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Shipping Business to San Diego

They are out on the ocean because the U.S. military plans ahead: A fleet of supply ships, carrying vehicles, helicopters, water, ammunition and other military equipment. They cross the oceans and sit in foreign ports, just in case the president decides to send U.S. forces into a global hot spot.

Meanwhile, big defense contractors have to plan with the instincts of generals and admirals. They want to be ready to serve the government when the Pentagon decides what the next-generation military logistics ship will look like.

If history is any indication, some of the work will go to San Diego-based National Steel and Shipbuilding Co.

Nassco, a unit of Falls Church, Va.-based General Dynamics, had $850 million in revenues during 2004 and employs 4,200.

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“I fully expect them (Nassco) to be a lead player” in the coming project, said Cynthia L. Brown, the president of the Washington, D.C.-based American Shipbuilding Association.

Stephen Clarey chooses his words with a little more care. “If the Navy decides to build a new class of military cargo vessels specifically for the sea-basing mission, then we would expect Nassco to play a significant role as a follow-on to our most recent (cargo ship) program,” said Clarey, Nassco’s director of marketing and business development and a retired rear admiral.

The most important word in the above statement, Clarey said, is “if.”

The company has been building logistics ships since the 1980s. “They are one of our core competencies,” Clarey said. Nassco is now at work on a $2.5 billion order of eight dry cargo/ammunition ships. The first of the 689-foot ships will be named Lewis and Clark. The ships are designed to hold 7,000 metric tons of dry cargo, plus cargoes of fuel and water. Each ship will have a diesel power plant capable of moving it at a speed of 20 knots (about 23 mph). The Navy has an option to order four more.

As yet there are no dimensions or names attached to the next-generation logistics ship, known in Pentagon lingo as “Maritime Prepositioning Force (Future)” or “MPF(F).” Brown said she expects MPF(F) will be a multibillion-dollar project.

Such a ship will be influenced by a concept that Navy and Marine Corps leaders are exploring. The concept is called “sea basing.”

Increasingly, military leaders are talking about large, specialized vessels positioned far enough beyond the horizon that they cannot be observed from a foreign coast.

The lesson of Turkey and Iraq has reinforced the sea-base idea, according to current and retired military officers.

In 2003, the Turkish Parliament refused to let the U.S. Army’s 4th Infantry Division cross into Iraq from Turkey. In planning for its invasion of Iraq that spring, the Pentagon had wanted to send equipment ashore at the Mediterranean port of Iskenderun. The plan was to cross through southern Turkey and cross Turkey’s border to Iraq.

Because of Turkey’s refusal, the 4th Infantry’s hardware was diverted from the Mediterranean Sea to the Persian Gulf. Instead of a northern entrance, the troops made a southern entrance, through Kuwait.

The incident was cited in an analysis of the sea-base concept written by Navy Lt. Cmdr. John Klein and Army Maj. Rich Morales in the January 2004 issue of Proceedings, a publication of the U.S. Naval Institute, a private organization based in Annapolis, Md.

Retired Vice Adm. Charles W. Moore, now an executive with Lockheed Martin, brought up the incident during a panel discussion on sea basing at the West 2005 military conference in February at the San Diego Convention Center.

Sea bases would let the United States stage its forces without having to get a “permission slip” from another country, said Clarey, attributing the phrase to the Navy’s top officer, Adm. Vern Clark.

The sea-base project certainly has Nassco designers thinking. Clarey said Nassco has already done 18 months of planning in anticipation of the government’s request. It has also marketed some preliminary concepts to the Navy and Marine Corps. Clarey would not comment on Nassco’s financial investment in the project.

The military envisions sea bases as alternates to port cities. They can be places where Marines can be paired up with their hardware, then sent into battle. They can be places where supplies are forwarded to troops and Marines. When the military leaves a region, it can take troops and equipment out of the area via a sea base.

One concept the military is evaluating for its sea bases is “selective offload” of cargo.

That means the capability of fetching exactly the item you want, as opposed to taking out unneeded cargo because it is in the way of the thing you want, then putting the unneeded cargo back where it was.

Nassco is investigating cargo-handling technologies for land-based warehouses to see if they’re adaptable for use on the seas, Clarey said.

As Pentagon leaders think, defense contractors have been presenting proposals.


Inside the Navy,

a product of Inside Washington Publishers, said in late February that Nassco parent General Dynamics has been talking up a concept that involves a trio of ships. One is a design based on an existing logistics ship. The other two are new concepts: a “connector” ship for ferrying troops and supplies to shore, and a combined command/troop/hospital ship.

General Dynamics owns three other shipbuilding companies: Maine-based Bath Iron Works, Connecticut-based Electric Boat and Massachusetts-based American Overseas Marine.


Competitive Business

Competitor Northrop Grumman Corp., based in El Segundo, has its own ideas for the sea bases, pitching modifications of existing ship designs. And other corporations are floating different ideas.

Norfolk, Va.-based Maersk Line Ltd., a unit of the Danish container ship operator Maersk, has proposed converting one class of its container ships into advanced forward support bases. An artist’s rendering of the conversion shows a new deck structure that could provide landing spots for 15 helicopters.

In the face of all this, the Pentagon may be changing course.

Last week’s issue of Inside the Navy suggested that the Pentagon may want to scale back its ambitions, use already-tested designs, and save some money.

Reporter Jason Ma quotes Gen. Michael Hagee, commandant of the Marine Corps, talking about the “sticker shock” associated with designing the perfect, new ship.

In the recent interview, Hagee also spoke of the military’s interest in “legacy platforms” , existing ship designs , with modifications.

So what does Nassco do, as its big client mulls its future? It waits, it listens, it plans for contingencies.

Clarey said Nassco’s overall business plan is to build military cargo ships and fill any gaps in production with commercial ship production.

But that may not be easy. Nassco has had to deal with cost overruns on recent commercial ship programs.

In its annual report to the Securities and Exchange Commission, filed March 4, General Dynamics revealed a $43 million loss during the second half of 2004 on Nassco’s program to build four oil tankers for London-based BP Amoco PLC.

And unlike the U.S. military, commercial ship lines have the option of buying from shipyards in other countries, which can provide their products at a cheaper price.

However, the law specifies that commercial ship lines must use American-built ships when transferring cargo between U.S. ports.

As a result, Nassco has built commercial ships for carriers that serve Alaska and Hawaii.

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