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Why Is the U.S. Navy Rethinking Its Future Surface Combatant Fleet?

An MH-60R Seahawk assigned to Helicopter Maritime Strike Squadron (HSM) 73 flies in front of the littoral combat ship USS Freedom (LCS 1). Photo credit: U.S. Navy photo by Mass Communication Specialist 1st Class James R. Evans. 

According to the Government Accountability Office, or GAO, Lockheed Martin's (NYSE: LMT  ) Littoral Combat Ship, or LCS, is supposed to be reconfigurable to perform three different primary missions: mine countermeasures, surface warfare, and anti-submarine warfare.

Additionally, the LCS is supposed to accomplish this goal by having two distinct parts: the seaframe, which is available in either a Freedom or Independence variant (the Independence variant was designed and built by Austal USA and General Dynamics), and an interchangeable package called a "mission package," which consists of different weapons, sensors, and aircraft. 

Thanks to its ability to meet three main goals, the LCS is supposed to represent a "large portion of the Navy's future surface combatant fleet." Unfortunately, the ship doesn't exactly work like it's supposed to. Consequently, the Navy may be looking for an LCS alternative, dubbed the Small Surface Combatant, or SSC. Here's what you need to know.

The problems

The littoral combat ship USS Independence (LCS 2) pulls out of Naval Station Mayport as the ship begins transit to her homeport of San Diego. Photo credit: U.S. Navy photo by Mass Communication Specialist 2nd Class Gary Granger Jr.

According to the GAO, one of the big problems facing the LCS is weight. Specifically, during construction of the first several ships, the weight of the LCS' seaframe grew significantly. This is problematic because it limits the LCS' capabilities and decreases the ship's service life. 

When the Navy deployed the LCS USS Freedom to Singapore in March 2013, it found that although the LCS is supposed to run on a 40-person crew, the USS Freedom had a 50-person crew (the maximum crew allowed), which still strained to keep up with duties. 

During its 10-month deployment, the USS Freedom lost 55 mission days due to mechanical failures, and used more fuel than expected, which contributed to low average transit speeds. In addition, fleet users expressed uncertainty regarding the LCS' ability to perform in theater. 

The solution?

The littoral combat ship Pre-Commissioning Unit (PCU) Fort Worth (LCS 3) conducts builders trials in Lake Michigan. Photo credit: U.S. Navy photo courtesy of Lockheed Martin by Michael Rote.

Clearly, the above problems aren't the best news for the LCS, nor are they the only problems it faces. Secretary of Defense Chuck Hagel cut the Navy's procurement of LCSs from 52 to 32, and directed the Navy to appoint a Small Surface Combatant Task Force, or SSCTF, to "submit alternative proposals to procure a capable and lethal small surface combatant, consistent with the capabilities of a frigate."  

The possible good news for Lockheed Martin is that an alternative to the LCS includes the possibility of a "modified LCS." However, Hagel also instructed the Navy to consider a "new design," and an "existing ship design." More importantly, the SSCTF's deadline for submitting its findings was July 31st.

What to watch
As of this writing, there's no definitive news on what the SSCTF found. Further, Defense News reports that not all senior Navy officials have been briefed on the task force's findings. As such, it may be a while before we know officially what will happen to the LCS. However, we do know that a total of 20 ships have been funded through fiscal year 2014, though on February 24th, 2014, Hagel stated, "no new contract negotiations beyond 32 ships will go forward."  

Considering that the GAO estimates that each LCS has a program unit cost of $577.4 million (as of 12/2012), and orders are split evenly between Lockheed Martin and Austal, anything besides a "modified LCS" could be bad news for Lockheed Martin. 

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 03, 2014, at 11:46 AM, kilroy50 wrote:

    The Navy had best wait until the current CIC and his cronies are gone before any drastic decisions are made.

  • Report this Comment On August 04, 2014, at 8:05 AM, fujidan wrote:

    Poorly thought out, poorly engineered design.

    This ship is a total failure. Lockheed Martin should stick to airplanes. The cut should have been from 52 to the existing ships, cancel all orders and get reimbursement for failure to perform.

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Katie Spence

Katie Spence has been a financial journalist for The Fool since 2011. She specializes in defense companies, “green" technology, autos, and robots. Follow her on Twitter for breaking news in the defense, auto, and robot industry.

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