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Navy Working with GD on DDG-1000 Prices

The U.S.Navy had originally planned to begin mass production of the DDG-1000 class in the early part of this century. The new ship would begin to replace the AEGIS cruisers and destroyers built since the late Seventies. The DDG-1000 would offer a more stealthy design, new power plant and improved radar over the existing DDG-51 Arleigh Burke class.

The first of the new Zumwalt class of destroyers was built at General Dynamics’ (GD) shipyard in Maine operated by their subsidiary BIW. The Obama Administration due to budget issues and cost and schedule growth for the new ship decided to end production after the second was built. Congress in 2008 disagreed and added DDG-1003 to the budget. All three would be built at BIW.

Instead of entering series production of the new class the Navy would continue to order the substantially cheaper DDG-51 ships built not only at BIW but also at what is now Huntington Ingalls Industries (HII) at their yard in Pascagoula, MS. HII used to be part of Northrop Grumman (NOC) but they spun off their ship building arm into a separate company earlier this year. The Navy planned to continue competitive production of the new destroyers as in the past between the two companies.

Unfortunately for BIW the Navy and GD have yet to be able to negotiate a price and award the contract for DDG-1002 and 1003. This is delaying start of production of the two new ships and causing concern at BIW and in Maine that it may make it hard for them to compete for the new DDG-51 production that would follow the completion of the DDG-1000 ships.

Reportedly the two sides are quite far apart on the actual price for the two ships. The first cost almost $2 billion and these two due to the fact that they are follow on should be cheaper but the truncated production of only two more in the class will cause prices to rise due to the limited requirements for sub-contractors and suppliers.

There are also starting to be concerns that the latest planned “Flight III” of the Arleigh Burkes may not be large enough to carry all of the equipment the Navy desires. This includes a new radar, Air and Missile Defense Radar (AMDR), under development to support the missile defense mission of the ships. This might mean the need for a new destroyer or continued production of the DDG-1000 although that is well in the future.

The Navy faces a challenging ship building situation over the next several years. New ships have proven to be very expensive and the budget may be limited due to the U.S. financial situation. This may limit what can be built among the planned classes of aircraft carriers, destroyers, Littoral Combat Ships (LCS), amphibious warfare and support ships. The need for the Navy to get the best price possible for the DDG-1002 and 1003 is affecting the contract negotiations and may ultimately the whole destroyer program in the near term.

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Northrop Grumman’s Shipbuilding Spinoff Proceeds Smoothly

The first major shake up in the U.S. defense industry since the implementation of the reforms by Secretary of Defense Robert Gates completed last Thursday as Northrop Grumman (NOC) spun off its shipbuilding arm to its shareholders. One of the biggest defense contractors in the world the company had announced last year that they were looking at leaving the business of building warships primarily for the U.S. Navy due to contraction in that service’s plans and expected budget reductions in the future.

As soon as the transfer of the assets to the new company, Huntington Ingalls Industries (HII), was complete the U.S. Navy followed up with the announcement of an order for the tenth San Antonio class amphibious assault ship, the U.S.S. John P. Murtha. The $1.5 billion ship is named for the former Congressman from Pennsylvania and Marine Corps veteran. Huntington has also inherited four other LPD-17 class ships already under construction at their Pascagoula, MS and Avondale, LA yards.

Prior to the decision to spinoff the business Nortrop had announced plans that they would consolidate their capabilities which would lead to the closing of the Avondale facility. This is still on track to be done by 2013 but the new company says there are opportunities to keep it open if viable work can be found for the shipyard. As well as the two Gulf Coast yards Huntington Ingalls now also operates Newport News shipbuilding which constructs aircraft carriers.

The decision by Northrop has led to rumors that the remaining company now separated from its services arm, TASC, and no longer building ships might be planning on merging with one of the other large defense contractors such as Boeing (BA), Lockheed Martin (LMT), General Dynamics (GD) or Raytheon (RTN). Moves like that were not uncommon in the Nineties when last the defense budget declined precipitously. This time around, though, the Pentagon has made it clear that it does not want to reduce industrial base capabilities and may not allow such mergers.

Huntington Ingalls must compete with primarily General Dynamics for a small shipbuilding budget for cruisers, destroyers and larger amphibious ships. The Navy is building at least twenty Littoral Combat Ships (LCS) over the next several years but these are smaller combatants made in smaller yards owned by Austal America and Marinette Marine. The U.S. if it wants to preserve industrial base must award enough ships to keep both companies going and their yards open.

Photo from surfaceforces’ flickr photostream.

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VT HALTER MARINE WINS US$165M CONTRACT TO BUILD 4TH FAST MISSILE CRAFT — Press Release

VT HALTER MARINE WINS US$165M CONTRACT TO BUILD 4TH FAST MISSILE CRAFT

Bringing total project value to US$807m

Pascagoula, MS, 29 March, 2010 – VT Halter Marine Inc. (VT Halter Marine), a subsidiary of VT Systems Inc. (VT Systems), today announced that it has secured an undefinitized contract in excess of US$165m with the US Navy for a fourth Fast Missile Craft (FMC) for the Egyptian Navy. This most recent contract brings the total value for the FMC project to approximately US$807m. Work on this fourth FMC will commence by mid 2011 and delivery is expected by end of 2013. VT Halter Marine has begun construction on the first FMC which it expects to deliver by mid 2012.

VT Halter Marine announced on 1 December 2005 that it had secured the initial Phase I functional design contract for approximately US$29m. Two subsequent contract modifications were awarded in November 2006 and June 2007 respectively for procuring the FMC project’s long lead items which added US$206.5m to the contract. Subsequent changes in the scope of work further increased the Phase I contract value to US$249.2m. With the award of Phase II of the FMC project in September 2008, the total contract value awarded to VT Halter Marine for the first three FMCs amounted to US$642m. This latest US$165m contract reflects non-recurring cost reductions from the first three vessels contracted earlier and government furnished equipment which was previously provided by VT Halter Marine.

The FMC is designed to perform coastal patrol, surveillance, interdiction, surface strike and naval battle group support for the 21st century. The vessels will allow the Republic of Egypt to maintain the security of its coastal regions for both itself and friendly countries, while denying access to the areas by any potential adversaries. Each vessel will be approximately 62m in length and will incorporate ship signature control technology. High speed and maneuverability are two of the ship’s primary assets to fulfill these roles. The vessels will also incorporate numerous combat system assets and electronic sensors, equipping the vessels with capabilities in anti-aircraft, anti-surface and electronic warfare.

“Halter Marine is proud to partner with the US Navy in the construction of a fourth state-of-the-art FMC vessel, contributing towards the US Government’s maritime strategy which helps to secure partners around the world.”

~Bill SKINNER

Chief Executive Officer, VT Halter Marine

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VT Halter Marine, the marine operations of VT Systems, is based in Pascagoula, Mississippi and is a leader in the design and construction of medium-sized ships in the United States. VT Halter Marine designs, builds and repairs a wide variety of ocean-going vessels such as patrol vessels, oil recovery vessels, oil cargo vessels, ferries, logistic support vessels and survey vessels. Please visit www.vthaltermarine.com.

VT Systems is a diversified company providing solutions to the commercial and government markets in the aerospace, electronics, land systems and marine sectors. VT Systems products and services include aircraft inspection, maintenance and modification; software solutions in training and simulation; satellite-based IP communications technology; network solutions that integrate data, voice and video; rugged computers and computer peripheral equipment; specialized truck bodies and trailers; weapons and munitions systems; road construction equipment; and shipbuilding. Headquartered in Alexandria, Va., VT Systems operates globally and is a wholly owned subsidiary of ST Engineering. Please visit www.vt-systems.com.

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