In May 1908, Congress approved $3 million for the establishment of what is now known as the Pearl Harbor Naval Shipyard as a coaling and repair station.

Suffering the devastating blows of Dec. 7, 1941, the shipyard and its workers pulled together and put 15 of 18 damaged ships back into service to fight again.

As the historic yard and the state's largest industrial employer looks ahead to celebrating its first hundred years, it's also planning a major retooling to survive the next 100.

A 2005 closure scare, excess ship repair capabilities, greater competition for work among the Navy's four yards, and shrinking budgets have prompted the shipyard to start renovating.

A long-term master plan for modernizing the shipyard and its World War I and II infrastructure is taking shape. Hundreds of millions of dollars in improvements will be sought by 2030 to keep the shipyard competitive.

The shipyard's storied history, however, is proving to be a challenge for the future. Separately, a 2007 budget anomaly means that this year it won't be getting $22 million for the start of some of those needed repairs.

WHAT'S AT RISK

At stake, ultimately, are 4,800 jobs and a shipyard with a strategic seven-day sailing advantage over West Coast brethren in operating and maintaining fleet assets.

"Revitalizing the core of the shipyard is a vital imperative for improving efficiency and ensuring we have the requisite infrastructure for meeting the current and future mission requirements of the Pacific Fleet," the Navy said.

Most of the buildings within the core of the shipyard and around four drydocks were built during World War I or II, and the classes of ships and many of the functions the buildings were built to support no longer exist, the Navy said.

The original power plant, foundry and forge shops are vacant and obsolete, but they remain front and center on important waterfront real estate.

The Navy said the buildings and others make up 300,000 square feet of unusable space, but they are part of a larger National Historic Landmark, and as such, require a rigorous historic preservation review before changes are made or demolitions take place.

The deteriorated condition and wrong size make them unacceptable for modernization, the Navy said.

"We are working closely with our historic partners, but this is a shipyard, not a museum," said Kerry Gershaneck, congressional and public affairs officer for the Pearl Harbor Naval Shipyard.

"Our mission is to keep the Pacific Fleet fit to fight, and to do this we need state-of-the-art facilities and technology," Gershaneck said. "We will do what we can to preserve the skyline, but we also will do what it takes to keep our fleet combat-ready."

BUDGET SETBACKS

Congress failed to pass a 2007 military construction bill in the change of leadership that came with the November elections, and instead chose to continue 2006 funding levels. It also threw out funding earmarks for specific projects, meaning $22 million in renovation funds for drydocks 1 and 2 at the shipyard went with it.

Those funds are being sought again in the president's 2008 defense budget, but master plan money to renovate is being sought sequentially, and the budget loss is an early setback to the rebuilding plan.

"That was the No. 1 priority as determined by the shipyard," said Charlie Ota, vice president for military affairs with the Chamber of Commerce of Hawai'i.

In the 2008 budget, $14.6 million is being requested for the construction of a production services support building close to the primary drydocks, another improvement in the renovation plan.

As the state's largest industrial employer, with operations and maintenance running at about $550 million annually, the shipyard always is high on the chamber's radar.

Negotiations are under way on historic preservation, but the improvements on drydocks 1 and 2 — including installing high- and low-pressure gas systems to do away with temporary equipment — are seen as work that can be done without any conflict with historic buildings.

The failure to obtain the funds represents at minimum a one-year setback in a long-term plan, but Ota noted the urgency to move ahead with shipyard renovations.

Portsmouth Naval Shipyard in Kittery, Maine — Pearl Harbor's greatest competitor — has been modernizing its infrastructure for years, he said.

"So they are ahead of the curve, if you will, whereas Pearl Harbor has remained way back," Ota said. "It's still got World War II infrastructure. That creates problems in terms of efficiencies."

Even though they have somewhat different assignments, Pearl and Portsmouth were compared in a 2005 round of military base closures by the Base Realignment and Closure Commission.

The Pentagon had considered closing one of the shipyards — setting off alarm bells in Hawai'i and prompting the renovation plan now being pursued after the commission came up two votes short of including Pearl on the list for possible closure.

Closing Portsmouth was recommended but also rejected.

A commission report said there was sufficient excess capacity across the four yards to close either Pearl Harbor or Portsmouth.

"Naval Shipyard Pearl Harbor is less efficient than Naval Shipyard Portsmouth," the report stated.

WORKLOAD REDUCTION

The chairman of the base closure commission, Anthony J. Principi, said at the time, "I think cost and efficiency and quality are important issues, but the Navy has made a compelling argument that Pearl's strategic location is very, very important."

Still, the excess repair capacity has resulted in a 10 percent workload reduction at Pearl Harbor, and the longer term worry is that the work could be significantly cut back, officials said.

About 30 percent of the shipyard's work is "fast response" work, and 90 percent of that work is on submarines. A shipyard official said Pearl Harbor is the largest submarine home port in the U.S. with 17 Los Angeles-class attack submarines.

The USS Hawai'i will be the first of the new Virginia-class submarines to be home-ported at Pearl Harbor when it arrives permanently in 2009, and the shipyard is gearing up for that work, as well as work on new littoral combat ships.

Reactor refueling and overhaul of the aging Los Angeles-class subs — which can take two years — is coming to an end, but during an August visit to Hawai'i, Navy Secretary Donald Winter said a lot of maintenance work remains to be done.

"There still is a very good workload requirement there," he said. "It's not a precipitous decline."

He also added that the base realignment and closure was "history" as far as he was concerned, and that "we are committed to maintaining (Pearl Harbor shipyard)."

Winter said what was needed at Pearl was a look at processes "to make sure that work flows are efficient."

The shipyard points to recent success with the submarine USS City of Corpus Christi and the completion of a maintenance cycle in late December.

This project was completed six days early and under budget, to the great pride of the shipyard. But it also took an extraordinary effort that has to be performed consistently, officials acknowledge, and shipyard modernization will help improve efficiency.

Matt Hamilton, president of the Hawai'i Federal Employees Metal Trades Council, the bargaining agent for 15 labor organizations at the shipyard, said workers went through a lot of soul-searching after the base realignment scare.

"We do a really good job, but we come out looking so bad," he said.

Part of the problem was that if extra work was discovered, it was done, but it delayed the expected completion, he said. Now that extra work has to be approved by the chief engineer, and that way, shipyard workers get credit for it.

A system now is in place for workers to pass up recommendations to improve efficiency, he added.

Philip Coyle III, a defense analyst with the Center for Defense Information who was on the base realignment commission, said Pearl Harbor shipyard's greatest asset is its strategic location in the Pacific.

The outlook for the shipyard is generally positive, he said, with the Navy putting more ships in the Pacific. The Navy also is under a lot of pressure to reduce its budget and operate more efficiently.

"The Navy is capable of making some pretty draconian decisions when they really get pushed, so I don't think Pearl Harbor should take its position for granted," Coyle said. "The main thing is make it be a place that rivals the other shipyards in efficiency."

Reach William Cole at wcole@honoluluadvertiser.com.