Forbes: Local shipyards bracing for budget fallout
Feb 02, 2013 (Daily Press (Menafn - Newport News - McClatchy-Tribune Information Services via COMTEX) --Rep. Randy Forbes completed a sobering tour of Hampton Roads shipyards Friday, and later warned of pending job losses and irreversible damage to the region's economy unless Congress fixes its budget woes.
The Chesapeake Republican visited six shipyards over two days, including Newport News Shipbuilding. One concern mentioned at every stop was the fear of long lasting fiscal harm as congressional gridlock continues, he said.
"The public sometimes has the feeling that this is like a faucet," he said. "You can turn it off for a couple of months and then you can turn it on."
It's not necessarily the shipyards that will take the first hit, but the second- and third-tier suppliers, Forbes said. Those smaller operations don't have the reserves of larger companies.
"With several months of no cash flow, they could be bankrupt and out of business," he said. "And each of them is a niche you can't replace."
Forbes was recently named chairman of the Seapower and Projection Forces Subcommittee on the House Armed Services panel.
The region's vulnerability was underscored this week as Old Dominion University issued its 2013 economic forecast for the Hampton Roads region. Defense spending, a main pillar of the economy, grew by only 1.62 percent in 2012, the smallest rate of growth since 2001. The report said there is a "real threat" that military spending may decline this year.
The current budget threat is twofold. The military is operating under a 2012 continuing resolution, not an updated 2013 budget. The longer the continuing resolution remains in effect, the tighter the money will be. In Virginia for the Navy alone, the consequences of not passing a budget would be 1.4 billion as the service is forced to defer projects, freeze hiring and make other moves.
The second problem, which has been an issue since last year, is across-the-board cuts under the process known as sequestration.
Without being specific, Forbes said he would not be surprised to see layoff notices at some shipyards in the next two weeks -- not including Newport News Shipbuilding.
Christie Miller, shipyard spokeswoman, said the near-term impacts of sequestration would be minimal since most work over the next several years is already under contract.
However, she added: "Our supply chain, which consists of 5,000 companies in 50 states, could be at more immediate risk."
She said it was "premature" to speculate about the impact of a year-long continuing resolution, "but potential areas of concern for us would be manning at our facilities, increased costs and issues scheduling future work in our dry docks."
In addition, working under a continuing resolution could create "significant disruption and hardship" on shipyard suppliers, she said.
Another threat, said Forbes: The Navy may pull money from shipbuilding budgets to take care of more immediate needs.
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