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Tuesday, Sep 27, 2022

Contractors Prepare for Worst When Budget Cuts Hit

Claudio Rivas is looking at the prospect of layoffs. He may have to let the majority of his workers go because of impending federal budget cuts.

Rivas is president and owner of Universal Steel Fabrication in National City, which does 90 percent of its business with the U.S. Navy. It does structural welding repairs on ships.

Finding itself four months into the federal fiscal year and facing a lower than expected budget, the Navy is slashing its operation and maintenance spending. Among other things, it plans to cancel 10 ship repair projects in San Diego. Most of the work would be on destroyers.

Along San Diego’s waterfront, an estimated 4,000 to 5,000 people could lose their jobs in the ship repair industry, according to the San Diego Military Advisory Council, or SDMAC. An additional 1,600 civilian jobs outside of ship repair — including jobs in the temporary industry — could also be lost, said the organization, which brings businesses and the military together to discuss issues of mutual importance.

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The uncertainty of the federal budget situation is weighing on local defense executives, reported Larry Blumberg, SDMAC’s executive director.

Cuts will affect the major ship repair yards as well as their subcontractors, Blumberg said. “Most of them are kind of mom-and-pop operations,” he said.

The Navy’s top officer, Adm. Jonathan Greenert, says the budget cuts are reversible. To reverse them, however, leaders in Washington will have to take action.

As part of its effort to cut expenses, the Navy also plans to cut aircraft maintenance. And three Navy construction projects in San Diego could be delayed by the budget troubles.

They are a $76 million barracks project in Coronado, a $59 million center to train crews of the Navy’s new littoral combat ships at Naval Station San Diego, as well as a $2.5 million helicopter simulation facility set to be built in Coronado.

Spectrum of Players Affected

The biggest players in San Diego’s ship repair community are General Dynamics Nassco, BAE Systems and Continental Maritime, a unit of Huntington Ingalls Industries.

There are many smaller players, such as Universal Steel Fabrication.

Roughly half of the business’ employees work aboard Navy ships. The business repairs corroded parts of a ship’s superstructure. Universal crews remove the bad piece, weld on new steel, prime and paint the new material, and otherwise get it ready for service. The business works with steel panels between one-quarter inch and 1 inch thick.

Universal employs 54 people. Rivas said he may need to let at least half of those employees go by the middle of February. Another wave of layoffs would come by the first week of March, leaving the business with six employees, Rivas said.

The family-owned business has been in existence since 1991.

Rivas said he agrees with SDMAC that Congress is making a “big mistake” by their handling of the federal budget situation.

“SDMAC sincerely hopes that the administration, the House of Representatives and the Senate will return to the principles and processes of reasoned debate, compromise, and legislative action for the common good, to resolve these issues,” SDMAC said in a statement.

Congress has yet to pass key budget legislation for 2013. The government is running on a “continuing resolution,” meaning that spending cannot exceed fiscal 2012 levels, and that the government may not start new programs.

On the horizon are across-the-board budget cuts of roughly 10 percent, which would go into effect in March if Congress and the White House can’t strike a deal on the budget and the federal government’s handling of the deficit.

The maximum budget cuts will cancel appearances by the Blue Angels, the U.S. Navy flight team, at air shows, including the show at Marine Corps Air Station Miramar. They could also mean as many as 22 furlough days for Navy civilian employees.


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