The world shipbuilding industry is currently enjoying a strong upturn, according to Research and Markets. European production has increased as the nation fends off the new kids on the shipbuilding block — the Chinese. And while U.S. shipbuilding remains plagued by cost overruns and schedule delays, there are signs of progress.

Over the past 20 years, production in the European shipbuilding industry has increased by more than 40 percent. The challenge for Europe is the new competition from Asia — especially China, as China’s shipbuilding industry is preparing to boost efforts over the next five to 10 years in order to enter the elite club of independent mainstream shipbuilders. In recent years, China has boosted shipbuilding output by more than 40 percent a year. In the period 2002-2005, China quadrupled capacity from 3.5 million to 12 million deadweight tons (dwt).

U.S. Navy shipbuilding, however, has long been plagued by billions of dollars of cost overruns and lengthy, schedule delays, Reuters recently reported.

Yet acquisition chief Delores Etter says she sees encouraging signs of progress.

Etter, a former Naval Academy electrical engineering professor, said both the Navy and U.S. shipbuilders have begun making changes that should lead to improvements. Etter said Navy officials were working with U.S. lawmakers to move toward greater funding stability for domestic shipbuilding. Frustrated by chronic cost overruns, and keen to maintain well-paying jobs in their home districts, lawmakers have recently tweaked Navy budget plans, adding ships, delaying ships and blocking plans to have just one shipyard build a ship.

Cost growth has been around 27 percent for first-in-class ships, the Government Accountability Office said in a March report. Budget pressures are escalating throughout the Pentagon.

Over the next few years, Mississippi’s shipbuilding industry should see its share of the defense spending bill passed by federal lawmakers late last month, according to the Biloxi Sun Herald. About $2.6 billion of the $447.6 billion defense appropriations bill approved by Congress in September is earmarked for construction of two naval destroyers.

Ingalls Shipyard will build one of the naval destroyers and parts of the other. Northrop Grumman, the largest manufacturing employer in Mississippi and Louisiana, has teamed with Bath Iron Works in Maine in designing and building destroyers. Preliminary construction of a keel (i.e., a large structure that facilitates building of the ship itself) should begin at Ingalls in 2008, said Northrop Grumman Ship Systems Sector Director Brian Cullin. He also mentioned a new reward and incentive program to attract new workers and retain current employees.

A total of $10.6 billion of defense funding will go toward shipbuilding in fiscal 2007.

Since taking office in November 2005, Etter has gotten tough with companies reporting cost overruns. For instance, she forced Textron Inc.’s Bell Helicopter to revamp its management processes to keep an $8 billion upgrade program.

Recently she traveled with two House lawmakers (Republican Rep. Roscoe Bartlett of Maryland and Democratic Rep. Gene Taylor of Mississippi) to most U.S. military shipyards, and said she was impressed with some changes under way.

For instance, shipyards have begun focusing on how to more efficiently put together ships’ pieces, including a move to building mega-blocks inside buildings, safe from weather conditions that can slow down work outside.

Interestingly, General Dynamics Corp.‘s NASSCO shipyard in San Diego had been traveling to Asia and Europe to gather ideas for trimming cost in the U.S. (Perhaps something U.S. automakers should consider doing?) Northrop Grumman Corp. has also been making improvements to streamline production as it rebuilds Gulf Coast shipyards damaged by Hurricane Katrina last year, Etter said.

Etter said moves to a more open architecture of missions systems — the systems that control how the warship operates and fights — would make it easier for competing companies to develop parts of the software and plug into the basic design.

“There are lots of challenges,” Etter told Reuters. “We don’t have a very good track record.”