Maritime Memos                                                                                December 2010

REVIEW OF THE YEAR

STORIES OF THE YEAR:

  • Northrop Grumman gave up.  It took them ten years to realize that they don't understand shipbuilding.  The shipbuilding division will be spun off in early 2011, an approach to divestiture which forces the combination of extremely profitable Newport News with extremely unprofitable Ingalls, creating thereby a recipe for further disasters.

  • In the long run, the saga of the Deepwater Horizon, BP's Macondo well, the restructuring of the MMS, the moratorium, etc., etc., may prove to be more significant than the Northrop Grumman story, but it's more of an oil industry story and less of a maritime industry story.

SOME GOOD THINGS THAT HAPPENED IN 2010:

  • The Navy, the Coast Guard, the Army and the commercial maritime industry all did a great job in the Haiti emergency.

  • MARAD dispensed $15 million in grants to 17 small shipyards for capital improvements - a good program but not enough money.

  • Matson Navigation and Horizon Lines both launched five-ship trans-Pacific service with foreign-built ships.

  • The two-member American Shipbuilding Association closed its doors, taking with it the infamous Bateman Award for porker of the year in shipbuilding.

  • There were real signs of the maritime industry getting on board with the idea of "green".

  • In a year when it was hardly ever out of the news, the saga of the LCS program finally came down to the award of two parallel ten-ship contracts to two very good shipyards.

SOME STUPID THINGS THAT HAPPENED IN 2010:

  • The Navy said it would sell eight 25-year-old FFGs to Taiwan instead of arranging for the construction of new ships for them.

  • NAVSEA created a new bureaucratic monster, called the Surface Maintenance Engineering Planning Program, or SURFMEPP.

  • MARAD awarded a contract for the recycling of two NDRF ships to a start-up company operating in the former Mare Island NSY.

  • The Navy made gifts of $12 million to NGSB and $8 million to VT Halter Marine for capital improvements.

  • Senator Specter arranged for a gift of $35 million to Aker Philadelphia Shipyard.

  • Louisiana's politicians rallied around Avondale in a futile and probably very expensive effort to keep it alive.

  • Venezuela confiscated a bunch of US-owned drilling rigs and OSVs but your government paid no attention.

  • MARAD announced the formation of the Marine Transportation System National Advisory Committee, or MTSNAC, (pronounced Empty Snack), but has not yet appointed anyone to it.

  • Senator McCain and others got all fired up about how the Jones Act was impeding the BP disaster relief effort when it obviously wasn't.

SOME OTHER INTERESTING DEVELOPMENTS OF 2010:

  • MARAD took title to three of the bankrupt American Heavy Lift's four tankers and put them in the NDRF: send them for razorblades.

  • MARAD also took title to the two Hawaiian Super-Ferries: charter them to the Navy.

  • Canada short-listed five companies of widely varying and somewhat limited capabilities for future government shipbuilding programs - Davie Yards, Irving Shipbuilding, Vancouver Shipyards, Kiewit Offshore and Seaway Marine.

  • The Navy retired the Cyclone class of OPVs, having apparently only just realized that they were never designed for the missions that have been thrust upon them and weren't designed to live this long either.

SOME INTERESTING APPOINTMENTS IN 2010:

  • David Matsuda became Maritime Administrator, Orlando Gotay became Deputy Administrator and Harry Haskins became Associate Administrator.

  • RADM Philip Greene became Superintendent of the USMMA.

  • Erik Seither became Executive Director of SNAME.

  • Fred Moosally was appointed CEO of Fincantieri Marine Group.

  • ADM Robert J. Papp became Commandant of the Coast Guard.

  • Steve Hastings was appointed President of Sea Star Line.

  • Gene Caldwell was appointed GM of Bay Shipbuilding.

  • Oivind Lorentzen was appointed CEO of Seacor Holdings.

SOME SIGNIFICANT CORPORATE OWNERSHIP CHANGES IN 2010:

  • BAE Systems bought Atlantic Marine Florida and Atlantic Marine Alabama.

  • Ezra Holdings bought Aker Marine Contractors.

  • Harvey Gulf bought Dolphin Marine.

  • Platinum Equity bought ACLI, including JeffBoat.

  • Saltchuk Resources bought Cook Inlet Tug & Barge.

  • Shanghai Zhenhua Heavy Industries bought Friede & Goldman.

  • Signal International bought Bender Shipbuilding.

  • Signet Maritime bought Colle Towing.

  • Vigor Industrial bought Todd Shipyards.

  • but nobody bought Northrop Grumman Shipbuilding.

SOME COMPANIES THAT FAILED IN 2010:

  • Aluminum Chambered Boats

  • American Heavy Lift

  • Davie Yards (yet again)

  • Direct Marine Services

  • Skipperliner Industries (revived in December)

  • Suncruz Casinos

  • Trico Marine

SOME INDUSTRY LEADERS WHO DIED IN 2010:

  • Ed Campbell (Newport News Shipbuilding)

  • Jack Gilbert (Gilbert Associates)

  • Larry Glosten (Glosten Associates)

  • Matt Simmons (Ocean Energy Research Institute)

  • Ole Skaarup (Skaarup Shipping)

  • George Steinbrenner (American Ship Building)

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SOME SIGNIFICANT SHIPS THAT WERE ORDERED IN 2010:

  • T-AKEs 13 and 14 at NASSCO

  • JHSVs 2, 3, 4 and 5 at Austal

  • FMC 4 at VT Halter Marine

  • LCS 5 at Marinette Marine

  • LCS 6 at Austal

  • WMSL 753 at NGSB Pascagoula

  • WPCs 1105, 1106, 1107 and 1108 at Bollinger

  • NOAA's fifth FRV at Marinette Marine

SOME SIGNIFICANT SHIPS AND RIGS THAT WERE DELIVERED IN 2010:

  • Jack-ups EXL-I, EXL-II, EXL-III and Tuxpan (built byAMFELS)

  • Deepwater platform ATP Titan (built by Gulf Inland Marine)

  • Fisheries research vessel Bell M. Shimada (built by VT Halter Marine)

  • Combat supply ships Matthew Perry and Charles Drew (built by NASSCO)

  • Product carriers Empire State and Evergreen State (built by NASSCO)

  • Product carriers Overseas Anacortes and Overseas Martinez (built by Aker Philly)

  • Destroyer Jason Dunham (built by Bath)

  • Destroyer Gravely (built by Ingalls)

  • Submarine Missouri (built by Electric Boat)

SOME SIGNIFICANT SHIPS THAT WERE SOLD FOR SCRAP IN 2010:

  • Passenger liner Independence (built by Quincy)

  • Crude carrier Exxon Valdez (built by NASSCO)

  • Crude carrier Prince William Sound (built by Sun)

  • Product carriers ITB New York, ITB Baltimore, ITB Philadelphia and ITB Mobile (built by Sparrows Point and Halter Chickasaw)

  • Product carriers Overseas Diligence, Arizona Voyager and Colorado Voyager (built by FMC/Gundersons)

  • Product carrier Overseas Philadelphia (built by NASSCO)

  • Chemical carriers SMT One and SMT Two (built by Avondale)

  • Containership Horizon Crusader (built by Sun)

  • Destroyer tender Acadia (built by NASSCO)

  • Sub tender L. Y. Spear (built by Quincy)

  • Cruiser Vincennes (built by Ingalls)

  • Amphib Monticello (built by Ingalls)

AKER PHILLY BLEEDING

Aker Philadelphia Shipyard warns again that it will close within six months in the absence of new work, and the Philadelphia area politicians, as predicted, swing into action, promising tens of millions of U.S. taxpayers' money to bail them out, them and their Norwegian stockholders.  Read the story in the Philadelphia Inquirer here.  Suppose they do build two more ships: who wants them?  Maybe the Commonwealth of Pennsylvania's Liquor Control Board will charter them to bring in cheap Italian wine in bulk.  December 31, 2010.

LCS CONTRACTS AWARDED

Finally!  The Lockheed/Marinette contract is for $436.9 million, which, with options and other stuff will result in a total for ten ships of $4,070 million: completion is to be by August 2015.  The Austal contract is for $432.1 million, which, with options and other stuff will result in a total for ten ships of $3,786 million: completion is to be by June 2015.  Very good news for two excellent shipbuilders.  December 29, 2010.

Read the DefenseLink announcement here.  Read Lockheed's announcement here.  Read Austal's announcement here. 

Average prices of $407 million and $379 million are certainly well below the congressionally mandated cap of $480 million and way below the CBO's somewhat conservative estimate of $600 million, but they still raise questions.

I don't get the completion dates: mid-2015 seems too far off for one ship but too soon for ten.  The last four ships won't be funded until 2015: the yards can't build them faster than the Congress appropriates the money.  I would have thought that it should be possible to deliver the first two ships by mid-2013 and then turn them out at six-month intervals, the whole lot being done by end-2017.  Austal's press release says its first ship will be delivered in 2014, but not when in 2014.  Will someone please send me the two shipyards' schedules?  Anonymously, if necessary.

Are these contracts high-risk or what?  Some things I'd like to know about the pricing, but probably never will, are:

  • What are the deltas between the two third-ship estimates and the EACs of the two ships now under construction and how were they developed?

  • What learning curve is assumed for the other nine ships?

  • What assumptions were made about inflation?  Is the construction period so short that inflation's not much of a concern?  What percentage of the total program cost is locked in at the outset?

  • What happens to the cost estimates if the nitwit Congress changes the funding profile?

Goodness, we all hope these programs go well but one can't help being a tad nervous.  December 30, 2010.

MISTRALS TO RUSSIA

Despite a lot of yelling and screaming from some of their allies, including us, France has gone ahead and sold two Mistral-class LPHs to the Russians.  Read the article in Defense News here.  These ships are said to cost about $650 million each.  Meanwhile, rumor has it that NGSB is going to get two more San Antonio-class LPDs to build.  These ships are said to cost about $1.5 billion each, plus they break down a lot.  December 27, 2010.

VIGOR BUYS TODD

Vigor Industrial LLC, the owner of Cascade General, Washington Marine Repair, Vigor Marine Tacoma and U.S. Barge, has bought Todd Shipyards for $22.27 per share, or about $130 million in total.  This effectively consolidates the two remaining big-ship shipyards in the Pacific North West.  Read the announcement here.  Sounds like a good move to me.  December 23, 2010.

ACLI CLOSES DEAL

ACLI, the parent company of one of our largest inland barge operators, American Commercial Lines, and of one of our largest inland barge builders, JeffBoat, closed its deal with Platinum Equity yesterday and is no longer a publicly traded company.  Read the announcement here.  December 22, 2010.

THE LCS SAGA CONTINUES - CONTRACT AWARDS TODAY ?

The LCS program is the only DoD program of any kind that is specifically covered by the Continuing Resolution passed by the House and now in the Senate.  Read the report in Defense News here.  Will it pass?  December 21, 2010, 8.30 am EST.

P.S.  The measure passed the Senate this afternoon but has to go back to the House, which is expected to vote later on today.  Nearly there.  December 21, 2010, 3.20 pm EST.

P.P.S.  The measure passed the House this evening and goes to the President tomorrow.  So, the Navy should be able to execute both LCS contracts tomorrow or Thursday.  December 21, 2010, 7.40 pm EST.

P.P.P.S.  The CR was signed by the President this morning.  There is now no reason why the two contracts should not be executed today.  All it takes is the Contracting Officer's signature.  Read the Mobile Press-Register's coverage here and the Green Bay Press-Gazette's coverage here.  December 22, 2010, 11.40 am EST.

HORIZON LAUNCHES HIGH-SPEED TRANS-PACIFIC SERVICE

The Jones Act operator's venture into foreign trade - dubbed the Five-Star Express service - was officially launched this week, with the Horizon Hawk's sailing for Los Angeles from Shanghai.  As reported here previously, Horizon built five new US-flag ships at Hyundai Mipo for this service.  Read the latest announcement here and see the schedule here.  Reluctant as I am to say anything nice about Horizon, I think they get credit for this move.  It's interesting that Matson is doing much the same thing - see their schedule here - but with five 15-year-old foreign-flag ships, (which still haven't shown up on the fleet list on their web site).  Which approach is right?  December 18, 2010.

THIS IS NOT GOOD

According to data gathered by the Center for College Affordability and Productivity, which uses student ratings of their professors when it compiles its annual college rankings for Forbes, the two U.S. colleges with the worst professors are the U.S. Merchant Marine Academy and the U.S. Coast Guard Academy.  Not just two of the worst - the two worst.  Read the article on CBS MoneyWatch here.  So, what's the matter with the USMMA and USCGA faculties?  December 17, 2010.

P.S.  Or does this just mean that professors at the USMMA and the USCGA are unpopular with the cadets because they make them work hard?  December 18, 2010.

EXPLOSION AT NGSB PASCAGOULA

There was a bit of excitement at NGSB Pascagoula this morning.  Before any wild rumors get started, here's the inside story:

At the NGSB Pascagoula site this AM we had a main acetylene line rupture (small explosion) and caught on fire.  Fire is out, line has been isolated and investigation is in progress.  The line runs along our outfitting pier

where LPD-22 and LPD-24 are located.  All NGSB and Navy personnel present or accounted for.  Probable cause was a transformer failure adjacent to the area where the line ruptured.  One injury reported of a person who has

ringing in the ears from standing in the vicinity of the incident.  He was able to walk away from the incident and is presently at the hospital. This will affect work on both LPD-22 and 24 for at least the remainder of

the day.  Anticipate some local press interest.

December 16, 2010.

SOME CONSOLATION FOR VANCOUVER SHIPYARDS

After seeing their parent company order four harbor tugs from a shipyard in Turkey, Vancouver Shipyards have now been thrown a bone.  They will get to build a 270-foot tank barge and three 200-foot chip barges for Seaspan International.  Read the announcement here.  December 15, 2010.

SALTCHUK BUYS ANOTHER TUGBOAT COMPANY

Saltchuk Industries has acquired Cook Inlet Tug & Barge, to add to its already impressive marine stable.  Read the announcement here.  December 15, 2010.

VALIDITY OF LCS PRICING EXTENDED: SURPRISE HEARING SCHEDULED

The Mobile Press-Register reports that Austal and Lockheed Martin have agreed to a request from the Navy that the validity of their LCS prices be extended through December 30.  They were to have expired today.  Read the story here.  In addition, the Senate Armed Services Committee has scheduled a hearing on this topic today, so we may get some indication of the probable outcome.  December 14, 2010.

P.S.  The hearing ended at about 4.40 EST.  The Navy's witnesses made a persuasive case and there seemed to be little serious opposition from the members of the Committee, except for Senator McCain, of course.

WHY SAVE THE UNITED STATES?

Yet another philanthropist is pumping money into keeping the United States afloat and the latest scheme for her rescue involves turning her into a Foxwoods casino.  Will reality ever set in?  This admittedly wonderful ship - a credit to her builders, Newport News - operated (unprofitably) for 17 years and has now been laid up for 41 years.  I've lost count of the number of owners, all of whom had grandiose plans that came to nothing, costing them countless millions.  If it had ever made economic sense to put her to work, wouldn't someone have done it by now?  Time to bite the bullet: she needs to be scrapped.  Let's do it properly, however.  Remember the Constitution, which sank mysteriously on the way to Alang, the Independence, which is now falling apart on a beach near Alang, and the America, which was wrecked and abandoned on the way to Alang.  And let's put our resources into preserving ships and boats of historic significance, such as the Olympia.  What do you do in this regard?  Do you know that, in North America, there are over 300 ships and boats preserved as memorials and/or museums?  See the list here.  Some of these need financial help.  Visit the ones near you and give them a helping hand, or a check, or both.  December 12, 2010.

SKIPPERLINER BACK IN BUSINESS

The tour boat builder in La Crosse WI, which closed its doors in April, is back in business, with new owners, new products and a stimulus-funded contract to build a ferry for the Wisconsin DoT.  Read the news story in the La Crosse Tribune here.  Visit the company here.  December 11, 2010.

NASSCO DELIVERS ITS LAST PC

The fifth and last product carrier for American Petroleum Tankers, Evergreen State, was delivered this week.  Like her predecessor, Empire State, she has been bareboated to Military Sealift Command.  Read NASSCO's press release here.  NASSCO's backlog is now reduced to four T-AKEs.  December 10, 2010.

LCS BUY GETS THROUGH HOUSE

Section 2314 of the Full Year Continuing Appropriations Act, which has now passed the House, gives the Secretary of the Navy the ok to award a contract or contracts for up to 20 Littoral Combat Ships.  So, on to the Senate.  December 10, 2010.

MORE ON THE DRY-DOCKING OF CGC DALLAS

Reports from people who were there indicate that Dallas was positioned with its stern hanging over the end of the dock, but its forward end was not in contact with the first 14 keel blocks.  There's a lot more besides this but it's not needed here.  This appears to have been a major screw-up and they are lucky nobody was hurt and the cutter was not badly damaged.  And still no report from CG Public Affairs, which is busy reporting on the Christmas decorations on the Mackinaw.  December 10, 2010.

ANOTHER $7 MILLION TO FIX PORT ROYAL

The Navy has added another $7 million to its contract with BAE Hawaii for fixing the damage done to the cruiser USS Port Royal (CG 73), when it ran aground as it left the shipyard in March last year.  This work is to be completed by end-February, almost two years after the accident.  Read the announcement here.  This add-on brings the total cost of shipyard work to nearly $34 million, by my count.  On top of this, of course, there are all the Navy's costs and the value of two years of unscheduled inoperability.  December 5, 2010.

WHY IS THE COAST GUARD EDITING THE NEWS?

I have commented before on the unsatisfactory nature of the Coast Guard's Public Affairs web site but I had never thought it to be unbalanced.  Until recently.  They seem to have stopped reporting commercial marine accidents.  Search-and-Rescue activity is still reported and reinforces the public image of the Coast Guard: they do a tough job and they do it well.  But an awful lot of what they put out nowadays is just PR rubbish.  Apparently it's important for us to know that there's going to be a Carol Service in the Academy chapel, but it's not important for us to know about accidents in U.S. waters involving commercial ships.  December 2, 2010.

DEKORT WINS CASE AGAINST LOCKHEED

The Deepwater whistleblower won.  Read the story on BusinessWire here.  Suits against NGSB and ICGS are still to be decided.  December 2, 2010.

DRY DOCK COLLAPSES IN TAMPA 

International Ship Repair & Marine Services, LLC, had an accident on Monday night, when its Dock #6 apparently broke its back while docking USCGC Dallas, (WHEC 716).  No announcements of any kind from anybody.  I  guess nobody needs to know.  December 2, 2010.

THE UAW LIVES ON MARS

If anyone could turn out a news story that was almost the exact opposite of the truth, it would almost have to be a labor union.  Nice people, of course, but they are adept at seeing facts where there were only rumors, firm commitments where there were only expressions of hope.  Click here to read the article "Northrop Grumman Won't Close LA Shipyard" in the UAW's newsletter.  It's shocking that they would build up the hopes of Avondale employees in this way.  December 1, 2010.

AMERICAN SHIPBUILDING ASSOCIATION CALLS IT QUITS

At its annual meeting yesterday, the ASA decided to fold up its tent and look for a different way of representing their members' interests, including their non-shipyard members' interests, in Washington.  The ASA was formed in 1995, when the "big six" walked out of the Shipbuilders Council of America.  The six all had different owner back then.  Happy days!  Hey, without the ASA, whose going to hand out the Herb Bateman award, which is given annually to the politician who pushed the most money towards shipyards?  December 1, 2010.

NGSB GETS FOURTH NSC

The Coast Guard has awarded a contract to NGSB for construction of the fourth National Security Cutter, or NSC, or WMSL.  Read the announcement here.  Note that this new contract includes options for ship 5 and for LLTM for ship 5 and ship 6.  The contract value is $480 million, with delivery in the first quarter of 2015, both of which figures are consistent with the shipyard's performance on ships 2 and 3.  It's not apples and apples, but the twelve WHECs - built by Avondale - that these eight WMSLs will replace cost $15 million each.  December 1, 2010.

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