Comment on the Maritime News

January-March 2004

   DD(X) SHOULD BE CANCELLED NOW.  The Navy's craven capitulation to Northrop Grumman on the need for competition on the DD(X) program makes it clear who's really running naval shipbuilding.  When was the cost of conducting a competitive procurement ever greater than the extra cost of not having any competition?  Good grief, has nobody in the Navy noticed how expensive the DDGs have got since they capitulated to Northrop Grumman on how the program should be divided up?  In case you haven't, look at the chart on the right.  In constant dollars, (i.e., adjusted for inflation) the current prices for DDGs are more than double those at the beginning of the program.  Are the newest DDGs more than twice as effective as the early ones?  Admiral the Right Honorable Doctor Dur may be known as "God" in Pascagoula, (although not because anyone thinks he's omnipotent), but that doesn't mean that the Navy has to do everything he says.

My sources tell me that the DD(X) is now so out of control that it's going to cost $1.7 billion, not the $1.45 billion budgeted.  A destroyer that costs $1.7 billion.  A destroyer that costs $1.7 billion.  A destroyer that costs $1.7 billion.  Nope, how ever many times you say it, it just isn't believable.  This is insanity: it's time for DoD to step in and stop it, as they just did with the Army's Comanche program.  Now.  Expensive as they are, it would be better to build some more DDGs and to get rolling on the LCS program, while someone rethinks the next generation of surface combatants.  Tim Colton, March 28, 2004.

   HORIZON LINES FOR SALE AGAIN ALREADY.   The news that Horizon Lines is for sale again, only 15 months after CSX sold it to Carlyle Group, confirms what I've suspected all along, that Carlyle Group never understood what it was getting into.  Due diligence is not, apparently, a concept with which Carlyle Group is familiar.

Here's what I wrote at the time (and read my position paper on this subject by clicking here):

   WHY WOULD CARLYLE WANT CSX LINES, ESPECIALLY AT THAT PRICE?  Why would anyone want to be a Jones Act operator?  Why, in particular, would an investment group that's heavily involved in the defense industry, and doesn't have a CCF, want the collection of floating razor-blades that constitutes the bulk of the CSX Lines fleet (see below).  A total of 16 ships, with an average age of 25 years.  Only 3 of the 16 are under 20 years old: the other 13 have an average age of 28.  And these 13 ships are not only old, they're also steam-powered: it's getting harder every year to find marine engineers who can remember what a steam plant looks like.

Carlyle is paying $300 million for a company that had net earnings last year of $17 million on total revenues of $681 million, an unimpressive 2.5%.  Its net cash flow was, wait for it, zero.  The book value of its fixed assets at the end of last year was $167 million.  The scrap value of the 13 old ships is around $30 to $35 million, total, and their replacement cost is over $1 billion. 

So, if Carlyle didn't buy CSX Lines for its income, and it didn't buy it for its assets, and it can't have bought it for its cash flow, why did it buy it?  Somebody please explain this deal to me.  Tim Colton, December 19, 2002.

So, the big questions now are (a) who will buy it and (b) how much of a bath will Carlyle have to take?  Tim Colton, March 5, 2004.

   ADMINISTRATION REQUESTS $13.3 BILLION IN FY-05 FOR ONLY 9 SHIPS.  It's too much per ship but not enough in totalTim Colton, February 13, 2004.

Program

# of New Ships

SC,N

# of New Ships

RDT&E

# of New Ships

Sealift Fund

# of New Ships

Totals

Prior-Year Costs

CVN 77

 

$626,084,000   

 

$352,800,000   

   

 

$978,884,000   

 

CVN refuelings

 

$333,061,000   

 

   

   

 

$333,061,000   

 

SSGN conversions

 

$517,226,000   

 

$20,000,000   

   

 

$537,226,000   

 

NSSN

1

$2,453,007,000   

 

$143,300,000   

   

1

$2,606,307,000   

$91,330,000   

SSN/SSBN refuelings

 

$353,768,000   

 

$90,700,000   

   

 

$444,468,000   

 

DD(X)

 

   

1

$1,450,600,000   

   

1

$1,450,600,000   

 

DDG 51

3

$3,444,950,000   

 

$146,500,000   

   

3

$3,591,950,000   

$128,279,000   

LHD 8

a

$236,018,000   

a

     

 

$236,018,000   

 

LPD 17

1

$966,559,000   

 

$9,000,000   

   

1

$975,559,000   

$264,781,000   

T-AKE 1

 

   

 

   

2

$768,400,000   

2

$768,400,000   

 

Littoral Combat Ship

 

   

1

$352,100,000   

   

1

$352,100,000   

 

LCAC upgrades

 

$90,490,000   

         

$90,490,000   

 

LCU(X)

 

$25,048,000   

         

$25,048,000   

 

Service craft

 

$32,099,000   

         

$32,099,000   

 

Outfitting

 

$399,327,000   

         

$399,327,000   

 

Prior-year costs

 

$484,390,000   

         

$484,390,000   

 

In all

5

$9,962,027,000   

2

$2,563,000,000   

2

$768,400,000   

9

$13,293,427,000   

$484,390,000   

   COASTAL SHIPPING GETS A BOOST.   The news that MARAD has contracted with Halter Marine to develop the design of a coastal ro-ro is to be welcomed.  It's a smart move by MARAD (see, I can say nice things about MARAD) both in taking this initiative and in picking Halter (clearly the best qualified yard for this type of thing) for the job, and it's obviously a smart move by Halter and its new owners.  We have preached endlessly and for over a decade both that the U.S. needs a coastal ro-ro shipping system and that it's DoT's job to make such a thing come about.  The last administration was never interested.  This one is and more power to them.  Tim Colton, January 23, 2004.

   LOCKHEED MARTIN INVENTS A NEW TYPE OF BOAT.   Lockheed Martin's Littoral Combat Ship, (LCS),  is apparently neither a ship nor a boat but a "seaframe".  "Platform" as a defense-industry euphemism for a ship was bad enough, but "seaframe"?  Of course this vessel also shifts paradigms, so that makes a difference.  It probably takes a seaframe to shift a paradigm.  A mere boat wouldn't be able to handle it. 

Read LMT's semi-literate, jargon-packed, preening, self-satisfied nonsense of a press release here.  Tim Colton, January 17, 2004.

For comment on maritime news reported in earlier quarters, click on one of the following links:

Fourth Quarter of 2003

Third Quarter of 2003

Second Quarter of 2003

First Quarter of 2003

Fourth Quarter of 2002

Third Quarter of 2002

Second Quarter of 2002

First Quarter of 2002

Fourth Quarter of  2001

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