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programs. These commercial practices, combined with quantity

production would drive down the cost of naval ships.

The lease payments from U.S. operators would be deposited into

the National Defense Sealift Fund of DOD to defray the up-front

acquisition of MSP eligible ships. The contractual terms and conditions

of the voluntary intermodal sealift agreement of DOD would still apply

to U.S. operators participating in the program.

A renewal of the existing MSP, under its existing construct or MSP

shipowner proposed changes, would place the Department of Defense at

the mercy of foreign shipowners to take whatever ship types those

owners make available to DOD - regardless of their military utility.

This was the case when the MSP program was enacted in 1996,

and MSP owners have already indicated that they plan to bring 5,000

TEU containerships into a reauthorized program. While TRANSCOM

may question the military usefulness of such large containerships, they

will have no say in the matter.

DOD has normally needed ships that can enter a majority of the

world's ports, rather than just those few that can handle extra large

ships. DOD has also wanted increased flexibility by having ships that

can transit the Panama Canal. Maybe TRANSCOM will determine that

it requires some very large ships, but TRANSCOM should at least have

a say in the decision.

DOD also requires car carriers, or Ro/Ro's. However, neither

Maersk nor Neptune Orient Lines, for example, own any Ro/Ro's

participating in the MSP program today.

TRANSCOM has a requirement for tankers. Yet, there are no

tankers in the MSP program.

The mix of ships that TRANSCOM needs, while still ensuring a

competitive commercial market for these ships, will be achieved under

the program we propose.

I recognize that there needs to be a balance between military

usefulness and commercial viability, because these ships will have to

compete in the international commercial shipping business in peacetime.

I am confident that this balance can be struck.

In closing, let me emphasize that our industry supports an

enhanced Maritime Security Program. We support a 20-year annual per

ship operating subsidy to offset the higher costs associated with U.S.

merchant mariners and doing business under the laws of the United

States. But a program that does not provide for a fleet of American-built

ships with military utility, under the ownership and control of America,

fails to meet the sovereign security requirements of the United States. A

program that lacks these critical elements cannot be called a Maritime

Security Program.

Will the program we propose increase the price? Yes. However,

95 percent of all military cargo and supplies for our forward deployed

troops will continue to have to go by sea. Given this indisputable fact,

this is a small price, which America can no longer ignore if the U.S.

needs a merchant marine and supporting shipbuilding industry.

Thank you.

The American Shipbuilding Association has received no grants

from nor contracts with the Federal Government during the past three

years, nor has it ever.

Mr. Vortmann's curriculum vitae is attached.

NASSCO

A GENERAL DYNAMICS COMPANY

2798 East Harbor Drive
San Diego, CA 92113
Tel 619 544- 3400

Biography

Richard H. Vortmann
Vice President, General Dynamics and President,
National Steel and Shipbuilding Company (NASSCO)

Richard H. Vortmann became a vice president of General Dynamics in November 1998 when the corporation acquired National Steel and Shipbuilding Company (NASSCO) based in San Diego, California.

Vortmann, for the prior ten years, had been chairman, president and chief executive officer of NASSCO, which was an employee-owned business prior to the acquisition.

Vortmann began his career in 1969, serving in various financial management and strategic planning positions with Kaiser Industries Corporation, then part owner of NASSCO. He joined NASSCO in 1976 as vice president of finance and information systems. He later served as the shipyard's vice president of production before becoming executive vice president of operations in 1980. He became president of NASSCO in 1984. From 1986 to 1988, he also served as Chairman of the Board of Emkey Development, a real estate development subsidiary of Morrison Knudsen Corporation, which was then NASSCO's parent company. From 1987 to 1988, he was a member of the board of Morrison Knudsen. In 1988, he led the management-ESOP purchase of NASSCO.

Vortmann is currently Chairman of the American Shipbuilding Association, a council member of the American Bureau of Shipping, and the Chairman of the American delegation to the annual Japanese, European, Korean, United States Shipbuilding Conference. He currently is serving on the Mayor's Blue Ribbon Committee on City Finances. He has previously served as chairman of the Shipbuilders Council of America and as a director of the Greater San Diego Chamber of Commerce.

Vortmann was born in San Francisco, California on April 11, 1944. He earned a bachelor's degree in finance in 1966 and a master's degree in business administration in 1967 from the University of California, Berkeley. He taught on the Business School faculty of his alma mater from 1967 to 1969.

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