Shipbuilders gear up for more work, missile cleared for foreign sale, exports to UAE, and more.

There’s an optimism among the dark-suited business executives meandering among the model ships, missiles, and drones at this naval conference in the Washington suburbs. It’s because the U.S. Navy says it wants 355 ships, big ships, 80 more than it has today. And companies say they are ready to build them.

The Crystal City, Va., conference was put on by the Surface Navy Association, a group that advocates for surface warships and those who fight in them. Huntington Ingalls Industries employees at the event were quick to point out how the firm’s shipyard in Pascagoula, Mississippi, is operating at just 75 percent capacity. There they build Arleigh Burke-class destroyers, amphibious transport docks, big-deck amphibious assault ships and Coast Guard National Security Cutters.

Earlier in the week, General Dynamics — the Navy’s other big shipbuilder — told lawmakers the firm was preparing to drastically expand its operations. Sen. Chris Murphy, D-Conn., reported that the firm would hire 2,000 new workers in this year, including 1,350 in Connecticut, where the firm’s Electric Boat division builds submarines. That’s the start of a plan to add 14,000 jobs in the next decade, Murphy said in a statement. The company had already been gearing up to build the new Columbia class of ballistic-missile subs, which will replace the venerable Ohio boomers.

“Manufacturing at Electric Boat and its hundreds of suppliers across the state is booming,” he said. “The Navy is committed to our submarine force for defense at sea, and we’re positioned better than ever to meet that demand.”

It’s not just the shipbuilders. BAE Systems, which does lots of maintenance on American warships, has poured $100 million into its shipyard in San Diego to add, among other things, a 55,000-long-ton floating drydock that can lift most of the Navy’s ships. The company made the investment even before the Navy said it wanted 355 ships, in part to meet the shift to the Pacific.

At SNA's opening day on Tuesday, Vice Adm. Tom Rowden, commander of Naval Surface Forces, talked about the prospect of expanding the Navy’s fleet of surface warships. In the Q&A, analyst Norman Polmar noted that aircraft carriers, attack submarines, and a new generation of ballistic-missile submarines will consume planned shipbuilding budgets. Responded Rowden: "If it’s going to take increased resources, then we have to go find more resources."

Wall Street is betting that the money will turn up. We noted last week that stocks for ship makers are performing well above the market average since Donald Trump was elected president in November. Huntington Ingalls is up nearly 27 percent since then while General Dynamics has risen more than 15 percent, far better than the overall market’s single-digit performance.

Trump’s critical tweets about the F-35 Joint Strike Fighter and a new Air Force One have tamped expectations of a blank check for defense firms, but folks here see shipbuilding as a safe bet.

The Importance of Work

Deputy Defense Secretary Bob Work and a few other Obama political appointees are likely to stick around for a few months during to help with the transition, according to the Washington Post, CNN, and Fox News. That means something.

Work is the guy who manages the Pentagon and is well-versed in the Pentagon’s budget. Just days after Trump was elected president, there were whispers that Work would be the best person to remain throughout the transition.

Keeping Work around a little longer bodes well for the Third Offset initiative, his effort to develop leap-ahead technologies to give the U.S. military an edge on the battlefields of the future. This is hardly a new concept, but having someone at Work’s level in charge elevates its priority, which really helps in a budget fight.

On a flight to the West Coast last month, I asked Work what might happen to the initiative in Trump’s Pentagon. “I don’t know if it’s going to still be called Third Offset,” he said, “but I do believe that the whole thrust of trying to extend our conventional overmatch is exactly what I think the service chiefs and the chairman and certainly this secretary and me have believed is very strong.”

In early meetings with the transition team, Work said, “We’re making as strong as a case that the [Third Offset] work that we’ve done we consider foundational and that it was specifically designed for any administration to take it in any way that they wanted to go.”

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SM-6 Approved for Foreign Sale

The SM-6 Standard missile, designed to bring down aircraft and other missiles, is on a roll. Last year, we learned the Pentagon and Raytheon had secretly modified the shipboard missile to sink enemy ships as well. And the missile broke its own record for the longest-range surface-to-air intercept.

Now the U.S. government has OKed the missile for foreign sales. A Raytheon statement named no potential customers, but said, “International navies are seeking the level of sophisticated protection that SM-6 provides.”

Raytheon builds the missile at a factory at the Redstone Arsenal in Huntsville, Alabama. I visited the plant, which also makes the SM-3 interceptor, in 2014. Two takeaways: Robots move the missiles between assembly stations, eliminating some human work and lowering the possibility of an accident. Second, everyone who works at the place backs their cars into parking spaces, allowing them to flee more quickly if something at the factory goes wrong.

It’s also worth noting that the plant was designed for expansion. If foreign orders arrive along with additional U.S. Navy ships, that factory could find itself growing soon.

Analysis of US Arms Deals with UAE

Bill Hartung with the Center for International Policy has a new report out today (Jan. 12) about American arms deals with the United Arab Emirates. “[T]he UAE’s increasingly effective military capabilities and growing regional security role deserve closer scrutiny, both because of their impact on the future of the region and their implications for the future of U.S. arms transfer policy,” he writes.

Large sections of the report focus on UAE’s participation in the Saudi-led campaign in Yemen, a war that Hartung notes has had “devastating humanitarian consequences.” Here are some highlights:

• The Obama administration has offered more than $25 billion in weaponry to UAE since 2009. Only Saudi Arabia, Qatar and Iraq have been offered more arms.
• Major items include 97 Apache attack helicopters, 30,000 bombs, 4,569 MRAP armored vehicles 16 Chinook transport helicopters and the THAAD missile defense system.
• UAE military spending has more than doubled over the past decade, from $9.7 billion in 2005 to $22 billion in 2014.
• American defense firms that have benefited the most: Lockheed Martin, Boeing and Raytheon

Also worth pointing out that the U.S. relies on Al Dhafra Air Base near Abu Dhabi as a hub for launching and supporting missions in Afghanistan, Iraq, Syria, and the horn of Africa. Two years ago, I wrote about how U.S. defense firms were putting down roots in the UAE in hopes of garnering more business. The UAE also hosts one of the largest arms show in the world.

Northrop Selling Commercial Cyber Business

Northrop Grumman is selling its commercial cybersecurity business, leaving Raytheon and Leidos as the two large defense firms still in the space. Last summer at the Farnborough Air Show in England, I asked Tom Kennedy, Raytheon chairman and CEO, about his firm’s doubling down on cybersecurity work. “The bottom line is cyber is in all elements of our business,” he said. “How could we even not do the commercial stuff. It’s just an inherent core competency that we’re applying in all our domains.”