By Geoff Fein
The Navy and the shipbuilding industry need to get into serial production that could also include moving to common hulls forms to keep production costs down and enable investment in facilities, according to a Northrop Grumman [NOC] official.
Additionally, thinking about return on investment over a class of ships could get at some of the issues impacting shipbuilding, Mike Petters, president of Northrop Grumman Shipbuilding, told Defense Daily earlier this week.
There’s a broad agreement, philosophically, that if the Navy and industry can get to common hull forms and reduce the number of different type model series, the two sides can save some money and industry can become more efficient and plan its capital, Petters said.
“The question is, how do you do it given the dynamics of our requirements? They change all the time, and I think that’s a fact of our business,” he said. “I think it’s a bit naive for any of us to step back…and I have heard people say this…. ‘we need to freeze our requirements.’ That’s naive.”
The shipbuilding business is such that the requirements are going to evolve every single day, Petters noted.
Petters recalls back when there was electronic countermeasures, and then electronic counter countermeasures, and then electronic counter counter countermeasures. “You sit there and say, ‘when does this end?’ And it never ends. My view is, the requirements, they are dynamic and that’s a part of…that’s part of who we are…being able to respond to dynamic requirements.”
On the other hand, Petters added, “we have a national acquisition system that really makes it hard.”
Last fall, Petters spent some time at the shipyards in South Korea. The successful commercial yards, he noted, have adopted this type model series approach that basically builds one type of ship. “The only changes are maybe cosmetic. They only have a couple of different weld processes in the yard. They only use a couple of different plates…steel plate thicknesses.”
And the commercial business is segregated from the Navy work, Petters added.
“What I saw there was their ability to invest in their facilities and their ability to invest in their producability, being driven by the fact that they could project their order book out many, many years and they could see that,” he said.
One company Petters visited had 300 ships in their order book. “If you have 300…even if you had 100 ships in your order book, you could decide you want to go buy a new crane that is going to improve the efficiency of production by one-tenth of one percent, and do that across 100 ships, and you just paid for your crane. Capital becomes free to you.
“Our system, while we may have 30-year plans, we may have thoughts of how do we truncate the programs from 11 different kinds of hulls to five different kinds of hulls to two different kinds of hulls, but we buy one at a time,” Petters said. “All those investments around capital and producability and production engineering and planning…we have to justify those on that first ship or we can’t afford to do it.”
That is really the “nut” the Navy and industry have to crack, Petters added.
“We could create platforms that are widely flexible to handle lots of different kinds of capabilities and mission and systems. We can do that on the platform side, but we can’t do it if you only buy one ship at a time,” he said.
The Navy has been looking at using either the LPD-17 hull or the T-AKE hull for the joint command ship replacement (LCC-R). And the service is also looking at using the LPD-17 hull for the future LSD-X. That could mean that instead of building 10 or 11 LPD-17 hulls, the Navy could actually build 30, Petters noted.
“If we knew today that we were actually going to build 30 of those hulls we would have a different investment strategy and we would have a different strategy for production engineering and planning for the ships than we do when we are only buying them one at a time,” he said.
The submarine program figured this out, Petters said.
“What they figured out was, even though we are going to buy these ships, they are not buying them one at a time. They are really buying them in blocks,” he added. “They created [the] CAPEX (Capital Expenditure) program that doesn’t look at the return. You don’t have to capture the return on investment on the first ship or even on the block. You are allowed to calculate the return on that investment across the whole 30-ship class. And if you can show a positive return on investment across 30 ships, the government says ‘that is good for you and it’s also good for me and we are going to invest with you.’ Great program…absolutely a great program, but the key is they understood you really have to look at the return on investment over the class.
“If we can start thinking of return on investment over the class of ships, I think you could get at some of the efficiency issues, some of the common hull issues, those kinds of things,” Petters added.
The submarine program also learned they better find a business plan that allowed them to proceed as quickly as they could into series production and then to get the volumes to a level where they could manage their rates, Petters said.
“So the CAPEX program was developed. The business deal between Newport News and [General Dynamics] Electric Boat was created, and the push to get to two subs a year to mange the volume. All of those were done in the mid ’90s. Here it is 2009 and we are seeing the fruits of that,” Petters said. “Carry that over to the destroyer business. If we really are going to truncate the [DDG-] 1000 program, what lessons are we going to learn from that? Are we going to restart the [DDG-] 51 program? How are we going to make sure that we looked at this program from a long-term perspective? If all we do is turn around and take a check out of the DDG-1000 program and then go try to throw it at the supplier base and say ‘okay manufacturer a [DDG-] 51 for us again.’ My view is that that would be a big disappointment for everybody.
“But if you take the opportunity to do some of the other things, create an opportunity for production engineering or create the opportunity for capital improvement to drive out the efficiencies in that program, and think about it as a long-term program and not a first ship or first two ships, or something like that, then I think you might have a chance to be successful with it,” he added. “If you don’t do that, then the surface combatant business will continue to be on life support.”
Northrop Grumman Shipbuilding has about $23 billion in orders on the books, Petters said “And the beginning of next year we will be right about that too.”
“We had a very big year in orders last year with the carrier construction contract and the submarine construction contract. The challenge the shareholders have given us is that we have to execute that $23 billion of work better than we have executed the last $23 billion worth of work,” he said. “So we are using…the last half of last year and this year to put in place the things we need to go do to make that happen.”