Amid program delays and cost increases in the most recent financial quarter, shipbuilder HII is pivoting to a different hiring method by focusing on recruitment of experienced employees rather than a green workforce.
The company will “focus on more experienced labor, because we're just out of alignment or out of balance from an experience level right now, which leads to rework, which leads to inefficiency, and it's not good for anyone, so we're repositioning that a bit, which I don't consider that slowing down, I consider that investing in the workforce so that you're more efficient, and really aligning,” HII CEO Chris Kastner said today during the company’s third quarter earnings call with investors.
This repositioning on labor follows a trend of little improvement in worker attrition within the company, which Kastner discussed at the last earnings call -- saying at the time that productivity was still not at pre-pandemic levels.
Today’s call marked a departure from Kastner’s optimistic outlook earlier in the year, when he discussed pilot programs HII was using with Navy participation to direct incentives toward workers in shipbuilding.
“We’ve done it before, we’ve fixed labor before -- after Hurricane Katrina we built a workforce down in Mississippi, so we know how to do this,” Kastner said in May.
There have been several attempts to boost hiring and workforce development, and in February, the Navy announced it was directing $50 million to various initiatives at Bath Iron Works and HII shipyards.
Aside from workforce woes, HII faced backlash last month when news emerged of faulty welds on Navy submarines and aircraft carriers at Newport News Shipbuilding.
HII confirmed at the time via internal reporting that although some welders “knowingly circumvented certain welding procedures,” there was no indication of malicious intent in the initial investigation.
“During the quarter, some welder issues were reported publicly that we had previously disclosed to our customer,” Chief Financial Officer Tom Stiehle told investors today. “An initial assessment at Newport News Shipbuilding determined that fewer than two dozen welders did not consistently follow procedures in their weld process. We continue to work alongside the Navy through a comprehensive investigation and analysis to determine the extent of any financial impact.”
The company’s third quarter revenues were $2.7 billion -- down 2.4 percent from last year’s third quarter.
New contract awards were $3.6 billion, bringing HII’s total backlog to approximately $49.4 billion. Among the major awards in the third quarter was $565 million -- part of the Navy’s multi-ship amphibious deal announced in September.
HII is dealing with two main issues that affected its performance this quarter: uncertainty in the timing of an agreement for Virginia-class Block V and VI and Columbia-class submarines, and late critical material deliveries, along with the lower experience levels throughout the shipyards’ workforce.
“While we remain confident that we will ultimately receive the new contract awards, we are now uncertain of the timing and whether the overall contracting construct of those awards will enable full pursuit of near-term key investments needed to accelerate performance, rate and volume of the Newport News portfolio contracts,” Kastner said today.
The contract will unlock investments in labor, infrastructure and technology, Kastner added, saying that when it is eventually executed, “it’s going to be a fair and equitable contract.”