HAWAII SUPERFERRY FILES FOR BANKRUPTCY

End of the HSF story.  Read the report in the Honolulu Advertiser here.  Read the filing here.  Now that HSF is broke, MARAD can take title to the two ships, pay off the bondholders and maybe charter them directly to the Navy.  Somewhere in this pile of @&*% there's a pony.   May 31, 2009.

ANOTHER CONFUSED ADMIRAL

OK, let's assume, for the purposes of discussion, that VADM Barry McCullough, who is the Deputy Chief of Naval Operations for Integration of Capabilities and Resources, is not an idiot, but has just been badly advised.  He is quoted in Inside Defense as saying: “You don’t have a realistic view of what the cost will be, the recurring expense, until about the fifth ship of any type,” he said. “That doesn’t mean five LCS’s, that means five of each kind. And that’s pretty much where you figure out what the recurrent cost is going to be.”

Wrong.  Any experienced and capable shipbuilder can estimate the cost of the ships it builds, including the shape of the "learning" curve, assuming that the design has been properly developed.  If they couldn't, they would never be able to bid for fixed-price contracts - e.g., all commercial work - and would be out of business.  This includes all three LCS builders - Marinette, Bollinger and Austal - and Austal's prime contractor, Bath Iron Works.  (It doesn't include Lockheed Martin, who got out of shipbuilding in the 1980s after realizing that it was altogether too difficult for them.)  If you have been told otherwise, Admiral, you have been misinformed. 

There are two principal reasons that the LCS costs are still shrouded in confusion.  First, the Navy is still making endless design changes - just ask Colonna's, where LCS 1 has spent most of this year so far and where she will practically be living for the rest of the year: Admiral, you and the Navy's acquisition executives need to stop all this messing around, freeze the designs and let the shipbuilders get on with building the ships.  Second, the Navy (and the Congress) have unrealistic expectations regarding cost: if you want to come in under the cost cap, you need to eliminate some of the bells and whistles.  Finally, if you could restructure these contracts so as to make the shipbuilders the prime contractors, so much the better.

Good grief, when Secretary Lehman said the other day that the Navy looks incompetent, he wasn't kidding.  May 30, 2009.

NO HOPE FOR TERMINAL ISLAND SHIP REPAIR PLAN

Various city and county agencies in Los Angeles are reported to be backing Gambol Industries' plan to reopen the old Southwest Marine yard on Terminal Island, against the advice of the Port, who actually have some considerable knowledge and experience in these matters.  They are wrong.  These people don't know what they are doing and should stick to small boats.  There is no market for a large-ship repair facility in LA/LB: there should be, of course, but there isn't.  Foreign-flag ships will not use U.S. shipyards except in emergencies and even then they only do the minimum that will get them back to sea.  Even Jones act ships find it cheaper to go to China or Singapore, despite the ad valorem duty.  Mid-sized and small repair yards already exist.  If this project is allowed to go ahead, it will fail within three years.  You can quote me.  May 29, 2009.

USNS VANDENBERG REEFED OFF KEY WEST

The second largest naval ship to be reefed is now sitting in 140 feet of water about seven miles off Key West.  See pictures and video here.  The USNS General Hoyt S. Vandenberg, (T-AGM 10), pictured on the right, was built by Kaiser's Permanente No. 3 shipyard in Richmond CA, 1944, as the troopship USS General Harry Taylor, (AP 145) and was converted to a missile range instrumentation ship in 1964.  May 29, 2009.

LIFE IN SOUTH FLORIDA - 2

You will be thrilled to know that there are now more than 150,000 Burmese pythons in South Florida.  They have no enemies once they get over about six feet long and they eat anything and everything up to and including cougars (the cats, that is).  Dogs and small children are just appetizers.  So the State is going to introduce a bounty system for catching them.  Finally, a chance to escape from shipbuilding and start a rewarding new career: now, where did I put my net?  May 29, 2009.

WILL THE RECOVERY FOLLOW THE PRICE OF OIL OR VICE VERSA?

I don't care how many wind farms we build or how high the CAFE standards go, we are not going to wean ourselves of our need for oil any time soon.  The chart on the right shows the overall average worldwide weekly price of crude oil, as calculated by the EIA, since the beginning of last year.  Looks good to me.  I will update this occasionally.  May 29, 2009.

NEW PROBLEMS FOR NGSB

DefenseNews reports that "More than 10,000 welded joints on at least eight U.S. submarines and a new aircraft carrier might need to be reinspected after the discovery by Northrop Grumman Shipbuilding that one of its inspectors had falsified inspection reports."  Read the story here.  Note that we're talking about MT and PT, not radiography, which could be really bad news, but it's still a potential nightmare for NGSB.  May 29, 2009.

ESCORT TUG ORDER FOR WASHBURN & DOUGHTY

Top-notch Maine tugboat specialist Washburn & Doughty, which has recovered with amazing speed from that terrible fire last year, seems to have scored something of a coup in securing a contract for two escort tugs for the Texas team of Suderman & Young Towing and Bay-Houston Towing.  Read W&D's announcement here.  It's interesting that these companies' most recent four escort tugs were built by Orange Shipbuilding, which company recently had orders for two more, for undisclosed clients widely presumed to be S&Y and B-H, cancelled.  May 28, 2009.

TEN BOATS FOR KUWAIT

NAVSEA has awarded an FMS contract to United States Marine for the construction of ten Mk. V patrol craft - pictured on the right - for the Kuwaiti Navy.  The value of the contract is $61.6 million, with completion by June 2013.  Read the DefenseLink announcement here.  Talk about a yard with a nice little niche market.  May 27, 2009.

LEHMAN SAYS NAVY LOOKS "INCOMPETENT"

There are topics on which it is possible to disagree with former SECNAV John Lehman, but this isn't one of them.  Read the story in DoDBuzz here.  May 27, 2009.

"AMERICAN OSPREY" SOLD FOR SCRAP

MARAD has sold the OPDS "American Osprey" - pictured on the right - for scrap.  Read the announcement here.  She was built at Sparrows Point in 1958 as "Gulfprince", one of four 32,600-dwt product carriers for Gulf Oil.  May 27, 2009.

ANOTHER LAW SUIT FOR BENDER

Louisiana Machinery Company has filed suit against Bender Shipbuilding and some of its principal officers for non-payment for the engines for the Gulfmark PSVs, alleging further that Bender entered into the contract although it knew it was insolvent.  Read the filing here.  It's hard to see any way that Bender's going to come out of this mess.  Next stop: bankruptcy and liquidation.  May 23, 2009.

LCS 1 HAS SUCCESSFUL ACCEPTANCE TRIAL

All went well apparently, which is good news.  May 22, 2009.

TRINITY TO LAY OFF PORT ALLEN WORK FORCE

Trinity Marine Products has given 190 workers at its Port Allen yard, in Brusly LA, notice that they will be laid off in July.  Read the report in the Baton Rouge Advocate here.  May 21, 2009.

SECNAV MABUS TAKES OVER

Ray Mabus was sworn in as Secretary of the Navy yesterday.  Read the Navy's announcement here.  Welcome aboard, Ray: great things are expected of you.  Let's start by putting a bomb under the Navy's shipbuilding program.  We need some competent managers in NAVSEA, we need a rational, balanced and streamlined procurement approach and we need to foster an understanding that the taxpayers just can't afford everything that the Navy would like to have.  And always remember, you're in charge, not the admirals.   May 20, 2009.

PENTAGON SAYS THAT FUEL USE MUST BE CUT

But not, apparently, when it comes to the ludicrously inefficient LCS 1, whose 72-MW Rolls-Royce MT-30 plant approaches the 100 MW of a DDG 51, although its full-load displacement is only about 35% of that of a DDG 51.  With a specific fuel consumption of .21 kg/kWhr, LCS 1 could burn as much as 15 tons of fuel an hour.  On a corvette!  And the ship's fuel capacity is about 375 tons.  Read Reuters' report here and read Rolls-Royce's spec sheet for the MT-30 here.  By the way, LCS 1 is the only ship in the world with MT-30s.  I wonder why.  May 19, 2009, corrected May 20.

CHOUEST TO BUILD AND OPERATE ICEBREAKER FOR SHELL

Shell has contracted with Edison Chouest Offshore for the services of a 368-foot anchor handler/ice management vessel for Arctic service, beginning in 2012.  This complies with the oil giant's commitment to replace a foreign-flag vessel brought in before it became necessary for anchor handlers to be Jones Act vessels, although the project for which it was required has since moved several years to the right.  I expect that they will find work for this expensive new boat somehow.  May 19, 2009.

CONRAD INDUSTRIES ADDS TO BACKLOG

The Morgan City shipbuilder has released its first-quarter results and announced the addition of a mixed bag of barges to its backlog.  Net income of $5.7 million on revenues of $49.6 million, about 15% up on last year: pretty healthy.  Read the report here.  May 19, 2009.

VTHM APPOINTS SKINNER AND ALBERT

Following the untimely death of Butch King, VT Systems has appointed Bill Skinner as CEO and Paul Albert as COO of VT Halter Marine.  Read the announcement here.  May 18, 2009.

SUPERFERRY STUFF AUCTIONED OFF

In a clear signal that the Hawaii Superferry operation is dead, they auctioned off all their stuff yesterday.  Read the report in The Maui News here.  May 17, 2009.

MARINETTE TO PURSUE SSC PROGRAM

Marinette Marine will go after the Navy's ship-to-shore connector, (SSC), program, with technical support from parent company Fincantieri and from Boeing, both of which have distinguished track records in the design and construction of surface-effect ships.  No announcement on Marinette's web site, which, like Fincantieri's, is really pathetic, but read Boeing's announcement here.  The ship-to-shore connector is a fancy name for what is, in effect, the Navy's replacement for the aging (and very expensive) LCAC, pictured at right.  This is a good move by Marinette.  They can take this program from Textron, although they should be prepared for Textron to propose astonishingly low prices, as they did on the Coast Guard's MLB program.  And note that the shipbuilder is the leader in this consortium, which is as it should be.  May 17, 2009.

MABUS NOMINATION GOES TO FLOOR

The Senate Armed Services Committee yesterday approved, by a voice vote, the nomination of Governor Ray Mabus to be Secretary of the Navy.  The full Senate could vote next week.  May 15, 2009.

GAO DUMPS ON NAVAL SHIPBUILDING

The GAO has published a new report that is critical of the Navy's approach to shipbuilding.  Well, it would be truly astonishing if it wasn't, right?  A key sentence reads: "These inefficient practices cause Navy ships to cost more than they otherwise should, reducing the number of ships that can be bought under constrained budgets."  Read the full report here.  May 14, 2009.

NEW STEALTH LCS UNDER CONSTRUCTION

The secret is out.  The LCS program will be terminated at four ships and the Navy will procure 500 of a new "stealth" LCS design from the well known South Louisiana firm of Boudreaux and Thibodeaux Boat Builders, for $5 million each.  See the accompanying photo of the prototype under construction in the yard on Bayou  Gavroche.  A DDG variant is said to be under development.  You read it here first.  May 14, 2009.

HORIZON AND SEA STAR MANAGERS JAILED

Tradewinds reports that the Horizon Lines and Sea Star Lines managers charged with anti-competitive practices in the Puerto Rico trade have been sentenced to jail.  Read the report here.  May 14, 2009.

KITTY HAWK DECOMMISSIONED

The Navy decommissioned the USS Kitty Hawk, (CV 63), yesterday, after 48 years of service.  Read the Navy's announcement here. Not only was she the last non-nuclear carrier on active duty but she was the last carrier not to have been built by Newport News, being a product of New York Ship, in Camden NJ.  May 13, 2009.

SENATORS DRAW ATTENTION TO UNDERFUNDING OF FLEET MAINTENANCE

In a world in which the Navy needs to extend the economic working life of its ships, it is inevitable that the cost of fleet maintenance must rise.  But while the cost rises, the budget doesn't.  Senator Webb and others are trying to do something about this case of extreme myopia.  Read their letter here.  Good for them.  May 13, 2009.

PORT OF LA NIXES PLAN FOR SHIPYARD REACTIVATION

The Port of Los Angeles has rejected a plan to reopen the former Southwest Marine shipyard on Terminal Island, which has been closed since 2005.  Read the story in the Daily Breeze here.  The plan was put forward by Gambol Industries, which currently operates a small yacht yard in Long Beach.  May 12, 2009.

THE NAVY ACCEPTS CVN 77

The USS George H. W. Bush, (CVN 77), was delivered yesterday, almost exactly 300 weeks since her keel was laid.  Read the Navy's report here.  Read Northrop Grumman's press release here.  May 12, 2009.

ACL DOES A REVERSE SPLIT

It sounds painful but it may be something we will be seeing more of.  As of May 26, every four shares in American Commercial Lines, (ACL), the parent company of JeffBoat, will be combined to form one share.  Read their announcement here.  May 12, 2009.

WHICH REMINDS ME

The preceding intemperate comment reminds me that the fourth NSC is in the FY 2010 budget, but the Coast Guard does not actually have a contractor for this ship, having terminated the disastrous ICGS joint venture.  They say that they are in discussions with NGSB concerning construction of the fourth and remaining NSCs, and that's fair enough, as it would be very disruptive to stop the program for a proper competition.  I hope, however, that these discussions are really hard-nosed negotiations that will result in an FFP contract and that the cost breakdown supporting the prices reflects a commercial overhead rate, without all that Navy-driven piling on of unnecessary cost.  May 11, 2009.

YOU CAN'T BE SERIOUS

I've been encouraged by the Coast Guard's new hands-on approach to ship acquisition.  Goodness, it's almost like the old days.  But not quite.  I'm hoping and praying that suggestions from RADM Blore and others that the LCS designs are in the running as OPCs are mere persiflage, designed to keep the politicians and lobbyists happy, or at least quiet.  Heaven protect the Coast Guard from either LCS design, even in a stripped-down configuration.  LMT and GD may think that these nightmare designs would suit the OPC program just fine but their shipbuilding contractors, Marinette (Fincantieri), Bollinger and Austal, know better and they all have access to proven, economical OPV designs, as does the fourth serious player in this field, VTHM.  Hey, Coast Guard, do not screw this up!  You know perfectly well that there are lots of proven affordable OPV designs out there, none of which should cost more than about $100 million a copy.  Which would you rather have?  A fleet of 25 reliable boats that cost about $100 or even $150 million each or some smaller number of unreliable boats that cost $300 million each and another small fortune in maintenance?  May 11, 2009.

LPD 21 FALLS FURTHER BEHIND

The word from New Orleans is that the future USS New York, (LPD 21), is unlikely to be completed this year.  When the contract was awarded, in November 2003, delivery was set for August 2007, but that date is, of course, long gone.  The current plan is for August 2009, so that she can be commissioned in New York on November 7, with maximum fanfare, as described here.  Somehow I don't think that's going to happen, unless they tow her up there.  The yard is having major problems, particularly with the electrical systems.  Builders Trials are still scheduled for next month, with Acceptance Trials and INSURV in July, but don't hold your breath.  Note that the Avondale yard is building this ship without help from Pascagoula.  Will they be able to finish her without having to be bailed out by the Pascagoula folks, who are now performing well on LPDs 22 and 24?  Will NGSB shift LPDs 23 and 25 to Pascagoula and make LPD 21 Avondale's last ship?  May 11, 2009.

FY 2010 COAST GUARD BUDGET REQUEST RELEASED

The table below shows the Coast Guard's shipbuilding budget request for FY 2010, extracted from the 3500-page DHS budget.  Read the whole thing here: it starts at page 1653.  May 8, 2009.

FY 2010 DOD BUDGET REQUEST RELEASED

No surprises that I can see.  The table below shows the Administration's shipbuilding budget request for FY 2010.  $16 billion buys four big ships and five small ships.  Wow!  Read the whole thing here.  May 7, 2009, expanded May 8, 2009.

HASC CRITICIZES CLASSIFICATION OF INSURV REPORTS

The Navy Times reports that 11 members of the HASC have written to Secretary Gates to criticize the Navy's decision to classify INSURV reports.  Good for them.   Read the article here.  I love the bit about top Navy officials having said that the action was nothing to do with shielding the service from embarrassment but because the reports could help potential adversaries exploit weaknesses in U.S. warships.  This has never been seen as a threat before, but maybe we've never before had so many ships with weaknesses to be exploited.  May 7, 2009.

LCS 1 OUT OF ACTION?  NOT SO !  WELL, MAYBE PARTLY SO

Rumor has it that the wonderful LCS 1 sustained propulsion problems on its way to the Navy League's annual shindig in the fancily named National Harbor MD and had to pull in to NSWC Dahlgren, where it remains.  More info from someone, please?  May 6, 2009.  NOT SO !  LCS 1 is in Old Town Alexandria, where she arrived under her own power, and is open for public tours.  See the Navy's coverage here.  I gotta stop listening to rumors.  May 7, 2009.  But, then again, other sources say that she lost power to one gas turbine on her way up the Potomac and finished the journey on diesel power.  We will probably never know the full story.  The saga continues.  May 7, 2009.

AND GULFMARK MAKES FOUR

Gulfmark's suit brings the number of Bender's customers that are suing to four, since Trico and Seacor both also have ongoing suits.  And that's not counting vendors.  Very sad.  May 6, 2009.

GULFMARK SUES BENDER

Gulfmark Offshore has filed suit against Bender Shipbuilding over  its alleged non-performance on its three-vessel PSV contract.  Read the filing here.  All kinds of questions arise.  (I know, I'm not a Wall Street analyst, I just know more about this industry than any twenty Wall Street analysts put together.)  What's the basis for the $46 million write-off?  How do you get to that number?  Who owns the work in process?  How could Bender have an alternative buyer for these boats if they don't own the WIP?  And if Gulfmark owns the WIP, who's going to finish these boats?  Does Gulfmark even want to finish these boats?  And, if not, why not?  May 6, 2009.  (Full disclosure: I'm a Gulfmark stockholder.)

OSG'S NON-CLARIFICATION

OSG America has clarified, to some extent, the situation regarding its contract with Bender.  Its press release. which you can read here, about its first quarter results, says that "During the first quarter, Overseas Shipholding Group, Inc. (the Sponsor), which owns a 77.1% interest in the Partnership, terminated its contract with Bender Shipbuilding & Repair Co., Inc. (Bender) related to the construction of six ATBs and two tug boats. The Partnership and its Sponsor intend to complete two tug boats, which the Partnership owns, and two ATBs, which the Partnership has the option to purchase, at alternative yards. As of today, the Sponsor has moved one ATB out of the Bender shipyard and anticipates moving the second ATB by the end of May 2009."  Not much of a clarification, is it?  What alternative yards?  At what cost?  What about the other four ATBs?  We don't need them any more, is that it?  If so, why not?  So maybe Bender's "non-performance" actually suite our business plan?  May 6, 2009. (Full disclosure: I'm an OSG stockholder.)

LIFE IN SOUTH FLORIDA - 1

It's amazing.  May Day comes, marking the start of summer, and suddenly all the snowbirds are gone and the condos are all boarded up again.  Automobile transporters go round collecting their cars.  The weather is still beautiful - right now it's 84° and 58% humidity - and suddenly there are no crowds.  You can wander into almost any restaurant and have your pick of its tables.  Well, I know the weather can be quite nice up north at this time of year but not for long and down here we will still have temperatures in the 80s and that beautiful ocean breeze, when up north its 100° and 100% and it sits on you like a hot, wet rag.  May 4, 2009.

DOES THE NAVY HAVE EVEN A TINY CLUE OR IS LOCKHEED MARTIN IN CHARGE?

So now two more LCSs are on order despite the fact that neither of the prototypes has yet demonstrated that it can, in fact, do what the Navy requires.  Let's be blunt (for a change).  LCS 1 is way overweight.  I'm told that her lightweight is about 3100 tons and her full-load displacement is about 3400 tons.  At sprint speed, her fuel consumption and fuel load give her a range of only about  800 miles.  At that rate, she'll be out of fuel in less than a day.  Note that LCS 1 has one tenth the fuel capacity of a DDG 51, although it has twice the installed horse power.  (Read the NPS study you will find here for more ugly data.)  And then there are all the other problems that nobody wants to talk about.  Why are we building this ship?

We don't yet know what the LCS 2 design will do, and whatever it is, the Navy will probably try to hush it up, but at least we know that she has four times the fuel capacity of LCS 1.

Yes, I know we need littoral combat ships (formerly known as offshore patrol vessels).  But are these designs really what we need?  I say we should treat this program like the DDG 1000: build the first flight, if we must, to keep the yards occupied, and work on developing a cheaper, slower but more reliable OPV, based on a proven design, that can be built economically in much larger numbers.  Do the arithmetic: 110 boats that cost $100 to $125 million each and work is a much, much better deal than 55 boats that cost $400 to $500 million each and don't work.   May 3, 2009.

GD/AUSTAL TEAM GETS LCS 4 CONTRACT

The Navy has awarded a contract for LCS 4 to the GD BIW / Austal team.  Read the DefenseLink announcement here.  As with the recent award of LCS 3 to the Lockheed Martin / Marinette / Bollinger team, the price has been withheld, because there's a possible award coming of LCS 5.  Completion of LCS 4 is to be by end-June 2012, which is six months earlier than that of LCS 3, raising some interesting questions.  May 1, 2009.

SCA ELECTS HERSCHEL VINYARD CHAIRMAN

The long-time VP of Atlantic Marine Holdings takes over from Steve Welch, President of Todd Shipyards, as Chair of the Shipbuilders Council of America, the industry association for over 100 small and mid-sized shipyards.  Read the announcement here.  May 1, 2009.

A&B BLAMES FIRST QUARTER ON MATSON

Alexander & Baldwin reported net income of $3.0 million in the first quarter of 2009, on revenues of $319.9 million.  Both figures were significantly lower than those for the first quarter last year - $42.1 million and $578.7 million, respectively - primarily due to a collapse in Matson Navigation's business.  A&B's stock price dropped sharply on the news.  Read the company's announcement here.  Note "the severity of the drop in freight volume at Matson Navigation has no modern parallel."  Matson's first-quarter revenue was down 17% and its operating profit was down 65%, even before restructuring costs.  May 1, 2009.

K-SEA REPORTS ON FIRST QUARTER

K-Sea Transportation Partners reported net income of $3.9 million in the first quarter of 2009, which is the third quarter of their fiscal year, on revenues of $78.4 million.  Both figures are slightly lower than those for the first quarter last year - $4.3 million and $80.7 million, respectively - primarily due to the increased depreciation required by the addition of new vessels to the fleet.  Read the company's 8-K here.  It's interesting to note that K-Sea blames reduced earnings on the increased depreciation and dry-docking expenses associated with a bigger fleet, which makes no sense at all, while Hornbeck correctly credits its increased earnings to the increased utilization and economies of scale associated with a bigger fleet.  May 1, 2009.

HORNBECK REPORTS ON FIRST QUARTER

Hornbeck Offshore Services reported net income of $27.2 million in the first quarter of 2009, on revenues of $109.6 million.  Both figures are substantially up on those for the first quarter last year - $22.6 million and $97.5 million, respectively - primarily due to the addition of five new vessels to the Hornbeck fleet.  Read the company's 8-K here.  Note that ten of the conventional OSVs in the Nabors fleet acquired last year have either been sold or laid up and six of their 20 tank barges are laid up.  May 1, 2009.