How to revive American shipbuilding: A Q&A with Matthew Collette
American shipbuilding rusted away in the 1970s and ’80s. Congress and the White House want it back, but how do we do it effectively?
Most of the world’s international shipping vessels are built and owned outside of the United States. Federal officials want to turn the tide with Congress’s proposed SHIPS for America Act and the White House’s new Office of Shipbuilding. They are calling for financial incentives for shipyards, new regulations on transporting American cargo, and a Maritime Innovation Center to develop new technologies, among other steps.
But will it be enough to revive an industry that has largely been left to rust since the 1980s? We discussed the issues and options with Matt Collette, a professor of naval architecture and marine engineering who is working to establish a Michigan Maritime Institute at U-M, and is helping to advise the state of Michigan on their maritime strategy.
Collette understands the industry and government perspectives, having worked for four years as a naval architect at SAIC, an American company that provides information technology and engineering services primarily to the U.S. government. He also currently co-chairs NATO’s panel on autonomy, maintenance, and logistical support.
Shipbuilding combines high labor demand with advanced manufacturing, making it an attractive industry for developing economies to invest in. Because of the advanced infrastructure, shipbuilding can be perceived as a prestige industry. For those reasons, several countries—particularly Japan, Korea, and China—focused heavily on developing their shipbuilding industry after World War II. Their governments heavily subsidized shipyards so that they would have world-class facilities capable of building ever-larger vessels. In contrast, Europe focused on maintaining their existing shipyards by paying workers high wages to design and build fewer, high-value ships. The U.S. took a middle-road approach supporting a small maritime industry with subsidies. Unlike Japan, China and Korea, we didn’t have a national strategy to support the industries that make the parts—things like steel, electronics, propellers, engines, cargo handling gear, even furniture for the inside, which further lowered our competitiveness. As government subsidies for heavy industries fell out of favor, President Reagan eliminated the last subsidies that were propping up the U.S. shipyards in the 1980s. We haven’t participated in the market for ocean-going merchant ships since.
There’s been a growing realization that we now depend entirely on other nations to build and largely operate the ships that bring goods to our shores and carry our exports to the world. After the Cold War, the nation was happy to globalize industries like shipbuilding as we did not think a large conflict was likely.
But now, there is a concern that our supply chains could be pressured if other countries decide to stop providing ships. China produces half of the world’s new merchant ship tonnage and has one of the largest commercial fleets, while its government continues to have territorial disputes with nations in the South China Sea and Pacific. And Russia is investing in new, nuclear-powered ships that can navigate emerging shipping lanes in the Arctic.
We certainly need a large re-investment in U.S. shipyards, so any solution in that area will likely help, especially with the Navy needing to repair and expand its fleet at the same time we are racing to build more commercial vessels.
But shipbuilding is nothing like tech start-ups and Silicon Valley entrepreneurship we’re most familiar with in the U.S. It can be hard to convince companies to invest in a new shipyard because they require hundreds of millions of dollars in up-front capital for equipment and facilities. You also can’t wind down a shipyard quickly, or pivot to do something else with it. If we’re going to encourage private industry to invest in the shipyards, the government needs to signal a very clear demand. The Ships for America Act attempts to address this by supporting both shipyard investment and providing construction and operational support for a 250-vessel U.S. flagged commercial fleet, which will help reduce investment risk. Whether more needs to be done will become apparent.
The SHIPS for America Act hasn’t yet become law, but we are already seeing some interest globally. Hanwha Ocean, a major Korean shipbuilder, has bought and invested in a shipyard in Philadelphia. They are talking about increasing its productivity by a factor of 10, which would bring it to the level of an internationally competitive shipyard. Although the shipyard is owned by a foreign company, the ships could be built, crewed, and flagged in the United States.
The U.S. still doesn’t build a lot of the components that go in and on ships, so it currently costs more to import the parts than to buy a finished ship from Asia. Building that supply chain will require careful strategy. We need to decide which parts to build domestically versus import. We can also update our ship design philosophy to accommodate scalability. For example, we could ensure that new ships require the same or similar components to encourage their mass production. We could also design ships to align the shipbuilding supply chain with other industries that have been more successful in America, such as the offshore energy and auto industries.
We also need to think about how we’re going to staff the shipyards. We need to both make these manufacturing jobs desirable, and find ways to offset labor shortages with automation.
Right now, the Jones Act requires that all American ships have American sailors, but being a mariner can be a very difficult job and the Jones Act fleet is very small. There aren’t enough sailors to expand our fleet rapidly. The Ships for America Act proposed extensive investment in the federal and state maritime academies to increase the supply of U.S. sailors.
I see U-M taking a leading role in supporting U.S. shipbuilding. Our department of naval architecture and marine engineering is unique among R1 universities, and we also have a department of industrial and operations engineering that is world class in terms of supply chain analysis. We have top experts in assembly, manufacturing, robotics, and automation—all with long careers working with the automotive industry. We can also tap knowledge in the Ford School of Public Policy and the Ross School of Business. This puts us in a strong position to help determine the best way to ramp up the supply chain and manufacturing infrastructure needed for shipbuilding.
We are also uniquely positioned to adapt new technologies for the marine world—particularly for nuclear reactors. The U.S. is still a global leader in nuclear power, and U-M has the country’s No. 1 ranked nuclear engineering department. If we can incorporate this technology into commercial ships, we can not just catch up to other nations, but get ahead of the curve.
We can also help in shipbuilding education. As a nation, we aren’t producing anywhere near the number of naval architects and marine engineers required. We can think about setting up new degree programs that link naval architecture with robotics, manufacturing, computer science, business, and policy. We can also partner with community colleges, who are already revamping their welding and skilled trades programs with support from the state’s Michigan Maritime Manufacturing program.
The final way we can help is by serving as an incubator for new technology demonstrations. Because the maritime industry is so capital intensive, it’s hard for people to take risks and start new companies. I’d love for U-M to make it efficient for tech start-ups to come and get data and experience in the marine industry, without carrying all of the costs. We could potentially create or support land-based test beds for new technology, as well as marine test beds in the Great Lakes. It could be modeled after the LIFT center, which U-M helped establish around a decade ago in Detroit to test ways to produce and use advanced lightweight metals in railways, cars, trucks, and airplanes.
We’ve seen the shipbuilding industry take off in other countries. There’s no reason to think it can’t happen here, if we’re smart about it.
