On Oct. 15, 2016, the U.S. Navy commissioned its largest gun-toting surface warship since battleships prowled the seas: the USS Zumwalt (DDG 1000).
Technically a destroyer, Zumwalt is actually bigger than the Navy's current fleet of Ticonderoga-class cruisers -- weighing in at 14,800 tons to the Tico's 9,800. It also carries more powerful guns than the Navy's big cruisers: two 155-mm Advanced Guns System (AGS) cannon, each capable of firing a 225-lb. Long Range Land-Attack Projectile (LRLAP) and striking a target 80 miles distant with pinpoint accuracy. There is, however, one small problem with these guns...
They have no bullets.
Bullets for battleships
Well, they have almost no bullets. Although in 2015, Congress approved $113 million in funding for 150 rounds of LRLAP ammunition for the Zumwalt and her two sister ships (not yet commissioned), as of today only 90 rounds have actually been purchased -- and some of those have already been used in testing. Worse news for Zumwalt: Earlier this month the Navy confirmed that it has decided to halt purchases of LRLAP ammunition entirely.
The reason: While by all accounts, LRLAP has worked admirably in testing, the fact is that it was designed to be produced in bulk to arm a fleet of more than two dozen Zumwalt-class destroyers. As plans evolved, though, the Navy ultimately cut its anticipated purchases of Zumwalts to just three ships.
The corresponding reduction in volume of ammunition needed means that LRLAP producer Lockheed Martin (NYSE:LMT) is unable to produce the ammunition at scale, unable to cut prices accordingly, and must charge the Navy somewhere between $800,000 and $1 million per each round of ammunition.
$1 million. That's nearly as much as the Navy pays to buy Harpoon missiles from Boeing -- and Boeing's Harpoons carry 500-pound warheads, 20 times the size of the 24 pounds contained in the LRLAP. This being the case, the Navy is probably making the right decision to cancel further purchases of the LRLAP. It does, however, leave open the question of what to load into those big, beautiful AGS cannon instead.
Desperately seeking ammunition
What's the alternative? And which company might ride to the Navy's rescue (from what's looking like a real PR nightmare) to suggest this alternative?
Currently, two options seem most likely. Given that accuracy was the defining characteristic that made LRLAP so attractive to the Navy, Raytheon's (NYSE:RTN) uber-accurate Excalibur howitzer round might make for a good substitute.
True, at $70,000 a pop, Excalibur is not what you'd call a "cheap" bullet. But it's a durned sight cheaper than $1 million, and Raytheon has proven in real-world testing that Excalibur can strike targets 30 miles distant -- and hit within two meters of what it was aiming at. Even better, as a 155-mm round, Excalibur should slide right into the AGS' borehole -- albeit its smaller size will probably necessitate changes to other aspects of the weapons system (such as for loading).
A second alternative, and one that's been talked about for years, is the Hyper Velocity Projectile (HVP) that BAE Systems (NASDAQOTH:BAESY) has been developing for use in the Navy's experimental electromagnetic railgun program. BAE says that HVP is the right size for use in Zumwalt's AGS cannon. What's more, its potential use as the projectile of choice for future railguns, and its suitability for firing from the 5-inch guns mounted on Navy Arleigh Burke-class destroyers (of which we have dozens), means that manufacturing HVPs in volume and at low cost should never be a problem.
Who will win?
Which alternative the Navy ultimately will elect on remains to be seen. Ultimately, though, if the Navy has decided not to buy Lockheed Martin's LRLAP for its AGS, it simply must choose a different bullet -- or render the AGS useless, and its Zumwalt-class destroyers disarmed. One way or another, Lockheed Martin's loss must turn into Raytheon's or BAE Systems' gain.