David Soyka goes aboard this premier supplier for the U.S. Navy to see how it keeps business afloat in building some of the most technologically advanced vessels throughout the seven seas.
While the defense department and government contracting in general are tightening their budget belts, even cancelling programs in some cases, shipbuilder Marinette Marine Corporation’s (MMC’s) recent award to construct 10 Littoral Combat Ships (LCS) for the U.S. Navy helps assure some safe sailing ahead in economically troubled waters.
“The LCS is an affordable, multi-mission ship that is very important to the future of the Navy and its mission to maintain 313 hulls in the water deemed necessary to the nation’s defense on the high seas,” says Richard McCreary, president and CEO. “LCS is expected to represent 25 percent of that number.”
Specifically, LSC is a highly maneuverable and survivable, semi-planing steel monohull capable of speeds well over 40 knots designed to support launch and recovery operations of manned and unmanned vehicles. The range of LCS missions include mine, anti-submarine and surface warfare, as well as maritime interdiction and humanitarian disaster relief.
He adds, “Today’s defense contractors are challenged to develop technologically highly sophisticated vessels in a highly cost-competitive global environment. With the LCS award, we’re ideally positioned in the market to provide ships at the scale that the Navy is increasingly moving towards. LCS is a transformational program intended to, among other goals, reduce by half the time from concept to fleet. In contrast, we wouldn’t want to be on the other end of that spectrum where the situation is more uncertain, for example, the very pricey modernization of large complex ships such as the Aegis-class destroyers where margins are thin and program cutbacks possible. We are of course watching very closely the federal funding of defense contractors, but we feel we are in a very good situation to meet the country’s needs with cost effective services.”
McCreary attributes this to modular construction approach that depends on a large degree of pre-outfitting. “The more you can do early on in a modular system drives out costs and improves efficiency when you get down to final construction,” he says. “MMC is recognized around the world for our innovative and highly efficient modular subassembly and assembly-line manufacturing techniques. This sophistication in construction methods enables us to build some of the most technologically advanced vessels at highly reasonable price points.”
MMC is constructing the ships for lead contractor Lockheed Martin, which has a fixed-price-incentive-fee contract value of $437 million to build the first of the 10 ships; if all contract options are exercised, the total value of the ship construction portion will reach approximately $3.6 billion. The LCS team also includes naval architects Gibbs & Cox.
McCreary notes that MMC has a longstanding relationship of successful partnerships with Lockheed Martin, which includes building the nation’s first LCS, the USS Freedom that was commissioned in September 2008. “Our experience in building the USS Freedom has led to additional cost-reduction and efficiency improvements in constructing the next vessels. The third LCS, the 389-foot Fort Worth, is about 80 percent complete after only 20 months of construction and is on-schedule for delivery in 2011,” McCreary notes.
MMC is located along the Menominne River in Marinette, Wis. On 65 acres with 300,000 square feet of climate controlled manufacturing space and 53,000 square feet of warehouse and receiving space. “We are a $300 million a year company,” says McCreary. “We currently have 1100 employees, but with the LCS contract going forward to 2013, we expect to grow to about 2,000 employees with annual revenues of about $500 million.”
The MMC shipyard was founded in 1942 with an initial contract to build five wooden barges and has since built more than 1500 vessels evolving into a world class naval construction yard. Its portfolio includes the improved Navy Lighterage System, mine countermeasure vessels and ocean tugs, U.S. Coast Guard icebreakers, buoy tenders and response vessels, as well as commercial transports such as the Staten Island Ferry.
Owned by various entrepreneurs throughout its history, MMC was purchased in 2000 by the Manitowoc Company, a crane manufacturer and food service products provider. Effective at the start of 2009, MMC was acquired by Fincantieri-Cantieri Navali Italiani SpA, one of the world’s most prominent and diversified shipbuilding groups, and is part of its subsidiary Fincantieri Marine Group.
Recent Fincantieri investments in MMC as part of a five-year, $100 million plan to modernize its U.S. Shipyards have doubled the shipyards production capacity, which allow for higher levels of pre-outfitting for modular construction and enable larger sections of a ship, such as the pilothouse, to be erected prior to the ship’s launch.
“As a defense contractor, we are under stringent agreements that ensure there are no foreign controlled influences on MMC,” McCreary explains. “That means that although two representatives from Fincantieri sit on our board of directors, and we do share some business information with them, MMC operates as an independent entity.”
In addition to its LCS work, the company currently engages in three other major programs. The University of Alaska recently contracted with MMC to build the Alaska Regional Research Vessel (ARRV) Sikuliaq, a 254-foot ice-capable oceanographic research ship designed specifically to operate in seasonal Arctic sea ice and open waters surrounding Alaska. Designed as one of most technologically advanced oceanographic vessels in the world, the Sikuliaq will have 2100-square-feet of onboard science labs with advanced over-the-side and stern handling systems for science equipment deployment. Projected to carry more than 500 researchers and spend as many as 300 days a year at sea, the Sikuliaq is designed for low environmental impact, including reduced underwater radiated noise levels for improved fisheries and acoustics research. Expected delivery is 2013.
Teaming with Boeing Integrated Defense Systems, MMC is also part of the Navy’s Ship-to-Shore Connector (SSC) program intended to provide a lower cost, higher availability, next generation platform for a hovercraft to replace the existing Landing Craft Air Cushion. The SSC is intended to serve as a low-flying, high load carrying rotorcraft. MMC is the prime contractor and hull form shipbuilder, while Boeing will design and supply the rotorcraft systems.
MMC is also the prime contractor and program manager to build nine Response Boats-Medium (RB-M) 45 foot ships capable of 45 knot speeds for the Coast Guard. The $19.3 million contract is part of a multiyear contract for the construction and delivery of up to 250 of these vessels at a total contract value of up to $600 million. Delivery is expected in the third quarter of 2011.
“We’re very pleased to continue our longstanding and successful relationship with the U.S. Coast Guard,” says McCreary. “The addition of the RB-M boats to our existing backlog of work is an excellent endorsement of our capabilities, service and quality and our ability to partner in the fixed price design, construction, and delivery of a new class of boats on schedule and on budget.”
Another factor working in MMC’s favor for future federal contracts is that it is one of the largest employers in the Wisconsin-Michigan area. “Unfortunately, we have a high unemployment rate. That gives us a large labor pool to draw upon, and we work actively with the state to provide training programs for people to get the skills they need to work with. We’re looking to hire on average 40 new people a month. Our state representatives and senators in Congress are very aware of how crucial MMC is to the local economy and employment picture, and they have been active advocates for us.”
He adds, “While price is always going to be a major decision point, the Navy and the government in general are changing the standards to consider other value-adds, such as speed-to-market. MMC is a solutions provider that excels at providing high quality at cost-effective levels, and with quick delivery times. For the LCS program, we’re estimating about 30 months for delivery time. We could speed that up even more if some issues that we can’t control could be improved. For example, lead time on some equipment, such as gearboxes, is as much as two years or longer. If our suppliers could improve on that, we could deliver even more quickly.”
Navigating fiscal defense spending constraints may have some rough seas ahead, but McCreary is confident that MMC will weather the storm. “Budget deficit concerns must be balanced against the needs of national defense,” he says. “MMC is a contractor with a proven track record that you can do both.”