Staying afloat in wake of peace; Defense: A Connecticut submarine builder streamlines its operation to survive the end of the Cold War and celebrate 100 years in business.


GROTON, Conn. -- Whenever submarines set off from the U.S. Naval Base here, workers at the Electric Boat Co. pause to watch their handiwork head out to sea. From its vantage point along the Thames River, the company has a good view of the path ahead, as designers and builders plan the submarines of the future.

That future has been on employees' minds more than usual during the past eight years.

Behind jubilant centennial celebrations last year and the anticipation of the 100th anniversary of the Navy's submarine fleet this year rests a sense of relief and satisfaction that the company has weathered the fallout of the peace dividend.

"At the end of World War II," says company president Jack Welch, "everybody declared victory and went home, whereas at the end of the Cold War, we knew the threat had been reduced dramatically, but there was no real celebration. It just sort of ended."

And the budgets came down.

Some wondered whether Electric Boat, the country's leading submarine manufacturer, would survive to see its centennial. In 1992 the Navy canceled the Seawolf-class sub, cutting its order from 29 vessels to three. Over several years, the company slashed its work force from 22,000 to about 9,000.

But it also tapped into new technologies and created an organizational structure based on a concept known as "design-build," incorporating all phases of the work from design to at-sea operation. The results are not only the sophisticated Virginia class -- the first submarine entirely designed by computer -- but also a company that officials believe is more efficient.

Founded by John P. Holland in 1899, Electric Boat showed persistence right from the start. When the Navy initially refused to buy the submarine Holland, company president Isaac L. Rice brought the ship for a public demonstration on the Potomac River. The Navy changed its mind.

Changing fortunes

During ensuing decades, the company's fortunes rose and dove repeatedly on the waves of events. After producing submarines for Britain, Russia, Italy and the United States during World War I, Electric Boat survived a 13-year lull in Navy orders by making smaller crafts such as yachts and appliances such as sewing machines.

After World War II, business dropped again, by 70 percent. Production picked up in 1951, when the Navy signed a contract for 21 nuclear submarines, beginning with the Nautilus.

Nuclear technology was a promising new world to Herbert Berry, a junior engineer who became vice president for engineering. "I knew what a submarine was," he says. "I didn't quite know what nuclear was."

The very nature of nuclear submarines compounded the task of sifting through details and what-ifs to avoid mistakes. "You're always faced with the potential of a casualty," says Berry, now retired. "That was the challenge of the time. This thing has got to come and go, and do it in a safe manner."

When the downsizing of the 1990s came, the company decided to hang on by streamlining existing processes and relying on technological superiority, rather than diversify into increasingly competitive fields. Existing orders offered a grace period of several years.

Officials at first hoped to reduce the work force through attrition, but it became clear that this would not be enough. So the company tried to make the layoffs as gentle as possible. It gave downsized employees 60 days notice and allowed them to use the company's career center, even after they were off the payroll. As a result, company officials say, there were no attempts at sabotage or other anti-company activities.

Employees who remained felt the changes as well. "We knew we had to create an environment that was much different than when we were building four submarines a year," Welch says. "You had so much work to do, you basically broke the work up in manageable chunks and then went out and managed the heck out of it." At low rates of production, he says, "the people were going to have to be much more flexible and be able to work multiple jobs."

Modular design

The result, Welch says, was a more cost-effective product. While the discontinued Seawolf-class subs carried a price tag of nearly $2.5 billion, the first Virginia submarine will cost about $1.6 billion. Its modular design allows technological advances to be built into later submarines in the class and retrofitted into earlier ones.

"So instead of being a class of 30 ships that all look alike, my guess is it will go through three or four different versions of that platform," Welch says.

Electric Boat has also forged ties with competitors, a growing trend in the defense industry. Work on the Virginia-class sub is being shared with the Newport News shipyard. The company is also working with Bath Iron Works in Bath, Maine -- both companies are subsidiaries of General Dynamics -- to develop an advanced electric-drive system for submarine and surface fleets.

"You can gain by using the best capabilities of a couple yards instead of the government having to [facilitate] this capability in each shipyard," says Jim Yorgenson, Electric Boat's manager for integration construction operations.

Welch, who joined General Dynamics in 1989 before becoming Electric Boat's president in 1995, is a graduate of Mount St. Joseph and the Naval Academy. He served for seven years in the submarine force, which he says gives him a personal attachment to the program.

"I had a very good appreciation for the role that submarines played during the Cold War," he says. "I knew that firsthand, and the chance to get involved to provide a better product to the sailors that were out on the front line, it was pretty easy to get pumped up on that."

Downsizing at Electric Boat was just one of several hits suffered by Connecticut, which lost at least 16,000 defense jobs during the 1990s -- including job cuts at Sikorsky Aircraft and the closure of the Allied-Signal plant in Stratford. Only lately has the state rebounded from a decade-long recession.

Other developments helped balance some of the losses. Casinos opened by the Pequot and Mohegan tribes in nearby towns offered job opportunities, while other companies expanded their presence in the area. Pfizer Central Research, for example, sits on the site of the former Victory Shipyards built by the Navy during World War II, and a new research and development building is rising across the river.

In the changing world of defense strategy, Electric Boat continues to count on submarines playing a key role. A recent government report suggested that the country should increase its submarine fleet.

Cautious optimism

"We're playing it cautiously optimistic," says company spokesman Neil Ruenzel, noting that actual orders stimulated by the report could be years away.

Cmdr. James Taylor, chairman of the Navy's Submarine Centennial events, expects smaller countries to turn to submarines -- perhaps equipped with missiles -- as they try to get their toes in the water.

"There are more requirements than there were at the end of the Cold War," Taylor says. "The best thing to counter another submarine is another submarine."

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