Just a quick note ... For those of you who continue to believe that foreign
shipbuilders can build naval vessels faster and cheaper than US builders, here’s
a data point. The newly specified MEKO
A-200 frigates for the German navy will reportedly cost $1.9B(USD) each for four ships
and you can bet your soul that cost will increase as work actually
commences. We’re looking at a $2 - $2.5B
frigate! Yikes!
At those prices, it actually makes more fiscal sense to buy Burkes, which can be had for the same money.
ReplyDeleteThe Chinese CAN build ships cheaper, but that ignores how their wages are significantly lower and their shipyards are eating gov subsidies, if not outright owned by the PLA.
I can't prove it but when all the subsidies, of various types, are figured in, I believe the Chinese ships cost about the same as ours.
DeleteThey find their ways to cut corners, for sure.
DeleteA Chinese acquaintance was in shock to learn the amount of gear we spend outfitting our troops; according to him, a PLA soldier's kit comes up to 500 USD per man, with a rifle that costs only 400 dollars. On the other hand the Type 95 is not a good rifle, and it has survived a lot of complaints purely on its cheap price tag.
It's a far cry from the M4A1, which I would argue is the platonic ideal of a mass issue service rifle, being accurate enough, reliable enough, durable enough, and most importantly, cheap enough, at 740 USD with government pricing.
European shipyards - and industry generally - have become internationally uncompetitive due to the very high costs of energy, wages + benefits, environmental compliance, fragmented supply chains and procurement policies favoring inefficient localized production.
ReplyDeleteChina however can build warships more cheaply than the United States because its prime cost inputs are much lower, with steel, energy and labor costs all around 50% below US equivalent levels. Additionally, Chinese shipyards are modern and efficient, designed to optimize hull throughput, and operate with a younger workforce with a high level of technical skills and formal qualifications.
Further, Chinese companies working in the defense space may be privately owned, but their focus is on fulfilling their obligations to the State and not the financial interests of their shareholders.
It’s always hard to do an apples to apples comparison, and subsidies do distort the picture, but a combination of all of the above factors give Chinese naval shipbuilding significant competitive and pricing advantages over US yards.
"China however can build warships more cheaply than the United States"
DeleteI doubt this is true to any significant extent. China subsidizes its shipbuilding to a massive extent and in ways we don't even consider.
There are also indirect subsidies. For example, China's nominal wages are claimed to be lower, however, China subsidizes housing, groceries, etc. and such subsidies are, in essence, wages for the workers. The wages are just paid indirectly through the subsidies instead of directly through a paycheck. Similarly, China subsidizes oil/gas, vehicles, etc. for the private sector (there isn't really a truly private sector!). China's weapon/military research is funded by the govt which alleviates the cost to weapon's manufacturers who don't have to pay for R&D. And so on.
If one could truly account for all the subsidies, I'm confident that their shipbuilding costs would be pretty much on par with ours. The costs are simply distributed versus our costs which are more concentrated and easier to see.
Yes, as noted and acknowledged, subsidies distort the picture.
DeleteHowever China can produce ships, including naval ships, more cheaply because of production system advantages not because of subsidies.
EG;
China has far a greater shipbuilding capacity than the US, which it runs at a steady ‘drumbeat’ pace, and lets shipyards spread overhead, optimize usage of capital equipment, and use labor more efficiently thereby lowering unit costs.
China’s shipyards are vertically integrated to a greater extent than US yards, reducing supply chain markups, third party delays/inefficiencies and shipping costs.
China’s shipyards are generally more productive than even their largest U.S. equivalents, supporting lower build cost and faster hull throughput (critical for warships where outfitting and combat systems integration dominate schedules)
China’s enormous manufacturing base (for steel and many other key supply-chain inputs) and its established local supplier networks reduce the bottlenecks and rework that inflate U.S. production timelines and costs.
China’s approach is to evolve a design over multiple builds, rather than attempting to design and construct multiple ‘first in class’ ships as the US tends to do.
There are plenty of other reasons to explain why the Chinese can build warships more rapidly and cheaply than the U.S. - subsidies are a small part of the picture.
DS
"China has far a greater shipbuilding capacity than the US"
DeleteYou're confusing production and cost. We've been discussing cost. Production is simply a matter of how many ships you want to build. It's a choice, not an inherent advantage. China chooses to build more ships therefore it builds more ships. The US chooses to build fewer ships therefore it builds fewer ships. Nothing inherent about it. China has no inherent advantage. It's just a choice.
Similarly, China appears to commit to a build and then, as best we can tell, leaves it alone whereas the US can't resist issuing hundreds/thousands of change orders which impacts cost and schedule. Again, this is not an inherent advantage, it's a choice. If the US would issue a contract and leave it alone, we'd build ships faster and cheaper.
"why the Chinese can build warships more rapidly and cheaply than the U.S."
China builds ships faster as a matter of choice. China does not build ships cheaper. You're ignoring the degree of subsidies present in the Chinese system.
Let me put it more simply.
DeleteYes - agree that China subsidizes its shipbuilding industry, including naval shipbuilding, along with many other areas of its economy (although not groceries).
A ‘subsidy’ is not easy to define, let alone measure, so the impact of these subsidies on the ex-yard cost of a ship is impossible to quantify.
However, China’s shipbuilding industry is far larger, and its yards are more modern and highly capitalized than in the US, so likely more productive.
Its workforce is younger (average age circa 35) than America’s (average age circa 55) and better trained, and has no issues with wasteful churn of entry level employees.
Its workers are highly productive and aligned with company objectives, not unionized with restrictive practices and featherbedding.
Chinese industry doesn’t spend much time or money on DEI, OHS, or Green initiatives nor does it pay its board members tens of millions of dollars in compensation.
Its shipyards work to a steady and efficient cadence delivering a guaranteed and predictable workload.
Many of its prime input costs are lower than America’s, not just thru subsidies but thru scale and efficiencies.
Add all these factors together and the result is likely going to be lower construction costs.
For the MEKO frigates, the numbers are very different, and despite heavy German government subsidies their shipbuilding industry is always going to be uncompetitive by international standards.
Let me put it even more simply. China's entire economy is government controlled and subsidized. It is impossible to determine the "true" cost of a Chinese ship other than to say it is much higher than what is publicly claimed.
DeleteYou are idealizing the Chinese shipbuilding industry and workers to a degree that is patently unrealistic. Do you think China has no problems, whatsoever, and that rainbows and unicorns shower their shipyards daily while the workers break into spontaneous patriotic songs? They have problems but those problems are not made public and any negative news is strictly censored. What those specific problems are, we don't know. That said, does China have some possible advantages? Likely so. As you note, their shipyards may be newer and may (or may not) be more efficient. This might account for a few percent cost benefit but isn't going to remotely confer the kinds of cost benefits publicly claimed.
As an example of hidden problems, recall the reports of the Chinese finding water in their missiles instead of fuel? Without a doubt, China has problems. It's just hard to get specific information about them.
Until you can produce actual costs with all subsidies included and actual labor hours, etc., I'll stick with the common sense that says costs are reasonably close for all countries when ALL factors are considered.
An interesting off topic note- but wasn't EMALS partially sold on the premise of gentler launches and extended airframe life??? I just caught this in an article this morning:
ReplyDelete"The trouble with the Ford-class EMALS is not that it can't launch Super Hornets into the air, but rather that it does so too harshly, putting undue wear and tear on the jets every time they take a 'cat shot.' Testing showed that F/A-18E/F Super Hornets and EA-18G Growlers carrying full 480-gallon external fuel tanks experienced severe, out-of-tolerance structural vibrations. In response, the Navy introduced a software patch intended to minimize vibrations without sacrificing launch power, according to Military.com. The specific concern with this characteristic is the stress placed on the jets when they are loaded with heavy underwing munitions or fuel tanks. The linear motor’s rapid acceleration profile induced a violent longitudinal harmonic oscillation. This 'pogo effect' generated excessive force on the wing pylons and fuel tank attachments, threatening to drastically reduce the fatigue life of the airframe, according to the USNI."
Wow... go figure. Even the selling points were fiction... as we all thought!
The "launch bounce" is a well known problem and was identified almost from the start. Supposedly, the problem has been "fixed" although there is no evidence of this. I don't know the current status of the issue. There did not seem to be an easy solution so I doubt that the problem has been resolved. This is why you don't commit to concurrent construction of multiple ships before the first one is fully designed and debugged. The magnitude of the stupidity of this, especially when talking about tens of billions of dollars of construction, is breathtaking ... but, sadly, no surprising.
Delete"wasn't EMALS partially sold on the premise of gentler launches and extended airframe life"
DeleteIt was and that was complete fiction from day one. The current steam cats don't shorten airframe life so EMALS, even if it did produce gentler launches, gains us nothing. Airframe life is limited by cumulative wing stress from maneuvering g-forces not catapult launches.
The Navy solved that launch problem by not putting external tanks on F-18E/Fs. I once researched the EMALS issue and wrote an article. EMALS had failed ground tests at Lakehurst before construction of the Ford began. They decided the issue could be fixed eventually.
Delete"The Navy solved that launch problem by not putting external tanks on F-18E/Fs."
DeleteSo they arent using Hornets for 'buddy tanking' anymore then?
"The Navy solved that launch problem by not putting external tanks on F-18E/Fs."
DeleteThat was the immediate, short term "fix" but was never intended to be the permanent solution. Supposedly, the software could be adjusted to provide a permanent solution but I've seen no follow up claiming that succeeded. My strong suspicion is that the problem remains.
"So they arent using Hornets for 'buddy tanking' anymore then?"
DeleteThis is an issue ONLY for the Ford class. The Nimitz class can launch aircraft with external tanks just fine.
This also raises the question, is the same problem present for aircraft that launch with, say, bombs instead of fuel tanks? One would assume a fuel tank and a bomb are similar size, shape, and weight and would result in the same "bounce" issue on launch. In other words, how is Ford launching aircraft with weapon payloads? Are they simply accepting the bounce for the time being and hoping to eventually have a solution? Did they come up with a solution? I don't know.
One thing that doesn't help is the fact that none of the Eropean navies buy ships in large quanties to would help lower material costs, hence unit cost.
ReplyDeleteThe FREEM frigate comes close, but even then the French and Italian variants vary in terms of propulsion, electronics, and armament. For example, the French ships use CODLAG and the Italians use CODGAG.
"Eropean navies buy ships in large quanties"
DeleteThe portion of your statement that I've put in quotes is true. HOWEVER, the rest of your statement that larger quantities would lower costs is technically true but likely not significant. This gets into accounting. Conceptually, buying two of something instead of one will result in a lower price for both but it's on the order of a few percent, not half off or something of that magnitude. In other words, buying multiple ships will, theoretically, save a few percent around the periphery but that doesn't significantly impact the ship's cost. Whether you buy one hull or twenty, the number of hours to fabricate and assemble the hull doesn't change. Perhaps you'd get a very slight discount on the steel (likely not) but that's all.
There are some cost savings to be had from dispersing the yard's overhead over a larger number of ships although, if the yard is continually busy that doesn't even apply.
The real savings would come from "amortizing" the R&D costs over a larger number of ships. That's significant but that's also not really the production cost of the ship although it is the cost of the overall acquisition program. This is just a matter of accounting and definitions. Do you consider R&D part of the ship's cost? If so, larger numbers will disburse those costs and make it appear as if you've "saved" money although the ultimate total remains the same. Do you consider R&D NOT part of the ship's cost? If so, larger ship numbers don't matter.
Here's a concrete example. The Zumwalt was originally priced for 55 ships. At around $4B per ship plus $12B R&D costs, the overall program cost would have been $4B + $12B/55 = $4.2B per ship. Instead, the Zumwalt was terminated at 3 ships at $4B plus $12B R&D for a program ship cost of $4B+$12B/3 = $8B per ship. See how that works?
We have never seen a demonstrated cost savings due to larger production runs. The closest I've seen is the Burke class which, over a run of some 80 ships has claimed to remain nearly the same unit cost although the Navy has thoroughly gimmicked the accounting that it's impossible to be sure. I did a post proving that our continual carrier production has not only NOT resulted in reduced costs but has seen the cost rise significantly more than the cost of living!
Okay, did you understand that or was it too confusing?
When we had a steady production run of Burkes, the costs of the final batch were actually lower than the inflation adjusted average - not by much, but a couple hundred million is a couple hundred million. The Restart and Flight III ships lost those cost savings.
DeleteNo, not really. The Navy started engaging in accounting gimmicks like more GFE, phased delivery, incomplete construction deliveries, deferred construction that came out of other budgets, etc. The cost seemed lower but wasn’t. It was just distributed and hidden.
DeleteThis is totally O/T but a few months ago you wrote a post in which you criticized the government for allowing the SPR to fall to dangerously low levels.
ReplyDeleteThis was extremely prescient of you!
The levels are now a heck of a lot lower than they were then!
Well, the actual cost of a MEKO is €1.57 billion under the proposed contract. It would have been €130 million lower if Germany had committed to eight instead of four units. If you further deduct non-ship-related costs, such as bank guarantees, you arrive at a unit price of roughly €1.4 billion, which is about US$1.6 billion.
ReplyDeleteThat is for a ship fully fitted with a complete ASW suite, a 32-cell strike-length VLS, a 5-inch gun, and so on. That actually represents good value. And since it is a tried-and-tested design, the risk of delays and cost overruns is rather low. I think it is quite a good deal if you compare it to the FF(X) cutter or the FFG-62 disaster.
"If you further deduct"
DeleteWhat a ridiculous line of reasoning. You're hand-waving away reality. If a ship build requires bank guarantees (whatever those are?) then that's part of the cost of building the ship. Similarly, you're using costs for a non-existent production run of a non-existent number of ships.
You can do the same for the US. If we actually built the full 32 Zumwalts, they'd be a lot cheaper. If we didn't have some of our restrictive shipping laws and OSHA regulations, production costs would be lower. If we hadn't issued a thousand change orders for the Constitution frigate, it would have cheaper and done by now. And so on.
I'm sorry but reality is reality. If all those things actually exist then they're part of the cost of the ship. You can't hand-wave them away. If you do, you're just making up stuff to fit what you want to say.
Well, sticking to the facts: Germany actually intends to buy eight MEKOs this year. They're just ordering four now and the other four later in the year. Across the full program, the price is about €130 million lower per ship. Whether that's a good decision or not depends on your risk appetite, and the same applies to the bank guarantees.
DeleteAll in all, it's good value for money and nowhere near your predicted 2.5 billion.
I mean, if you want examples of foreign procurement programs that have gone wrong, take the F126 program in Germany. But don't use one of the few genuinely sensible procurement decisions as an example of something it isn't.
.
Well, sticking to the facts, which you're not since you're still dealing in hypothetical quantities, the ACTUAL contracted amount is $1.9B USD. Since no modern naval ship acquisition program has ever come in at the initial contracted price, that $1.9B cost WILL increase. That's a fact. What's unknown is the final cost and typical ship overruns strongly suggest a final price of $2B - $2.5B..Germany may or may not ever order additional vessels but the FACT is that they have not, as yet. If they do order additional ships, the supposed cost savings for buying 8 instead of 4 will no longer apply and a new contract will be issued at, presumably, whatever the final cost of the initial ships turns out to be.
Delete" nowhere near your predicted 2.5 billion."
Setting aside the near certainty that the final cost WILL be near that figure, you'll note, as a matter of FACT, that my prediction was not $2.5B. It was a range of $2B - $2.5B. Given the contract price of $1.9B and the certainty that the price will increase, the low end of my prediction is a near guarantee and the high end is quite likely.
You might also note this quote: "[The German procurement ministry] has attached conditions to this authorization due to a 70 percent cost increase over initial plans ..."
And, "As reported by hartpunkt, the fact that the unit price of a MEKO frigate has risen by around 70 percent—to approximately 1.57 billion euros—contrary to the manufacturer’s initial estimates, ..."
What's the likelihood that there will be no further cost increases? That's right - zero.
This demonstrates the magnitude of typical shipbuilding cost increases and the belief of the German ministry that costs will likely increase. If you care to check the FACTS, here is the article: https://www.navalnews.com/naval-news/2026/07/german-budget-committee-approves-f128-frigates-conditions
" value for money"
Value is a subjective, debatable matter. A frigate that costs 2/3 - 3/4 of a Burke and has 1/3 - 1/2 the capability seems like poor value. However, you're welcome to your opinion on that.
The next time you claim facts be certain they actually are. I'll say it again, the FACT is that 4 ships being ordered, not 8.