept, but there is a changing attitude taking place in the entire maritime commun'!

ith respect to standardization. If we are given the chance to build entical or nearly identical ships, we can accomplish many of the st economies we believe are possible and these are cost economies at will result in savings to the government.

Mr. EDWARDS. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Reinecke.

Mr. REINECKE. Thank you, Mr. Chairman.

I, too, enjoyed your statement, Mr. Hood. I would like to ask a few Jestions here with reference to a statement of Mr. Edwards.

Would you say that through DOD research funds are in effect subdizing the sale of commercial aircraft to foreign operators?

Mr. HOOD. I don't know that I would put it that way. I would merey remind you that the initial production facility to carry out the overnment contract was largely paid for by Government funds. Mr. REINECKE. The R. & D. and a great deal of initial tooling? Mr. HooD. That is right.

Mr. REINECKE. On the subject of the capacity, this spring several f us went over to the Arendal Yard in Sweden and my recollection s that we saw a bulk ship over there that was around 800 or 900 feet ong and it was on the ways only 60 days.

Now, if the American shipbulding industry is to truly compete and gear up to a modularized production type approach, perhaps even standard shipping as we have been talking about, and if we have the number of ways that you say, are we not going to find ourselves in a position where we in effect have an overcapacity or where certain yards, those yards that specialize, will get the bulk of the work? Mr. HOOD. With a carefully conceived program I don't see how we could ever reach the point of overstimulation of capacity in this country.

Mr. REINECKE. How many ways are we talking about for the maritime industry?

Mr. HOOD. Let me check the Ernst & Ernst report.

Mr. REINECKE. Is it 45 or 55?

Mr. HOOD. In 1966, the report shows we had 49.7 building ways unoccupied.

Mr. REINECKE. What are the total ways available? I thought that 55 percent figure of unoccupied represented 15 ways.

Mr. HOOD. No. For the construction of C-5 or larger vessels, there were available 28 building ways of which 15 were unoccupied, thus occupancy of these ways was 45 percent.

Mr. REINECKE. But then the 55 was corrected to 45.

Mr. HOOD. Yes.

Mr. REINECKE. That was the occupancy ?

Mr. HOOD. Forty-five percent.

Mr. REINECKE. Forty-five percent was the occupancy, so there is a 55 percent vacancy and 55 represents 15 point some ways. So we have roughly 30 ways.

Mr. HOOD. That is right.

Mr. REINECKE. If we got to the point where by production techniques we had an average time on the ways of 90 days, four ships per year times 30 would be a capacity of 120 ships. That is the reason I am asking. Do we need to expand our shipyards or are we going to hold

tight, particularly in view of the fact that only five shipyar sponded to the LASH invitation.

Mr. Hoop. I don't consider the number five as being partic unusual in this instance because these are specialized vessels. Ne theless, I have always felt that if the United States were to bui. of the ships that are needed for our Navy and all of the ships that needed for our merchant marine-to correct the obsolescence f in both fleets-we would need additional shipbuilding capacity, Mr. REINECKE. Do you feel that any of the U.S. yards are ra moving ahead to try to automate, to try to bring up their prodot techniques?

Mr. Hood. Yes, sir. There has been a considerable amount of car improvement in practically every private shipyard in this co over the last 15 years. There are a number of yards that are in orating automated materials-handling concepts which I did not in the most modern Japanese yards during my recent travels. The CHAIRMAN. Will the gentleman yield for a question. Is it possible that you could get the amount of money that the are age yard has spent in new, modern equipment in the last several year Mr. HOOD. Yes, sir. I will be happy to file that for the record. Chairman.

(The information follows:)

MEMORANDUM

AUGUST 3, 196

Contrary to some popular misconceptions, U.S. private shipyards have been devoid of modernizations in capital facilities and production techniques T pace and magnitude of these improvements has only been inhibited by the ini of a clear-cut national policy covering construction of ships for the Amer merchant marine.

To keep abreast of changing conditions, as well as to survive in a highly s petitive endeavor, practically every private yard in America has been obla to make investments in capital improvements. Over the past decade, it is servatively estimated that these betterments have totaled more than $400 mil Many of the modern shipbuilding techniques such as reduced scale of optical layout, automated flame cutting, new welding processes, prefabricat, of larger sub-assemblies, automated materials handling equipment, computer tion, and others, are being extensively employed in all major American park In spite of unsatisfactory work levels, certain of these techniques have also fee applied in the smaller yards to a varying degree.

A recent sampling indicates that a new, post-war peak in capital expenditur in the U.S. shipyard industry may be established during 1967, Outlays in 1 according to the poll, revealed that plant improvements exceeded the industr previous post-World War II high. Most yards report that their current upgrad projects are part of long-range programs to improve efficiency and reduce est Among the multimillion dollar projects under way are construction of new and rearrangement of existing buildings and other facilities to obtain m efficient flow of materials and to provide for optimum subassembly sections building ways; installation of the most advanced material handling and fabricating equipment; and construction of shipbuilding ways to match enha capabilities of sub-assembly and other supporting shops.

Some naval architects operating on a world-wide basis contend that the shipyard industry, in terms of techniques, know-how and productivity, is parable to the most advanced foreign shipyard industries.

That U.S. private shipyards are technically alert, cost conscious and age sively striving to increase efficiency is also evidenced by the testimony of Secretary of Commerce, the Honorable Alexander B. Trowbridge, before Subcommittee on Merchant Marine and Fisheries of the Senate Committee Commerce on April 12, 1967, in which he noted that U.S. shipbuilding prices 1a "now about 10 percent below the 1957 peak." This pattern has been maintai despite substantial increases in shipyard labor and material costs.

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Finally, the U.S. shipbuilding and allied industries lead the world in deeloping and building nuclear propelled vessels. This accomplishment would ot have been possible without the technological competence, personnel capailities and plant facilities to deal with the full spectrum of engineering and echnical problems associated with nuclear power.

Mr. REINECKE. Do any of the American shipyards offer any sort of productivity incentive for the workers?

Mr. HOOD. Several do.

Mr. REINECKE. These are written into the contracts?

Mr. HOOD. Yes, sir.

Mr. REINECKE. How are they working so far as compared to other yards?

Mr. HOOD. Having heard no complaints, I assume they are working effectively.

Mr. REINECKE. Are we producing ships at lower costs?

Mr. HOOD. Productivity is another word that is hard to define in the shipbuilding industry. It depends upon what you are building and with what you are comparing it. There have been many "apples and oranges" comparisons in terms of shipyard productivity. But on the whole our studies show that only two countries in the world had real increases in productivity over the last 5 years, and these were Japan and the United States. Also, I would state the U.S. shipbuilding selling prices are today better than 10 percent. Below the level which prevailed in 1957.

Mr. REINECKE. Do you think the components manufacturers would be able to keep up with you if you did have an expanded production program? Would you have any production bottlenecks that you are aware of?

Mr. HOOD. This comment was raised at last Tuesday's hearing, and I have since checked with a number of the component manufacturers that are represented in our organization. They tell me that with certain items there is a momentary bottleneck, yes, but it is a momentary condition which would not impede any real program for revitalizing the merchant marine. With a continuing volume of work, this condition would dissipate and constitute no real problem.

Mr. REINECKE. Regarding the condition that you impose of level of shipbuilding activity needed to support the national interests of the United States, are you proposing that they would have access to DOD type of surveys?

Mr. HOOD. Yes, sir. This requirement was included, Mr. Reinecke, because the proponents of foreign building have said that the Government must know what level of shipbuilding is necessary to support the national interest.

Mr. REINECKE. It would be interesting because we can't seem to get that information out of DOD here.

Mr. HOOD. Apparently, section 502 (f) of the Merchant Marine Act cannot be carried out.

Mr. REINECKE. Thank you very much.

The CHAIRMAN. Mr. Drewry, the counsel for the committee, has some questions.

Mr. DREWRY. Mr. Hood, on this question of capacity and the underemployment of it, I believe you said last year 40 percent underemployed. Is that in real terms or is that something that needs qualifying?

83-195-67-39

I visited one of our major shipyards where they had a modern, fast cargo liner on the ways and they had only two ways that could handle a ship of that size. They had two other ways that were pretty big but not quite big enough to handle those ships or to handle a larger number of those ships under construction on the ways at one time.

Isn't that a factor here on the question of need for modernization perhaps? As we go into larger ships aren't there adjustments of that kind that will have to be made?

Mr. HOOD. Certainly it is good business practice, Mr. Drewry, that if the market is available, production facilities are going to be adjusted

to accommodate it.

Mr. DREWRY. I know it is explained here, but nevertheless I was intrigued by the statement in the Ernst & Ernst report that the total length of vessels that could be accommodated at one time exceeds onequarter of a million feet. That is an interesting statement but it is not necessarily in the terms in which we are dealing.

Mr. Hoop. You have to consider the predicate of the whole studyship positions available.

Mr. DREWRY. How large is a C-5 ship? You mentioned that. What are its characteristics?

Mr. HOOD. 600 feet long, 88 feet wide with some variations.

Mr. DREWRY. And the LASH sea barges are in the range of as high as 800, I believe.

Mr. Hoop. There are ways of handling that, In the letter that I am filing for the record, Mr. Drewry, Ernst & Ernst says:

Ways included as suitable for the construction of C-5 vessels were limited to those with a minimum width of 88 feet. With minor adjustments, a C-5 vesel may be built on a way 84 feet in width. Even narrower ways could be used if market demand made this necessary.

Mr. DREWRY. One other thing: In Mr. Boyd's testimony he referred to the fact that his program was going to double the number of em ployees in the shipyards doing commercial work. Isn't it more likely that it would be something less than doubling. In other words, if you had your assurance of a steady program and a larger quantity you would have to automate to some extent wouldn't you?

Mr. HOOD. A certain amount of automation would inevitably follow and I don't know that I could say that the work force would be doubled on a 30-ship program.

Mr. PELLY. Would the gentleman yield?

Mr. DREWRY. Yes.

Mr. PELLY. Isn't it a fact that we use certain types of skills and the lay them off while employing still other types on respective wors phases. If, on the other hand, you had a program with continuous costruction you could move these skills to other jobs. Therefore, you would have more employment in terms of man-hours but not neve sarily in numbers of men. As a result, isn't it possible that you actually double employment?

Mr. HOOD. Right. With a continuous program you can do all sorts of things in terms of production planning and manpower utilization. Mr. DREWRY. That is all, Mr. Chairman. Thank you.

The CHAIRMAN. Thank you very much, Mr. Hood.
Mr. Hoop. Thank you, sir.

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