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Recognizing the problems associated with the downturn of defense spending, Congress has created a program designed to assist firms in the transition from a defense to a commercial/ defense sales base. This program will provide substantial financial assistance to U.S. companies, including shipbuilders, ship repair firms, marine equipment manufacturers and other suppliers to the marine industry.

DEFENSE CONVERSION PROGRAM A major initiative has recently been enacted to assist U.S. companies in adjusting to the downsizing defense budget.

The Defense Conversion, Reinvestment, and Transition Assistance Act of 1992 is intended to promote commercial activities with strong growth potential, which creates jobs and utilizes the existing defense industrial base.

Development of commercial products which create a dual use for defense facilities is the objective. More than $1.2 billion has already been appropriated for defense conversion assistance, and plans call for substantial additional funds to be included in the defense budget over the next several years.

According to Congressional sources, a major thrust will be the creation of partnerships.

SEMATECH has repeatedly been cited as an example of a partnership that has well-served the electronics industry.

It has been suggested that shipbuilders, marine suppliers and others in the industry form such a partnership. It has also been suggested that partnerships involving commercial and government-owned facilities would be particularly interesting. Projects in the defense conversion area must be cost-shared, with maximum government involvement set at 50 percent. The purpose is to ensure that projects have commercial potential by requiring participating companies to contribute to the funding.

Ideas developed under cost-sharing defense conversion work will belong to industry. The DOD will not own any intellectual rights to technology. However, DOD will have the right to use the technology for its own purposes.

NATIONAL SHIPBUILDING INITIATIVE A major component of the defense conversion program is the National Shipbuilding Initiative, which was recently unveiled at an industry seminar on defense conversion. The idea is to create a National Maritime Center which would effectively "wire together shipyard and vendors." U.S. companies would jointly develop new technology and share breakthroughs, which would help them to be more competitive in the world market.

Projects with immediate results are desired.

It was pointed out at the seminar that despite an international shipbuilding boom on the international market, the U.S., to this point, has not been involved.

Factors such as the world fleet replacement of cruise ships, vehicle carriers and tankers, as well as the new market opportunities with LNG ships, refrigeration ships and fast ferries, coupled with MARPOL and OPA 90, have created an incredible demand for new vessels.

The U.S. builders have not been involved because of, among other reasons, agressive foreign government/ industry investment strategies, delays in replacement of Jones Act tankers and little U.S. Government investment.

Thus, the goals of the National Shipbuilding Initiative, as stated at the recent seminar, are to: (1) Create 250,000 jobs (2) Capture 10 percent of the world shipbuilding market (3) Create high-paying jobs, minimum $15/hr.

(4) Involve all 50 states (5) Create products which can be exported.

(Please see Exhibit 1) Plans call for $2.2 billion of defense conversion funds to be earmarked for the National Shipbuilding Initiative over the next eight years.

The action plan for spending the $2.2 billion, which is illustrated in exhibit 2, calls for $185 million spent over the next two years to firm up the plan, make broad area agency announcments, conduct a nation workshop and begin fast track progams.

Starting in 1995, when government input would hit $300 million for the year, such phases as long term contracts, the installation of transition projects, and the establishment of a maritime center would begin. From there, 1996 through 1999 represent the most active years, as $400 million is slated to be spent in each of those four years to kick the program into high gear.

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