Four Years of Comment on Northrop Grumman

July 2001 through June 2005

   NEW LEADERSHIP AT NGSS.  The new President of Northrop Grumman Ship Systems, Phil Teel, is an aeronautical engineer with a distinguished career in the aerospace industry, first at NAVAIR and more recently at Raytheon and Northrop Grumman.  He is not a shipbuilder, but don't let's hold that against him until we see what he does.  I invite employees of NGSS, its customers and its subcontractors to continue to keep me up to date on developments in Pascagoula and I undertake not to dump on this poor guy for at least six months, and not necessarily then.  And here is a link to a compendium of all my comments and position papers concerning Northrop Grumman over the past four years.  Tim Colton, June 3, 2005.

   THE LPD 17 SAGA CONTINUES.  I'm going to be in trouble with the PR folks at Northrop Grumman again, (ooh, scary), but I'll just have to live with that.  I have been told, by numerous different sources, all of them directly involved in the LPD 17 program but maybe not all of them completely impartial, that (a) the Navy issued over 15,000 trial cards as a result of the LPD 17's recent sea trials; (b) these were "the worst sea trials in the Navy's history"; (c) delivery is not now expected until the fall; and, most amazingly, (d) the problems are so bad that the Navy is seriously considering not commissioning the ship at all, but turning it into some kind of training platform.  I invite informed readers to tell me the real story, in confidence, of course.  Tim Colton, June 3, 2005.

   YOUR TAX DOLLARS AT WORK, PART 3.  The award of a $3-billion contract to Raytheon for design of the DD(X) raises the question of what happened to the $3-billion contract awarded to Northrop Grumman Ship Systems on April 29, 2002, for design of the DD(X).

Ingalls Shipbuilding Inc., Northrop Grumman Ship Systems (NGSS), Pascagoula, Miss., is being awarded a $2,879,347,000 cost-plus-award-fee contract for DD(X) Design Agent activities, including the design, build and test of engineering development models (EDMs) for major subsystems and components for the DD(X) destroyer. DD(X), a multi-mission surface combatant tailored for maritime dominance, will provide independent forward presence and deterrence, and operate as an integral part of joint and combined expeditionary forces. Work will be performed in Pascagoula, Miss. and Bath, Maine (38 percent); Portsmouth, R.I. (16 percent); Minneapolis, (13 percent); Tewksbury, Mass. (nine percent); Reading, Mass. (four percent); Andover, Mass. (four percent); Newport News, Va. (three percent); Fullerton, Calif. (two percent); Fort Wayne, Ind. (two percent); Bethesda, Md. (two percent); Anaheim, Calif. (two percent); Cincinnati, Ohio (two percent); Hudson, Mass. (two percent); and Philadelphia, (one percent) and is to be completed by September 2005. Contract funds will not expire by the end of the current fiscal year. This contract was competitively procured via publication in the Commerce Business Daily and the solicitation was posted to the Navy Electronic Commerce Online (NECO) Internet web page, with two offers received. This contract is incrementally funded; funding in the amount of $273,167,189 has been obligated to the contract. The Naval Sea Systems Command, Washington, D.C. is the contracting activity (N00024-02-C-2302).

How much does it cost to design a destroyer?  Tim Colton, June 3, 2005.

   HOLD DOWN THOSE DDG CONTRACT PRICES.  By now I guess that we all agree that the DD(X) program is going to go the way of the DD-21 program and the Navy will have to order a bunch more DDG 51s while it figures out how to design an affordable ship.  (Don't hold your breath.)  Before it does, however, maybe it should take a look at this chart.  Let's see, inflation has been about 2%, right?  Only in the Alice-in-Wonderland world of naval shipbuilding does the price per ship go up if you order more.  Tim Colton, May 29, 2005.

   YOUR TAX DOLLARS AT WORK.  Any comment on this announcement would be superfluous.

Raytheon Co., Integrated Defense Systems (IDS), Tewksbury, Mass., is being awarded a cost plus award fee letter contract with a not to exceed ceiling of $3,000,000,000 for DD(X) Ship System Integration and Detail Design associated with specific DD(X) Ship Systems.  Work will be performed by Raytheon IDS in Tewksbury, Mass.; Lockheed Martin Maritime Systems and Sensors, Moorestown, N.J.; United Defense LP, Minneapolis, Minn.; Northrop Grumman Mission Systems, King George, Va.; and Ball Aerospace & Technology Corp., Westminster, Colo., and is expected to be completed by December 2009.  Contract funds will not expire at the end of the current fiscal year.  This contract was not competitively procured.  The Naval Sea Systems Command, Washington, D.C., is the contracting activity (N00024-05-C-5346).

Let's hope that, even though the Navy couldn't manage to hold a competitive procurement, they remembered to include a cancellation clause.  Tim Colton, May 23, 2005.

   LPD 17 ON SEA TRIALS AT LAST.  The future USS San Antonio, the first of the Navy's new class of assault ships, left Ingalls' shipyard for its sea trials today, although sources say that a naval ship has rarely been so unready.  All being well, it will now be delivered on May 13, regardless of how long the deficiency list might be, and commissioned in Ingleside TX in June.  The contract for this ship was signed on December 17, 1996 and its original contract delivery date was July 17, 2002, allowing 67 months for detail design and construction.  Actual time required: 101 months, 50% more than planned.  Ah, well, better late than never.

The following photograph was released by Northrop Grumman, for once, thankfully, without a self-congratulatory press release.  But it looks to me like a fake: not only is there no sign of life on this ship, but where are all the porta-potties they loaded on board before sailing?  Tim Colton, April 29, 2005.  I am assured by people who went on the trials that the picture is not a fake: I stand corrected (May 13, 2005).

   WHAT SHOULD NORTHROP GRUMMAN DO?  It has been said that I am hard on Northrop Grumman Ship Systems (NGSS).  This may be so, but I doubt that it’s unjustified.  In addition, the number of critical e-mails that I receive is tiny compared to the number of supportive ones, most of which come from NGSS employees.  And I just went back and reviewed all my comments on NGSS since I started this column four years ago and can’t see any reason to modify any of them.  Sure, there are a few snide remarks here and there but they are intended more as attention-getters (Did you see what Colton wrote on his web site?) than anything else.  Nobody should ever take it personally.  If you can’t take the heat, get out of the shipyard.

So what would I do if I were in charge at NGSS (though heaven protect us all from such a dire situation)?  Read on.

If Northrop Grumman is a professionally managed company, it has a strategic plan, and each of its business units, including NGSS, also has a strategic plan.  Strategic plans usually (not necessarily but usually) look five years ahead and are updated annually, according to defined procedures.  I have not seen NGSS’ strategic plan, but here are some thoughts about what it might include.

The key question is, what business is NGSS in?  If all they want to do is build new ships for the U.S. Navy and the U.S. Coast Guard, they had better start downsizing today.  If, on the other hand, they are going to be bold, and not limit themselves to two customers, they had better have a plan not only for penetrating but also for making money in other markets.  Here’s how to do both of these.

First, some ideas for a downsizing strategy:

(1)   Move all the LPD work being done at Avondale to Ingalls.  All of it.  Transfer partial hulls and hull blocks onto barges and tow them out.

(2)   Put the last Polar Tanker in the water as soon as possible and either move it to Ingalls or subcontract its completion.

(3)   Then close Avondale.  Sell the off-site facilities/operations.  Don’t try to sell the main yard: nobody wants it.  Transfer it to the State of Louisiana, in return for the debt, and let the State split it up and lease it out.

(4)   Consolidation of the LPD program should improve facility utilization at Ingalls.  Restructure the yard’s construction schedule by product line to optimize resource utilization and productivity.  Get tough with the Navy on this and on changes.  No more changes. 

(5)   Don’t oppose sole-sourcing the DD(X): NGSS doesn’t owe the folks in Maine anything.  Propose a multi-year sole-source funding of DD(X).  At a minimum, this should be similar to that for the SSN 774 program, but something like the 30-ship DD 963 contract would be better. 

(6)   Get rid of all the non-shipbuilders in Production and hire some professionals.  Steal them from BIW if necessary.

(7)   Stop pursuing other markets and concentrate on the ones that are already locked up: if NGSS is going to be the sole source for both amphibs and surface combatants, there is no excuse for not being damn good at it. 

(8)   Attack the overhead: cut everything that’s not the minimum required.  Act like it’s your own money that’s being spent and cut back ferociously.  The yard’s too big: consolidate operations and mothball the parts that aren’t really needed.

(9)   Do more make-buy analyses and don’t hesitate to sub-contract anything that others can do for less.  There’s nothing wrong with subcontracting if it saves money, even though the unions don’t like it.

Second, some ideas for a growth strategy:

(1)   Move the LPD program to Ingalls, as in the downsizing strategy.

(2)   Reverse the Ingalls-Avondale integration and spin Avondale off into a separate company, with its own cost structure and with outside investors.  Turn it into a low-budget commercial ship factory, run by commercial shipbuilders. 

(3)   Step into the containership void left by Kvaerner Philadelphia switching to product carriers.  Buy a design and set up an assembly-line operation – one ship a year for Matson and one a year for Horizon.  Get Daewoo or somebody like that to help.  At the same time, step into the short-sea shipping void and propose a series of low-cost coastal trailerships.

(4)   NGSS expanded the Ingalls waterfront and lengthened the dry-dock to get into the offshore business.  Now carve out a chunk of the waterfront, including the dry-dock and possibly the East Bank yard too, and create a repair/conversion operation, also, like Avondale, as a separate company, with its own cost structure and with outside investors and professional managers.  There’s a lot of repair and conversion work out there.

(5)   The overhead still needs to be cut and the yard’s still too big: lease parts of it out.

(6)   Subcontracting is difficult if you’re downsizing but easy if you’re growing.  Do more of it: it’ll save millions.

(7)   Buy Halter from the Singaporeans: it has tremendous potential, which the Singaporeans are failing to take advantage of.  Again, structure it as a separate company, with outside investors and professional managers.  (No admirals!)  Shift the Deepwater Program to Halter: it’ll save more millions, many of them.

(8)   Go after the foreign military sales business vigorously, with simple, affordable designs, jointly marketing Ingalls’ frigates and Halter’s patrol vessels, and offering financing.  Finance the learning curve, if necessary and to the extent practical.  Use political muscle to get the Navy and the State Department to do what they are supposed to do but don’t do, i.e., help.

Downsizing would be painful, but it’s less risky than growth.  Personally, I think NGSS should go for the growth strategy, but I’m an optimist by nature and it’s not my money.  Of course, GD Marine Systems should probably go for a growth strategy too, especially as they could be downsized right out of business.  But NGSS has a whole bunch of advantages over GDMS: better facilities, better productivity, lower wages, bigger labor pools, more business-friendly locations, more political clout, and so on.

I could go on like this almost indefinitely but this is probably more than enough for the time being.  Tim Colton, April 22, 2005.

   HOW MUCH WORSE CAN IT GET?  The Government Accountability Office (GAO) recently published a report entitled "Improved Management Practices Could Help Minimize Cost Growth in Navy Shipbuilding Programs".  If you haven't read it, you can find it here.  I was going to comment on it but there's so much to comment on that it would take a week.  Read it for yourselves and weep, or, better, yell at your senators and representatives.  What the GAO euphemistically refers to as "improved management practices" might help, but I think shooting an admiral would be more effective.  You know, as Voltaire said of the execution of Admiral Byng, "pour encourager les autres".

Now if that's insufficiently discouraging, read last week's testimony on Navy shipbuilding and industrial base status to the Senate Armed Services Committee's Sea Power Subcommittee.  You can find it here.   Lawdy, lawdy.  The CNO doesn't say much.  Mike Toner reveals that he understands shipbuilding, which we knew.  Phil Dur reveals that he doesn't, which we also knew: his testimony is all misleading boasts, clichés and incomplete sentences.  And Ron O'Rourke has it right, as usual, and tackles head-on all the painful questions that the others either ignored or glossed over, such as the inevitability of BIW closing if the DD(X) program is single-sourced.  Tim Colton, April 16, 2005.

   GD NO LONGER OUTPERFORMING NOC.  The "big two" both published their results for 2004 recently.  The figures for their shipbuilding operations for the past four years are summarized below.  Not much comment is needed.  General Dynamics (NYSE:GD) is no longer doing better than Northrop Grumman (NYSE:NOC) - they both had the same operating profit margin, although GD has higher revenue per employee, lower assets per employee and higher asset turnover, indicating that NOC's shipyards are under-utilized compared to GD's.  Tim Colton, April 16, 2005.

   WHY CAN'T WE SELL FRIGATES TO PAKISTAN?  Only a week after it was announced that the Pakistani Air Force is to buy a coupla dozen F-16s from Lockheed Martin, we learn that the Pakistani Navy is to buy four frigates from China.  Am I missing something here?  If they can afford to buy Lockheed Martin's phenomenally expensive fighters, why can't they afford to buy Northrop Grumman's or General Dynamics' phenomenally expensive frigates?  After all, it's the U.S. taxpayers' money, isn't it?  And we are looking for a way to keep both Bath and Ingalls in business, aren't we?  Or aren't we?  Tim Colton, April 8, 2005.

   IT TAKES AT LEAST TWO TO TANGO.  It appears that the Navy is planning to cut the number of gray shipbuilders from six to three.  It will do this (a) by making Bath and Ingalls compete for the DD(X) construction contract on a winner-takes-all basis, a competition that Ingalls will win; (b) by making Electric Boat and Newport News do likewise for future SSNs, a competition that Newport News will win; and (c) by going along with Northrop Grumman's phasing out of Avondale as a shipbuilder.  It is, of course, purely coincidental that Maine, Connecticut and Louisiana are states whose congressional delegations can safely be ignored, however loudly they might scream.

Is this a good idea?  Hell no, but first let me explain why Ingalls and Newport News will win the winner-takes-all competitions. 

First, Ingalls has lower labor costs than Bath, not so much because it pays less but because its productivity is much better: this is partly because it has a much more efficient facility, even though General Dynamics has spent over $300mm on Bath's facility, and partly because it doesn't snow in Pascagoula.  In addition, Ingalls has lower overhead costs than Bath, primarily because it can spread its fixed overhead over a direct labor base that is about twice the size of Bath's.  As a result, the total cost of a destroyer built by Ingalls is quite a few percentage points lower than that of one built by Bath: unless GD decides to take a dive, therefore, and the probability of that is negligible, Ingalls will win a winner-takes-all competition.

Some of this logic applies to a Newport News-Electric Boat face-off.  EB is probably more efficient than Newport News but Newport News has much lower overhead costs.  In addition, Newport News makes such enormous amounts of money on its other programs that it can well afford to take at least a small dive.

This consolidation of the industry is not a good thing, for at least two reasons.

(1) Although building all the ships of a program in a single shipyard should result in lower unit costs than dividing it between two shipyards, it won't, because, after the initial competition, there will be no controls over future costs.  The winning shipbuilder will have the Navy over the proverbial barrel and the Navy will be unable to hold costs down.  We have seen this phenomenon over and over again but the Navy has apparently never understood it.

(2) Neither Bath nor EB has any other business opportunities that it can pursue.  Not even a sniff of an opportunity.  This means that both will go out of business and, as we know well from history, a dead shipyard cannot be resurrected.  In addition, as each shipyard works off its orderbook and lays off its workforce, it will incur progressively higher costs and delays on its remaining work, and the Navy will have to pay for this.

What should the Navy do?  Well, it's too late, unfortunately, to go back to real competition, which we haven't had since John Lehman was Secretary, because real competition requires not only two contractors but also at least three competitors for those two contracts.  In the absence of true competition, we must stay with the limited form of competition that we have had for the past 20 years but make it more effective.  This can be done in at least three ways:

(1) Rebuild the number of ships in the fleet by specifying ships that are intrinsically less expensive than the ludicrously gold-plated monsters that the Navy is specifying now.

(2) Restructure the standard shipbuilding contract to provide incentives to the contractor to cut costs and to reduce construction times, and incentives to the program manager to refrain from making design changes.  The Navy leadership goes on and on about the need for lower costs and shorter construction times but it's not going to happen as long as the contract encourages both the program managers and the shipbuilders to spend money rather than to save it.

(3) Continue and expand the process, started by the LCS and other programs, of increasing the amount of ship construction funding that flows to second-tier shipbuilders, such as Alabama, Austal, Bender, Bollinger, Halter, Signal and Marinette, whether directly or indirectly.  This will not only reduce total costs now but it will also stimulate the development of a new defense industrial base, capable of providing true competition for major procurements at some future time.

Does anyone think that any of this might happen?  No?  Nor do I.  Tim Colton, February 26, 2005.

   LPD 17 LEAVING AVONDALE.  Just in case you didn't believe me, here is a picture of LPD 17 passing the New Orleans Central Business District as she is towed from Avondale to Ingalls for completion.  Is this it for Avondale?  Will they ever again build a complete ship?  Tim Colton, December 3, 2004.

   IS NORTHROP GRUMMAN BETTER AT P.R. THAN AT BUILDING SHIPS?  An hilarious article in the New Orleans Times-Picayune recently trumpets alleged improvements in performance at Northrop Grumman's once-great but now pitiful Avondale operation.  I can't give you a link to the article because the Times-Picayune is one of the few newspapers that won't let you read it on-line.  Not that you're missing much.

The headline is "TROUBLES PASSED" and yes they are talking about Avondale.  Its most startling claim is that they built the fourth Polar tanker in half the time they took to build the third one.  Needless to say, this is not true.  Most of the remainder of the article concerns improvements in safety and housekeeping, with no explanation of how the yard's "troubles" might have been "passed".

The table below tells the Polar Tankers story.  The first of the five ships was delivered 15 months late, requiring about 50% more time than had been planned.  The second ship was 21 months late, also requiring about 50% more time than was originally planned and about four times as much time as would be needed in a Korean shipyard.  The second ship was 21 months late, the third ship was "only" 13 months late, and the fourth ship was a positive triumph, being only 12 months late.  A startling improvement in performance on the third and fourth ships, you say?  Not really, considering that they were both delivered with huge deficiency lists and taken to Grand Bahama Shipyard for their pre-delivery dry-docking and bottom painting.  The Polar Adventure, which was "delivered" on August 13, is now out of dry-dock but still has several weeks of shipyard work to do before she can make the long voyage round Cape Horn and go to work.

Avondale's LPD story is no more inspiring.  The first of the four ships under contract at Avondale is now expected to be delivered this December, (don't bet on it), an astonishing 8 years after it was contracted and two-and-a-half years late.  The second ship is expected to be a mere 22 months late and the third only 20 months late.

Depressing stuff.  Tim Colton, September 3, 2004.

   IS THE HIGH COST OF NAVAL SHIPBUILDING FINALLY CATCHING UP WITH THE NAVY LEADERSHIP?  The authoritative Washington newsletter "Inside the Navy" reports that the Navy's budget request for FY06 will include only four new ships and will still cost $6 billion.  The four ships are: one SSN at a budget-busting $2.5 billion; one DD(X) at a mind-boggling $1.5 billion; one LPD at a ludicrous $1.0 billion; and one T-AKE at a relatively modest $0.4 billion.

This is no real surprise.  Naval shipbuilding costs have  been out of control for about 15 years now and the Navy has brought it on itself.  First, it essentially eliminated competition by forcing more than half the shipbuilding industrial base, including critical suppliers, out of business.  Then it created a contracting environment in which the few remaining shipbuilders not only have no incentive to reduce costs but are actively encouraged to increase costs.  Finally, it has driven per-ship costs up even further by specifying ever more complex ship designs: there is no bell or whistle that the Navy doesn't want to have at least three of on every one of its new ships.  There are other factors at play here but these are the most significant ones.  The net result is that we now have a big-ship shipbuilding industry that is the most expensive and the most incompetently managed in the world and we have now, not coincidentally, almost completely lost our ability to build deep-draft merchant ships. 

I have to keep reinforcing this broad allegation with a fundamental fact: in the 1970s, productivity in U.S. big-ship shipbuilding was measured to be about half that in Japanese shipbuilding; today it is around a quarter.  (So much for the National Shipbuilding Research Program.) 

I also have to keep pointing out that the problem isn't with U.S. shipyard workers: our successful small yards demonstrate that.  The problem also isn't with U.S. shipyard facilities: they are all just as good as the older European and Japanese yards.  The problem in the yards is with U.S. shipyard management.  There's way too much of it and it doesn't seem to have a clue what it's doing.

But the real problem is the Navy itself.  The Navy dug this hole and can't find its way out.  It talks about "acquisition reform" but what it means by this is spreading the appropriation of funds for individual ships over multiple years.  This would not, of course, have any impact whatever on the high cost of ships: it would merely obfuscate the accounting of that high cost.  We do, indeed, need acquisition reform: we need rigorous cost-benefit analysis of every new ship system; we need elimination of all but the most critical change orders; we need firm-fixed-price contracts, with incentives for cost reduction and schedule acceleration and penalties for cost over-runs and delays; we need to reintroduce competition by requiring prime contractors to competitively procure x% of each contract from the second-tier shipbuilders; we need detailed audits of indirect costs and non-allowance of about half of them.  And much more besides.

Will it happen?  Not a chance.  It's only the taxpayers' money.  Tim Colton, August 20, 2004.

   IS THE WMSL TOO BIG AND TOO EXPENSIVE?  Ingalls Shipbuilding has announced that it has received $250mm in advanced funding for the first of the Coast Guard's new generation of high-endurance cutters, which are not designated WHECs, as would be traditional, but WMSLs, for Maritime Security Cutter, Large.  Large is the right word: at 4,200 tons, this vessel is about 60% larger than the "Hamilton" class of WHECs and about 13% larger than it was supposed to be.  In addition, the $250mm is only for advance production and procurement, i.e., the total contract value will be substantially more than this.  This sort of thing is, I suppose, what we have come to expect from the world's most expensive shipbuilder, but how is the Deep Water Project's budget going to be able to afford this kind of inflation, especially given Northrop Grumman's long track record of ever-growing costs and ever-slipping delivery dates?  Tim Colton, July 5, 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.

   LPDs GETTING PRETTY EXPENSIVE.   The fifth of the "San Antonio" class of LPDs, the contract for which was announced today, will cost over 70% more than the fourth in the series.  I know that the nation needs these ships and, goodness knows it would be nice if we could keep Avondale in business as well, but this is a tad excessive, even for Northrop Grumman.  Tim Colton, November 25, 2003.

   HOW MUCH WORSE CAN AVONDALE GET?  The news that Avondale has finally delivers its seventh and final sealift ship, the USNS Benavidez (T-AKR 306) is startling.  I had thought that they had delivered her back in June, but apparently not.  You read all the good words in Northrop Grumman's press release and you would never guess that the original contract delivery date for this, the seventh in a series of supposedly identical ships, was July 21, 2001.  That's right, July 21, 2001.  Let me see, now, that would have been, er, more than two years ago. Goodness!  The contract was awarded on December 18, 1998, so they signed up to build this ship in 31 months and it actually took them 57 months, 84% longer than planned.  And they launched her in July 2001, so she's been in the water, fitting out, for over two years!  Tim Colton, September 19, 2003.

   AVONDALE LAUNCHES LPD 17.  The first of the new class of LPDs, San Antonio, was finally launched this week and will be christened on Saturday.  And a strikingly good-looking ship it is, as you can see from the photograph below, copied from Northrop Grumman's press release.  Although about 27 months behind the original contract schedule and goodness knows how many hundreds of millions of dollars over the original budget, this event is nevertheless very good news.  Now, maybe, all the design problems are in the past and the shipyard will be allowed to get on with the job of building 12 ships as systematically and cost-effectively as possible.  Will this happen?  Probably not, but not through any particular fault of Northrop Grumman's, desperately bad at managing shipyards though they are.  No, the LPD program will continue to be ludicrously expensive, possibly even progressively more expensive, ship by ship - only in modern-day naval shipbuilding do we see negative learning curves - because the Navy will continue to mess with the design and the Congress will continue to stretch out the funding.  When will they ever learn?  Again and again, we tell them, (not just me, we all tell them): if you want cheaper ships, (1) design a cheaper ship, (2) design the ship completely before you start building it and (3) fund the whole program in advance, not ship by ship.  But they don't listen, probably never will.  Never mind.  Tim Colton, July 17, 2003.

   GD CONTINUED TO OUTPERFORM NG IN 2002.  The "big two" both published their results for 2002 on March 24.  The figures for their shipbuilding operations are summarized below.  The reason for the big jump in the NG figures in 2002 is that 2001 didn't include the full value of the acquisition of either Litton or Newport News.  There are no new surprises in the management discussion: GD was unhappy with the TOTE contract, NG with the Polar Tankers contract.  No revelations concerning the outcome of the American Classic Voyages fiasco, either: I guess we're never going to be told the full story.

Not much comment is needed.  GD is clearly doing better than NG - higher profit margin, higher revenue per employee, higher asset turnover.  It's interesting that NG has almost twice the assets per employee that GD has but still only generates about 72% of the revenue per employee.  And now NG is hurling more and more CapEx money at both Ingalls and Avondale, telling Mississippi legislators that it needs to do this to stay competitive with GD.  One of these years they may work out that it's not the facilities that are the problem, it's the management.  Tim Colton, March 27, 2003.