(FORTUNE Magazine) – It's the most technologically challenging, toughest-to-manufacture product. It delivers more striking power than the combined navy and air forces of most nations. It's the nuclear-powered, Nimitz-class, U.S. Navy aircraft carrier. Eight patrol the oceans of the world. The ninth, the U.S.S. Ronald Reagan (shown below), is nearing completion at Newport News Shipbuilding, the world's only maker of full-sized aircraft carriers, nuclear or otherwise. The yard's 550 acres of sheds, cranes, dry docks, piers, and century-old brick buildings sprawl 2 1/2 miles along Virginia's James River near the mouth of Chesapeake Bay.

The Reagan and its sister ships measure a fifth of a mile from bow to stern, have 4 1/2 acres of flight deck, and can knife through the seas at better than 30 knots--or 35 mph. With 50 fighters, currently F-14 Tomcats and F/A-18 Hornets, plus another 20 or so support aircraft, just one ship is a lethal "forward presence" that has become more so with the advent of smart weapons. Says Rear Admiral Roland Knapp, whose Naval Sea Systems Command office in the Washington Navy Yard is responsible for building and maintaining carriers: "In Desert Storm we were putting four to six aircraft on a target. In Afghanistan it's one aircraft hitting four to six targets."

Putting together an aircraft carrier is like no other manufacturing task, past or present. Each ship costs more than $4 billion, with some 80% of that going to the yard and the rest spent on Navy-supplied components. The job involves 47,000 tons of precision-welded steel up to four inches thick, more than a million distinct parts, 900 miles of wire and cable, around 40 million skilled-worker hours, battalions of engineers, and over seven years of hard work. You think you have tough specs and demanding customers? The Navy expects carriers to dominate the seas for 50 years and come home only once for refueling.

When the Reagan is commissioned next May, 11 of America's 12 active-duty carriers will have come out of Newport News, including all nine of the Nimitz class. Named for the first one, the U.S.S. Nimitz, the class shares a design of hull, flight deck, propulsion system, and two nuclear reactors that heat the water that makes the steam that runs the turbines that spin the four 21-foot, 33-ton propellers.

Since the Nimitz joined the Navy in 1975, each carrier has incorporated new features ranging from the exotic to the mundane, from advanced radar and communications systems to quarters for women at sea. Lots of the modifications have been retrofitted onto earlier vessels, but no two are exact duplicates. And no two have been built exactly the same way by the company, now officially Northrop Grumman Newport News since it was acquired by the Los Angeles defense contractor last year for $2.6 billion. For the first time, parts of the Reagan were designed in 3-D on computers, built indoors, and trucked to the dry dock.

Many of the 17,800 employees of Newport News are from families that have worked in the yard for generations. Among them, says one manager, there is "a fierce identity with the company, a long and proud tradition." That tradition goes back to the yard's founding in 1886. In its first 100 years or so, the company built all kinds of warships. It also turned out plenty of cargo vessels, tankers, and passenger liners, but by the 1970s it and all U.S. shipbuilders were having trouble competing with foreign yards. Most eventually closed, but Newport News, which had become a Tenneco subsidiary in 1968, ignored the foreigners' advantages in subsidized steel and low wages, sent its managers out to scour for new equipment and new ways to build ships, and in 1994 solicited orders for double-hulled tankers.

To cut costs and speed production, the company overhauled its information technology systems, put up an 11-acre automatic welding plant, and extended its biggest dry dock so that it could simultaneously build a carrier and a tanker. By the time it had delivered six tankers, it had lost $300 million. That was the end of the commercial business. And of Tenneco's interest. In 1996, Newport News Shipbuilding was spun out as an independent public company.

By 2000 the number of U.S. shipbuilders had been reduced to three: Litton Industries, General Dynamics, and Newport News, which had $2.1 billion in revenues that year but earned only $90 million after taxes. In early 2001, Litton was gobbled up by Northrop Grumman. Almost immediately Newport News and General Dynamics posted banns. Northrop Grumman and the Justice Department each found cause to oppose the marriage. By the end of 2001, Newport News was part of Northrop.

Northrop got a company dependent on one customer, the U.S. Navy, and largely reliant on one product, aircraft carriers. There is some submarine construction business. The overhauling and upgrading of military ships is another source of revenue, with the biggest contracts for the one-time overhauling and refueling of a carrier when it is 25 years old--a job for which Newport News has no competitors. The Nimitz has already been back. The Eisenhower is now in for what is no mere pit stop but a 39-month, $1.5 billion project. When Ike sails out toward the end of 2004, Vinson sails in. Barring the improbable outbreak of world peace, it will continue that way--one out, one in.

One after another is also the likely schedule for new-carrier completions. After the recent demonstration of their effectiveness, there's little argument about whether the U.S. needs aircraft carriers. The question is how many. The Navy would like 15, not the current 12, but Congress remains unswayed, in part because a lot of power can already get to one place in a hurry. Soon after Sept. 11, four carriers were within bombing distance of Afghanistan.

The best Newport News can hope for, then, is to have a replacement ready as each existing carrier turns 50. For the next 16 years, that works out to three new ships after the Reagan, which is known as CVN-76. Its successor, the so far unnamed CVN-77, will be delivered in early 2008. Six years later the Navy gets the first of a new carrier class, now called CVNX. That ship, CVNX-1, will have a new reactor and propulsion system as well as electromagnetic rather than steam catapults. There won't be much change in the design of the hull and flight deck until the yard gets to CVNX-2, which won't be delivered until 2018.

Construction of the Reagan, from award of the contract in December 1994 to delivery next March, will have taken more than eight years. Newport News managers get a bit testy when reminded that big container ships or supertankers are assembled a lot more quickly. They respond that building strings of identical commercial ships is hardly the same as building aircraft carriers that differ in significant details from their predecessors, have tons of specialized, very exotic equipment, house munitions lockers and nuclear reactors in their bellies, and provide quarters for 6,000 people and galleys that turn out 18,000 meals a day even while the ship's at war.

The Reagan is the first of the Nimitz carriers with changes that can be spotted by civilians. It's a "modified repeat" of CVN-73, the George Washington, newest in the fleet when its design was frozen in 1994. "That's modified repeat with a big 'M' and a small 'r,'" says Richard Coleman, a project manager. Newport News and the Navy had already spent two years planning changes before construction got going. They came up with 1,362, including a bulbous bow to counter a tendency of Nimitz-class carriers to bury their nose in the waves at high speed, and a newly designed island, the structure rising at the side of the flight deck from which the ship is conned and flight operations are managed. The island, stretched 22 feet, now engulfs the radar tower, which is freestanding on the earlier ships.

The way the Reagan has been put together distinguishes it from its sisters. Computer-generated prints have gradually been replacing the ink drawings on Mylar used for the Nimitz and the other early members of the class. But the Reagan's island is the first big part of a carrier laid out in a three-dimensional computer-drafting program, eliminating the need for mockups. Before steel was welded, the Navy knew what the ship's compartments would look like and what it would be like to occupy them. On computer screens, manikins modeled as a short woman or a tall man walked the space and virtually operated and maintained equipment.

Practices have changed in the yard as well. The first carriers in the Nimitz class were largely hand-built by skilled craftsmen, and rose steel piece by steel piece in a dry dock. If it rained, work might stop till the dock was pumped out. Most of the pipes, ducts, and cable were run and the machinery was installed only after large sections of the structure were erected. But the Reagan was assembled out of huge prebuilt modules. The entire island was put together and largely outfitted indoors, then transported to the dry dock where the ship was taking form, hoisted up, and delicately lowered into position.

One aim in the redesign was to build now so there's less manpower and money spent later. The Navy will spend more than $28 billion over a carrier's life, some 70% of it for maintenance and manning. On the Reagan, the jet-blast deflectors that rise up behind a plane about to be catapulted into the air have been "hogged" out of a single block of aluminum rather than made with pieces joined by welds that corrode in salt air. On earlier ships, rails that guide the elevators that move two fighter jets at a time between the hangar and flight deck were bolted down. At sea, the rails can shift, creating a maintenance problem. On the Reagan they were optically aligned perfectly and welded into place permanently.

In early 1995 the first job in the construction schedule was to place contracts for long-lead-time equipment, including major reactor components for which the sole source is BWX Technologies in Lynchburg, Va. In the past some high-tech equipment ordered early was outdated by the time the ship got to sea. For the Reagan, says Commander Margaret Ann McCloskey, a deputy supervisor of shipbuilding, "we didn't want to tell the shipbuilder at day one what we think we'll want in seven years because of changes in, for example, the combat and electronic warfare systems. We said, 'Give us this much power in that space. This much air conditioning. Put these many racks in. Closer to the end, we'll tell you what we're going to slide in there.' " Sometimes it didn't quite slide. When a photo lab was delivered bigger than expected, a hole had to be cut in the deck.

The start of assembly in the dry dock--about three years into the Reagan schedule--is still called "keel laying," but there's no keel. Most of the bottom of a carrier is flat. The first parts brought to the dry dock are big chunks of the bottom section of the ship. Work on those started early in 1995, when workers began to cut steel and weld it into 2,200 subassemblies called Base A units. They were then combined into 772 "erectable" units that make up the entire carrier from bottom to top. Some went directly to the dry dock. Others were welded together into 69 "superlifts," huge modules outfitted with piping, ducts, cabling, and equipment before being lifted by crane into place. The heaviest, a machinery-laden section, nearly maxed out the huge 990-ton-capacity crane that towers 233 feet over the dry dock.

By late 1999 the critical equipment for the four catapults had been installed. Sometime in 2000, the 717-ton island was lowered into position. Christening was in March 2001, three years after the keel was laid, a period during which work was stalled by a 16-week strike. Nancy Reagan broke the champagne bottle, and the yard workers began the delicate two-week task of slowly filling the dock with water. As the Reagan began to float off its blocks, they checked hundreds of sea valves and moved loads around on the flight deck to balance the still uncompleted ship. Then, in the highest of spring tides, they watched carefully as the huge vessel slipped into the James, its bottom clearing the sill of the dock by about a foot.

Next came some 15 months at an outfitting berth parallel to the yard, the ship's flight deck cluttered with temporary sheds protecting work crews from the weather and sensitive equipment from the view of other nations' satellites. Near the end of that period, a CAT-scan cross-section of the ship would have looked like nothing so much as a child's ant farm, with welders, painters, electricians, electronic-device installers, and pipe fitters rattling up and down ladders, in and out of hundreds of partly completed compartments, and ducking down corridors strung with temporary cabling, work lights, air hoses, and blue lights that mark the shortest path to the upper decks and exits.

By this spring urgency was in the air. Systems were being tested, but some parts were missing. Others had failed after sitting for years. That's when you expedite, says Bob Gunter, the company's 45-year-old senior vice president in charge of carrier construction and overhaul. "The Navy's standing there. We're standing there. We have local shops and supply houses with open purchase orders. So we put a pickup truck down there by the ship and burn the wheels off the thing. We send a guy. He says what he needs. They bill us later."

Last month tugs shepherded the Reagan a mile down the James from the outfitting berth to a pier for finishing and the start of final testing. To the amusement of passing boaters, testing includes catapulting dummy loads into the James equal in weight if not in aerodynamics to the planes they will someday launch. In October the galleys will serve their first meals to some 2,000 members of the ship's crew. They have been arriving steadily since two summers ago, living on shore, working and training on the equipment, and getting ready to take the Reagan to sea when the ship will house some 3,200 crew members plus another 2,500 in the air wing and 300 in the battle-group command.

From the start, uniformed and civilian representatives of the Newport News office of the Navy's supervisor of shipbuilding have been on-site checking quality and approving manufacturing methods. As early as the weeks on the outfitting dock, they were slowly accepting delivery of the ship, compartment by compartment, sealing off each one with a Navy blue lock. The big tests come next February with "builder's trials"--three or four days when the Navy takes the ship to sea for the first time and the yard can check its work. That's followed by "acceptance trials," when everything is inspected by Navy experts, designers learn whether the bulbous bow works, and the captain can order high-speed, deck-tilting turns he can't do when planes are onboard. Then it's back to the yard, through the punch list, delivery to the Navy, more time at sea, arrival of aircraft, commissioning on May 10, and in time, departure for San Diego, the Reagan's home port.

Given the long building schedule, a worrisome task for management is holding on to skilled people. At times, as many as 2,700 might have been working on the Reagan, but the individuals and their jobs or trades may have changed. Some expertise is needed for only a short time every four or five years. Eighteen months elapsed between the time the Truman, CVN-75, left dry dock, and the keel was laid for the Reagan. There's lots of work for welders early on. Fewer are needed as time passes. Toward the end painters are in demand, but then it's a long time until the next vessel is ready for them. A flexible United Steelworkers contract helps. Pipe fabricators can follow their output and do installations. Welders can be used as painters. But most painters can't drop a brush, put on a hood, and weld.

During the years it has worked on the Reagan, Newport News has gradually improved operations. Trying to build tankers at a profit not only resulted in new equipment but also pushed the company from a tradition-bound shop into modern manufacturing. The biggest changes will be in how CVN-77 is built, particularly in how work is planned and schedules are coordinated between purchasing, engineering, and manufacturing. In the past, says Gunter, "we could have done a much better planning job to remove some of the chaos in bringing all the pieces, parts, and people together."

A big help in keeping things organized is a complete new information technology system. In the early '90s much of the yard's software was still written in COBOL, a language fewer and fewer people knew. Maintenance was eating up most of the IT budget. And each part of the company was an isolated silo. Engineering had its tools. Purchasing had its systems. Designers could never be sure they were working on a drawing that hadn't been changed. There were 13 different catalogs with 8.5 million part numbers. It was easier to design a new part than to find an old one. Except then there were 21 handoffs from design to purchase order. Engineers usually had no idea what anything cost.

The IT overhaul cost $100 million and took four years. Mindful that many of the yard's "master shipbuilders," who have 40 years of experience, would soon be retiring, the overall goal, says Tano Maenza, one of the IT executives, was "to turn shipbuilding from an art into a science, to take all this beautiful knowledge people had in their heads and turn it into systems." On the business end, the company installed SAP enterprise

software, a daunting corporate task in itself. On the design end, it opted for Catia, a 3-D CAD-CAM program from France's Dassault Systemes. Another Dassault program, Enovia, integrates the whole caboodle into a "shared data environment." Today there's one catalog maintained at one location with 3.5 million standardized part names. When one designer shifts an air-conditioning duct, a piping designer knows it's now in or out of his way. Says Thomas Schievelbein, 48, president of Newport News: "Everybody knows where they're at. The carrier construction guys down at the end can look into it and see where the manufacturing guys that are building the parts are."

Stephen Hassell, who led the IT revamping program, says the new system ought to help with a major problem for Newport News: "There are not a lot of opportunities for organic growth. We're not going to get a phone call saying, 'We want you to build 30 aircraft carriers, and we want you to build them now.' " One way to grow is to take on jobs the Navy does for itself. Hassell figures the company's servers could be a central database for use in carrier upgrades and maintenance. But the first big score was a successful bid to take over the supply, testing, and linkup of the communications and weapons systems for CVN-77. In the past the Navy did that. But, says Admiral Knapp, "it's gotten so complicated that you cannot do that anymore. All these systems have become interdependent."

Even while the Reagan readies for sea trials and the first steel is being cut and assembled for CVN-77, Newport News has begun work on CVNX-1 under a $168 million design contract. Matt Mulherin, a vice president in charge of the program, says he'll save "hundreds of millions" through data sharing and 3-D product modeling. "It's a totally different mindset. You're figuring out, 'How do I want to build this? How can I break up the ship into reasonable-sized pieces? How do I automate pipe mending? How do I use my automated steel factory?' You have to put so much thought into the model, you're actually building the ship in the computer. We're really building CVNX-1 today."

Well, yes and no. Computer design is dandy. Better planning is great. But not until about 2007 will craftsmen start precisely cutting steel, welders don hoods, and cranes rumble into use. Then it will be seven years and millions of skilled-work hours until, in 2014, a new aircraft carrier casts off moorings, moves through Hampton Roads, and majestically sails into blue water and, when asked, harm's way.

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