The hundreds of BAE Systems employees who repair ships when they sail into San Diego could disappear because of the Navy’s plans to potentially cancel maintenance work.
Bill Clifford, president of Norfolk, Va.-based BAE Systems Ship Repair, issued a memo on Tuesday outlining the bad news: 3,600 of its 5,000 employees could be laid off.
The affected employees work at four of the company’s six shipyards across the United States that are focused exclusively on repair work for the U.S. Navy.
On Feb. 15, the Navy said it could ax maintenance work as soon as April as a result of the continuing resolution. For BAE, its four Navy ship repair sites -- located in Norfolk, San Diego, Jacksonville and Pearl Harbor -- would be impacted.
“This is not a cancellation order, but an intent to cancel," said John Measell, director of communications at BAE Systems Ship Repair.
Starting on Wednesday, “conditional” layoff notices will be mailed to the homes of the 3,600 impacted employees.
San Diego and Norfolk employees will get the bulk of the notices, totaling 1,368 and 1,625, respectively.
By law, certain employers need to tell the Department of Labor when layoffs are coming. The Worker Adjustment and Retraining Notification Act (WARN) requires most companies with 100 or more employees to give a 60-day notice of plant closings or “mass layoffs,” affecting 50 or more workers, or at least 33 percent of the work force for companies under 500 employees.
“The reason we did this has nothing to do with sequestration,” Measell noted.
The Navy’s $39.4 billion operations budget for 2013 faces a $4.6 billion shortfall, about $3.2 billion of which is because Congress has yet to pass a 2013 spending bill.
The continuing resolution, which expires March 27, will impact BAE's maintenance on seven ships in San Diego.
The first is the USS Gridley, which is still scheduled to come into its yard on April 17.
The other six ships are: USS Russell, USS Green Bay, USS Benfold, USS Rushmore, USS Sampson and USS Pioneer.
Measell “did not know” when the conditional notices could become definite.
Separately, the company announced it will lay off 302 ship repair employees, effective April 7, at 2205 East Belt St. near the foot of Coronado Bridge’s entrance into San Diego.
Affected positions include welders, helpers, improvers, pipe fitters and electricians, among others, according to a notice filed with California.
The 302 cuts are not related to the continuing resolution or sequestration, but rather a dip in business.
“That was because of a cyclical downturn in business we see from time to time,” Measell said.
BAE Systems Ship Repair is a unit of BAE Systems Inc., the U.S. subsidiary of London-based BAE Systems plc.
In San Diego, BAE Systems Ship Repair pulled in contracts worth nearly $348 million in fiscal year 2011, according to the Washington, D.C.-based Center for Security Policy.
All of BAE’s employees in San Diego do ship repair work; if the layoff notices are permanent, the company will be left with zero local employees.
The staggering consequence of the continuing resolution is much larger than BAE, however.
It’s likely put the entire industry that repairs, maintains and modernizes ships is in jeopardy. Subcontractors, vendors and suppliers that support the defense contractors are also at risk.
“The impact of these cuts will extend well beyond the military in San Diego. As many as 5,000 ship repair jobs – equating to half of the industry in San Diego – could be lost," said Mark Cafferty, president and CEO of the San Diego Regional Economic Development Corp.
The news also signals the potential loss of a specialized work force.
"These workers are highly-skilled individuals who are exactly the type of middle income taxpayers who help San Diego remain an economically competitive region," said Cafferty.
General Dynamics Marine Systems' NASSCO, its major shipyard in San Diego that repairs ships and builds new ones, has not yet taken similar action in response to the Navy's announcement on Friday.
“We are monitoring the situation and will notify our employees should it become necessary," said Jim Gill, director of communications for General Dynamics NASSCO.
NASSCO won $952.5 million in awards in fiscal year 2011, according to the center.
Adm. Jonathan Greenert, chief of naval operations, outlined on Jan. 31 what deferred maintenance looks like in San Diego.
“It looks to me there is $220 million worth of work in jeopardy right now,” Greenert said, referring to San Diego's shipyards, during a press panel at AFCEA/USNI West 2013.
That means there would be ships that won't get the maintenance they need.
“I'd like to make that up and I will as soon as possible,” Greenert said.
Despite maintenance cutbacks, he reiterated that safety won't be sacrificed.
“Safety of people, of equipment, of deployed operations and those deployed right now will get our top priority,” he said.
The number of ships in the inventory will grow to 285 in 2017, and by 2020, under the current build rate, up to 295 ships will be in the inventory.