Six years ago this month, Pearl Harbor Naval Shipyard, the state’s largest industrial employer, barely escaped inclusion on a Pentagon list for possible base closure.

Today the shipyard is healthy and hiring. But defense cuts loom nationally, and one of the first victims, for the shipyard anyway, could be the military construction projects that are modernizing the 103-year-old yard and which are a key component of continued progress, officials said.

A groundbreaking ceremony will be held Wednesday morning for a $15.85 million, 37,000-square-foot production services support building that the shipyard said will improve efficiency and shave six weeks off submarine overhauls.

So it is with pride in improvements, and trepidation about what might come, that officials will greet the start of the new shipyard project this week.

"The outlook for Pearl Harbor Naval Shipyard is bright," shipyard spokesman Kerry Gershaneck said. "Our civilian hiring has been on an upward slope, with nearly 500 more workers here than we had in 2007 by the end of this year."

He added that the shipyard is "hopeful that we will continue on our path to modernization."

By the fall, the shipyard projects, its work force will be just over 5,000, with about 4,500 civilian workers and 500 military personnel.

That compares with 4,064 civilian workers in fiscal 2007. Employment has increased every year since then, the Navy said.

Robert Lillis, president of the International Association of Machinists Local 1998, which represents about 160 surface ship workers in the shipyard, said the upward employment trend is a rare bit of positive news in a bleak economy for the islands.

Submarine and surface ship work is increasing, and the shipyard’s impact on the Hawaii economy this year stands at $845 million, including salaries, contracts and purchases.

The shipyard said it will be hiring between 250 and 300 new employees next year, with attrition affecting current ranks.

Those hires will include more than 100 blue-collar apprentices, 50 to 60 engineers, and accounting and administrative positions. Apprentices start at $19 an hour. Starting pay for engineers ranges from $45,000 to $68,000 a year, officials said.

One of the dark clouds that could affect the shipyard’s future, however, is the possibility that the $600 million to $800 million in modernization projects being pursued at the shipyard through 2035 could get sidetracked by budget cuts. What other cuts might come is unclear.

President Barack Obama wants to cut national defense spending by $400 billion.

"This is going to be hard," former Defense Secretary Robert Gates told Bloomberg News last week. "Tough choices are going to have to be made."

The Senate Armed Services Committee approved the 2012 defense authorization bill with a requirement that the Navy provide a plan for funding infrastructure improvements at the nation’s four public shipyards.

"I am very concerned with the lack of an investment strategy to address the lack of funding to maintain and repair our shipyards," Sen. Susan Collins, a Republican from Maine, said on June 17.

Charlie Ota, vice president for military affairs at the Chamber of Commerce of Hawaii, said Hawaii business leaders returned in June from their annual pilgrimage to Washington, D.C., worried about shipyard modernization cuts.

"For the future projects, yes, there is concern," Ota said.

The shipyard said it needs to make physical changes to go along with the workplace culture changes that have improved efficiency since the 2005 Base Realignment and Closure Commission scare.

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 previously.

If the $600 million to $800 million modernization falters, "we will continue to fulfill our mission," Gershaneck said, "but we must modernize according to our plan" if the shipyard is to meet modern needs.

The majority of the shipyard’s buildings were built between World War I and II, and the classes of ships and many of the functions they were built to support no longer exist.

The oldest dry dock was completed 92 years ago. The newest dry dock dates to World War II.

Years ago, ship components for aircraft carriers, battleships and cruisers were removed and worked on in the "back" shops away from the waterfront. Now, 90 percent of the yard’s work is on submarines, either aboard or next to the vessel.

Only one other modernization military construction project is under way at the shipyard: a $25.5 million Drydock 1 and 2 ship support services facility, officials said.

Submitted to Congress for fiscal years 2012 to 2015, but not yet approved, are a $46.1 million submarine production support facility, a $19.1 million dry-dock waterfront facility and a $2.8 million welding school shop consolidation.

The modernization needs come at a time of growing national security importance for Pearl Harbor shipyard.

Amid explosive economic and military growth in Asia and the Pacific and concerns over China, the Navy shifted 60 percent of its attack submarines to the Pacific in a change from its former 50-50 split in the Atlantic and Pacific, and picked Pearl Harbor as the sole base for its new Virginia-class submarines.

The shipyard embarked last year on a decade-long, $1.86 billion warship modernization program to extend the life of the fleet, meanwhile. All three cruisers at Pearl Harbor, and its six destroyers, will undergo upgrades.

In 2010, Pearl Harbor shipyard received the prestigious Robert T. Mason Award for maintenance excellence, and is nominated again this year for the award.

A Naval Sea Systems release said Pearl Harbor "completed high priority repairs on time and on budget."

Following the 2005 closure scare, the shipyard was told to improve efficiency. The Chamber of Commerce’s Ota said, "Their performance level has increased to be on the top of the Navy shipyards. They’ve been working real hard at it."

Bill Sullivan, a project superintendent on the upgrade of the cruiser USS Chosin, who has worked in the shipyard for 33 years, said "old-timers" and young workers alike looked deep within and concluded, "We have to make sweeping changes."

Sullivan said he worries that budget cuts will affect readiness the same way maintenance cutback decisions made 15 years ago negatively affected ships over time.

In the meantime he and others continue to try to improve Pearl Harbor.

"It (Pearl Harbor) will always be here, but I’ll tell you what, if we don’t do our jobs and continue to get better and better, I’ve always said, we could become a gas station. We wouldn’t have to do overhauls, which we do," Sullivan said. "So we have to prove that, yeah, we’ve got the location, but we also have the skills and work ethic, and what I see now is we are absolutely heading in the right direction."