Australian shipbuilder reveals Superferry loss

Austal Ltd., the Australian shipbuilder that constructed the Superferry, has posted a profit of only $9 million on $500 million revenue for the first half of 2009, because it wrote off $30 million it lent to Hawaii Superferry. Austal CEO Bob Browning, interviewed by someone who was busting his chops about the weeny profit, justified the investment in Superferry by saying it enabled the company to build a shipyard in the United States, which in turn allows it to compete for U.S. defense contracts. The interviewer was in Australia and was focused on the 82% plunge in profits, not exposing anything about Superferry. Browning was focused on explaining that the Superferry project led to other business, thus minimizing the loan loss. Browning is himself an American and joined the company as head of the Mobile, Ala., shipyard, but now runs the entire company. I mention all this because Superferry critics continue to portray all military connections to the project as suspicious. I would portray it as an example of something which isn't nefarious but is mildly interesting - reverse dual use. Austal took a private sector contract with the hope of later winning defense contracts. Dual use usually works the other way around. Hawaii technology companies, including Oceanit, Hoana Medical and Tissue Genesis, seek defense contracts to fund research and development, then look for civilian markets for the same technology. That's dual use. In the shipbuilding industry, the big money for smaller ships is from military contracts, but the Jones Act prevents foreign shipbuilders from chasing such contracts unless they build or acquire a shipyard in the United States. Austal lent money to Superferry to help the company get started, took the contract to build its first two catamaran ferries, and set up the U.S. shipyard it needed to win other U.S. business.

Comments

[Mauibrad]

The Australian reporter might have been busting his chops over losses for the year, but from here in Hawaii, the wording of the disclosure was funny to say the least.

[Ken McDaniel]

Actually, Austal USA opened in 1999 with the stated business plan of seeking to win US Naval contracts. It has never been a secret. They have never tried to hide their intentions from the outset. In fact, they have built nine commercial vessels at the Mobile shipyard in the last ten years, including the two HSF ferries. Their contract awards from the Navy and DOD have been ten years in the making. Their stock may have been raised a little bit by their construction of the two HSF vessels, but they didn't win the LCS and JHSV contracts based on HSF alone. Those projects were in the pipeline before HSF was hatched. Austal USA has been around a lot longer than that.

[Interesting. I merely tell you what the Austal CEO said in this recent interview. HMD]

[Mauibrad]

Re: "...In fact, they have built nine commercial vessels at the Mobile shipyard in the last ten years, including the two HSF ferries..."

Only 3 of them were large aluminium hull vessels. The two HSF's and LCS-1. The other 6 vessels were small and not an indication of manufacturing potential. The Alakai was contracted before LCS-1 was awarded by the Navy. Austal had to show the construction processes in the US before they would be favored in the awarding of the large aluminium hull contracts by the Navy. The construction of the HSF's was integral to getting the Navy contracts. And then getting the Alakai out of the way was important to making progress on the construction of LCS-1, which still ended up behind schedule.

"...Their contract awards from the Navy and DOD have been ten years in the making..."

Not for the JHSV nor LCS, not 10 years. More like about 5 years.

"Their stock may have been raised a little bit by their construction of the two HSF vessels,"

Their stock was never helped by construction of the two HSF's. It has been inflated by prospects of building more than 1 JHSV and more than 2 LSC's.

"...but they didn’t win the LCS and JHSV contracts based on HSF alone."

They very well might not have gotten either the LCS-1 contract nor the JHSV contract without the track record on the two HSF's. Actually, even now, the seaworthiness and seakeeping of LCS-1 and JHSV-1 may determine how many more of those they are contracted to build. There is a record with A-615, A-616, and LCS-1 that calls into question the fabrication processes which will have to be overcome on later large aluminium hulls from the same operations.

"Those projects were in the pipeline before HSF was hatched..."

No, HSF was hatched before Austal was given any contracts on LCS or JHSV.

[CRC]

MauiBrad has an underlying obsession with Austal all over the internet. Guess those originally from Californicate have a distinct interest in preserving their island from the Haoli.

[Well, okay, but I have to mark you down on spelling. HMD]

[Mauibrad]

CRC, I'm not from Cali. My obsession is with the truth. Ye shall know the truth and the truth shall make you free... It sure as h**l won't be Linda Lingle's arbitrary b*** ***t that makes you free.

[Let's stick to facts. I prefer your reasoned arguments. I'm allowing this through so you can explain to CRC that you're local. HMD]