Building Navy ships faster-and for less- Maine's Bath Iron Works

If the industry is shipbuilding, and the town contains the Bath Iron Works (BIW), the answer is "yes" -- against all odds. Stuck out on the end of the nation's supply line, facing high costs for energy and steel, BIW also faces a grim international market:

* In Japan, the world's leader in shipbuilding, shipyard capacity has been reduced by 35 percent in the past two years.

* In England, the nationalized British Shipbuilders is slowly sinking under high interest rates and labor costs.

* In the United States, two yards have closed recently and the rest of the industry operates at 55 to 60 percent of capacity.

But here on the Kennebec River, a shipyard with an old-fashioned name and a 97-year history refuses to slow down. BIW, in fact, is expanding -- with a $46. 7 million facility, announced July 16, which will help revitalize the ailing waterfront area in nearby Portland.

The reason: BIW simply can't keep up with the flood of orders for new ships and overhaul work.

Company spokesman Frank Kerr, his hard-hat glinting in the sunshine beneath the massive prow of a soon-to-be- launched guided missile frigate, has no trouble measuring BIW's success:

* Since delivering the prototype of this class of frigate to the US Navy in 1977, the yard has produced six more of the ships. Each was delivered early, and each was below cost. The program is now more than 80 weeks ahead of schedule, and enjoying "cost underruns" -- a rare word in this military circle -- totaling $37 million. (By contrast, another New England shipyard -- the Electric Boat Division of General Dynamics Corporation in Groton, Conn. -- has recently made news by coming in more than two years late and $280 million over budget on its Trident submarine program.)

* BIW also succeeds in commercial work. It now has a backlog of more than $ 900 million in orders -- for everything from a 643-foot sugar-barge for the California & Hawaiian Sugar company to bridge girders for highway construction and rock-crushing equipment for the mining industry.

* The largest employer in Maine (except for state government), it now has 6, 500 employees -- up from 2,500 in 1975. So popular are its jobs that the names of another 14,000 people are on file in the personnel office. The pay is low by nationwide shipyard standards, but the cost of living here is also low. So attractive is the firm, in fact, that the yard now employs forme bankers and college professors who have joined the trades.

* Figures for income, earnings, and profitability -- confidential since the company (a division of the floor- covering manufacturer Congoleum) returned to private ownership in 1978 -- show astonishing increases since the $10 million losses of 1975.

Many see in BIW the virtues of private enterprise and hard work preached by the Reagan administration. How does it do it?

In his small, comfortable office, hung with pictures of naval vessels boiling along through blue water, chairman John F. Sullivan cites several causes. Brought aboard in 1975 to turn around an ailing firm, Mr. Sullivan himself is often listed as the central reason for BIW's success. But he gives top credit to the local work force.

"It's mental," he says, trying to account for what has often been called the "Maine work ethic" that still produces, even under union conditions, an hour's work for an hour's pay. Such work, he says, is partly a matter of pride -- the kind of deep feeling for the ships that bring tears to the eyes of welders and pipe-fitters at each launching. The town has been making ships for 374 years -- since 1607, when a 50-foot pinnace built by English settlers at the mouth of the river sailed back across the Atlantic.

But unlike many one-industry towns, Bath breeds workers who actively encourage their children to go into the plant. And BIW responds. "We encourage nepotism," laughs Mr. Kerr, noting that young workers excel because of peer pressure and "because Uncle Fred and Aunt May are watching you."

That willingness to work hard also springs from plant conditions. "If a man's working in a junk shop, with stuff all over and the ships are late," says Mr. Sullivan, "that affects his philosophy." His emphasis on what he calls "housekeeping and safety" produces a yard which, by heavy industry standards, is very clean. The result: higher productivity, low turnover of pesonnel, and what company officials describe as one of the best safety records in the industry. And, says Mr. Sullivan, absenteeism has dropped to below 5 percent in the past few years -- in an industry with an average absenteeism of 20 percent.

Also figuring into the success is the management structure -- monthly (not quarterly) meetings where key managers review their progress, an apprentice program which has now trained 80 percent of the plant's supervisors, and a relation with the parent company that has allowed substantial investment at opportune times. One example: the towering red-and-white, 220-ton crane, a landmark familiar to tourists along Route 1.

But crucial to BIW's success, say many observers, is a program of "peroutfitting." The ships are built in modules of up to 200 tons each. Seventeen of them make up a naval frigate, while 100 may be brought together for larger ships. When ready, they are swung into place by the crane. Before they are joined, however, their walls, floors, and ceilings are outfitted with pipes and wired -- in contrast to most shipbuilding practices, in which the entire hull is assembled before the wires and pipes are installed.

The result: higher productivity, since the typically cramped areas below decks are more easily accessible while the ship is still is pieces. The challenge: making the pieces fit. That requires extremely precise planning -- and a work force capable of working to close tolerances. Quips Mr. Kerr: "Schedule and planning is a religion here." The planning, however, produces ships that are 75 percent complete at launch -- rather than the more customary 20 to 30 percent complete.

All of this translates into an American shipbuilding industry that is competitive in a world market -- so much so that firms from around the globe have sent representatives to Bath to see how it is done. One official recalled that a team from British Shipbuilders, on being told that a guided missile frigate required 1.6 million man-hours of work, responded that the same ship built in Britain would require 5 million man-hours.

Where will this success take them? BIW officials remain optimistic, foreseeing an upsurge in all types of marine work in the next decade. Edwin Hood, chairman of the Shipbuilders' Council of America, however, notes that the world market is still depressed. "I personally don't think it will begin to accelerate before 1984-85," he told the Monitor. Even new defense spending will not be felt by the nation's 25 shipyards and their 160,000 employees for another three years.

As for commercial building, that is being taken over by Japan, with South Korea, Taiwan, and Brazil in hot pursuit. Some of these governments, Mr. Hood notes, offer subsidies that allow yards to build ships at 40 percent below cost.

But the often-blamed bugbear of the industry -- militant unionism -- does not seem to be a factor in this quiet town. The last strike was in 1976. Union president Jim Harrington has his complaints about the management, pointing to some unsettled grievances. But as he looks ahead to contract talks in 1982, he notes that "it's an exciting time."

And with what sounds like common-sense Maine wisdom, he summarizes his position: "They've got to make money so that we can."