00:00Thank you very much. As I indicated in my opening statement, shipbuilding, as you know,
00:09enjoys strong bipartisan support. And I'm perplexed as to why the budget request would
00:18move $25 billion in shipbuilding over into reconciliation, where you have a cliff at
00:28some point. The cliff, of course, could become too soon. And why, Mr. Secretary, in your view,
00:38is the shipbuilding, $25 billion, not still in the base request?
00:48Thank you, Chairman, for the question. I know it's an important one to you. And I appreciate
00:53spending time with you recently. Look, the Department of the Navy supports a solution
00:58that provides consistent additional funding for the Navy and the Marine Corps to meet the
01:05challenges that we need. I think at the end of the day, we're going to need both the mandatory
01:10and discretionary funding to operate in fiscal year 26. So we call it one budget, two bills.
01:17We need both in order to operate and meet our objectives. Every program we have is extremely
01:25important. One of the tough things, as I said in my opening statement, this readiness challenge is
01:31how I have to optimally allocate capital. Because, look, the bad news is, we have underinvested in the
01:39U.S. Navy for a long time in our infrastructure, in our programs, in the shipbuilding maritime industrial
01:47base. And those bills are all coming due. We have deferred them in multiple ways. We've maintained
01:53ships at 50 percent maintenance levels. And you should not do that. We have done that. And they're
02:01all coming at the same time. So it is a big challenge that we're dealing with. But to answer your question,
02:08Senator, we're going to need both in order to meet our objectives.
02:15Let's switch to AUKUS. The Congress, on a bipartisan basis, has approved it. The Australians are
02:24contributing billions of dollars to the initiative. Could you explain why the department would signal to
02:32our closest partners, the Brits and the Aussies, that we're considering pulling the plug on the whole
02:40thing? What kind of message, excuse me, what kind of message are we sending to the very allies and
02:49partners we expect to fight side by side with us in the Indo-Pacific?
02:55Thank you. Thank you, Chairman, for the question. Australia and the UK are our most enduring allies
03:04and very important allies, in particular in the Indo-Pacific. I think, just like the British,
03:12you know, a new administration came in. They are reviewing that agreement. And that is what the
03:19current administration is doing. Our new administration is we're taking a look at the agreement,
03:23trying to understand it completely thoroughly. And I look forward to posting you after that review is
03:32done. But I don't think we are signaling in any way, shape or form that we are not committed. I think
03:38the president recently talked about the importance with the British prime minister. They're very
03:43important allies. This is an important treaty. I think we just want to make sure that it makes sense.
03:49And so it's just being reviewed. And I can, Admiral Kilby can elaborate on some of the things we've been doing
03:56with the Australians and the British as well.
04:00Well, I'm sorry.
04:04Just to add to what Secretary Phelan said, we are doing significant work with the Australians as far as
04:10the repair capability. They're embarked on our ships right now and training with us from an operational
04:16perspective. And they're in Pearl Harbor's naval shipyard. And we've just sent our first folks over
04:22to SRF West Sterling to stand up that base there. So those are some of the practical improvements that
04:28have happened over the last year.
04:31I've got one more question, then we'll turn this into shots. We need more munitions, air defense
04:39interceptors, long-range fires, artillery. Recent conflicts tell us we need a lot more of them.
04:49Recent experience tells us our industry isn't producing them fast enough.
04:55So, how are the Navy and Marine Corps addressing this challenge? Does the Navy's budget fully utilize the
05:03production capacity of the defense industrial base?
05:10Thank you again, Senator, for that question. A very important one. Look, fully funding our munitions
05:16industrial base is essential, both for the near term and the future. As I think Admiral Kilby mentioned
05:23in his opening statement, we're looking at a number of different avenues, including other parties and
05:30different ways of making some of these munitions. This is a huge priority from both the Secretary of Defense
05:37and the President. And we are putting as much effort and time into this as we are on shipbuilding. So it is
05:45critical. I look forward to coming back to you with some of the ideas and suggestions we have. But your point is
05:53absolutely well taken. It's something we need to focus on and get fixed.
05:58Senator Schatz.
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