Warship builder sees cooler heads prevailing on U.S. budget caps
By Andrea Shalal WASHINGTON (Reuters) - The chief executive of shipbuilder Huntington Ingalls Industries on Monday said he was optimistic U.S. lawmakers would eventually ease budget caps on U.S. military spending that are dampening investment in longer-term weapons research. "Cooler heads have a way of prevailing on something like this," Mike Petters told Reuters in an interview at the company's offices near Washington's Navy Yard. Petters said Huntington Ingalls was initially insulated from the brunt of automatic spending cuts known as "sequestration," given its long-term contracts with the Pentagon, but work on new programs, including a submarine to carry nuclear weapons and a small amphibious ship, would require investment decisions in coming months and years. Uncertainty about budget levels and the Pentagon's longer-term priorities made it hard for big firms like his and hundreds of smaller suppliers to invest in technologies and processes that could drive costs down in the longer-term, he said. "It sort of feels like we’re saving money, because we’re keeping the numbers down, but in fact we’re making the things that we want to buy ... more expensive," he said. Unlike commercial firms, arms makers work mainly for a single customer, the U.S. government, which means they need clear guidance before investing in new machinery, designs and workers, Petters said. The Defense Department is facing cuts of nearly $1 trillion in projected spending over a decade under the Budget Control Act of 2011. A congressional deal last year eased the effects of some of the cuts, but they are due to return in fiscal 2016. Petters welcomed a new initiative aimed at developing new weapons to keep ahead of Russia, China and other potential foes, but said companies needed clear signals about which investments would be worthwhile, and how and when they would generate sales. He said the Navy's decision to base a new class of smaller amphibious ships on the LPD-17 class built by Huntington Ingalls was a positive step, because it would allow the company to focus its investments on making those ships more affordable, he said. He said he hoped lawmakers would fund procurement of a 12th LPD-17 class ship to bridge to the new class of warships since a break in production would drive costs higher. "We're in a good place, but we're not across the finish line yet," he said. (Reporting by Andrea Shalal; editing by Andrew Hay)
