Year: 2011

Development Costs of F135 Rise, Marginal Unit Cost Falls

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The Pentagon and Pratt & Whitney have negotiated a cost reduction for the next 37 engines that they deliver, but the non-recurring R&D Costs go up:

Pratt & Whitney has reached an informal agreement with government officials to slash 16% off the total price of the next batch of 37 engines to be ordered for the Lockheed Martin F-35 Joint Strike Fighter.

At the same time, the company acknowledges the cost of the overall F135 engine development programme will grow by about $1 billion to support a three-year extension of flight tests and to improve the engine’s performance and durability.

If you assume $15 million per engine, it means that this cost, assuming that this continues across the production run (it won’t, particularly with the GE/Rolls F136 out of the picture) would end up saving money after the delivery of about 450 engines.

This is taking money out of one pot, and add it to another in the best case, and more likely it’s a stealth price increase.

Here’s a Shocker

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Wisconsin Governor Scott Walker was bankrolled by the Koch brothers Josef Stalin derived fortune:

Wisconsin Republican Governor Scott Walker, whose bill to kill collective bargaining rights for public-sector unions has caused an uproar among state employees, might not be where he is today without the Koch brothers. Charles and David Koch are conservative titans of industry who have infamously used their vast wealth to undermine President Obama and fight legislation they detest, such as the cap-and-trade climate bill, the health care reform act, and the economic stimulus package. For years, the billionaires have made extensive political donations to Republican candidates across the country and have provided millions of dollars to astroturf right-wing organizations. Koch Industries’ political action committee has doled out more than $2.6 million to candidates. And one prominent beneficiary of the Koch brothers’ largess is Scott Walker.

Seriously, these guys are to the conservative wackdoodle movement as Gaëtan Dugas was to AIDS.

*No seriously, Koch Industries made its money building refineries for Josef Stalin.

U.S. Vetoes UN Resolution On Settlements

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This is rather unsurprising.

I favor a 2 state solution, one along the other ethnic separations out there, which means parts of pre-1967 Israel will become a part of a future Palestinian state, because at it’s core what is going is is negotiations over ethnic land divisions, and under those terms, some areas near the West Bank, and parts of the Galilee which are overwhelmingly Arab, would necessarily move in that direction.

Whether or not this sort of separation occurs, full rights should be extended to non-Jews, by which I mean something along the lines of the US civil rights act, prohibiting discrimination on the basis of ethnicity.

Another full right that should be extended to the non Jewish (and non Druze) population in Israel is conscription: As it stands now Arabs are not required to serve, which, among other things, prevents the formation of social ties that normally occur during mandatory service, and which frequently help in later life. (aka “Old school ties).

As to the veto, I am increasingly of the opinion that any foreign involvement in the diplomacy between the Palestinian government and Israel is counter-productive, because it leads the negotiators to spend too much time playing to outside entities, whether it be the US, UN, EU, or Arab governments, and not enough dealing with each other.

One reality here that needs to be accepted is that at some point in the next few decades, Hamas will win an election (they already have) and take power (they weren’t allowed to after the election).

This may be scary, but the current principals in this matter need to suck it up and accept reality.

Because It Worked So Well in Egypt

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Libya has cuts off the Internet:

Internet service has been cut off in Libya for a second consecutive day as protesters step up demonstrations against longtime leader Muammar Gaddafi, a U.S. company that monitors Internet traffic said on Saturday.

Massachusetts-based Arbor Networks said data collected from 30 Internet providers around the world showed that online traffic in and out of Libya was disconnected abruptly at 7:15 p.m. EST on Friday after two partial interruptions earlier that day.

I kind of figured that Bahrain would go first, because it’s a predominantly Shia country ruled by a Sunni king, but I may have been wrong.

I Predicted This 12 Years Ago

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The Pentagon has killed the MEADS surface to air missile system:

The Pentagon announced today it would kill MEADS, an anti-missile program once declared the highest priority weapon system for the United States and its allies to build together.

The Army has tried several times before to kill the program, which uses the Patriot interceptor, but has always been overruled before by the Office of Secretary of Defense. Germany and Italy have made major political and industrial commitments in pursuit of MEADS and they will doubtless let America know just what they think of this decision.

I did some very preliminary work on MEADS about 12 years ago. Essentially, because, unlike the PAC-3, it did not exactly need to have 4 missiles to fit in a 4-pack that had the same form, fit, and function as the larger Patriot PAC-2, which allowed for some logistical enhancements.

At the time, I said that the program was doomed, because it was a multinational program, and, like the Roland SAM, it would be dropped by the US military, because the opportunities for cushy consulting gigs for retired generals would be too small.

I was right, and I am not alone in my jaundiced assesment of the decision:

To get expert perspective on MEADS’ demise, we contacted Frank Cevasco, one of the top international defense consultants and someone who has closely followed MEADS for more than a decade. While a senior Pentagon official he and colleagues at OSD pushed the Army to create a program office to manage a future extended air defense program, which eventually became MEADS. He said he does not represent any of the companies involved in the program.

Cevasco said at least part of the cost overrun can be attributed to a plan to replace Patriot with MEADS on a one-for-one basis. “I was told that doesn’t make sense as a MEADS fire unit has substantially greater geographic coverage than Patriot. I agree there would be additional costs associated with integrating MEADS with a separate Army command and control system, a requirement that was levied on the program unilaterally by Army about two years ago. Moreover, a portion of the cost overruns and schedule slippages can be attributed to the Army and DoD technology disclosure community who refused to allow the MEADS industry team to share key technology. The matter was resolved but only after intervention by senior OSD officials and the passage of considerable time; and, time is money with major weapons system development programs,” he said in an email.

Bottom line for Cevasco: “Army has done its best from the every beginning to sabotage the program, preferring to develop a US-only solution funded by the US (with funds provided by the good fairy).”

The military funds fairy is named either Obama or Gates, your choice.

Big Surprise: Boeing’s 787 Outsourcing Cost Money Instead of Saving It

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To the tune of billions of dollars:

The airliner is billions of dollars over budget and about three years late. Much of the blame belongs to the company’s farming out work to suppliers around the nation and in foreign countries.

It should be noted that aircraft manufacturers do not make money off of the sales of aircraft, but rather on spares and support down the road, and in outsourcing, Boeing has thrown that revenue stream to its suppliers, an act that Atrios calls, “obviously insane,” additionally, it makes the entire process of creating an aircraft more riskier, because you have less control over whether tab A fits in slot B, or, as Felix Salmon notes, it’s like, “picking up pennies in front of a steamroller“.

Boeing was told that this was an issue by a senior fellow, L.J. Hart-Smith in 2001, (also here, where the PDF cuts and pastes better) and but chose to ignore it:

The inescapable problem with outsourcing work that could be done in-house is that it necessarily increases the tasks and man-hours to carry out the work way above those needed to perform all assembly, including most subassemblies, at one site. Experience in the electronics industry has shown that out-sourcing work to regions of low labor rate is only a transitory phenomenon. The reason why the rates were low was that there had previously been no work there. Once the work became available, hourly rates increased, so that the primary electronic companies kept moving the work to yet another as-yet-under-developed area, and the cycle was repeated. This may be cost-effective for small items, with production lives of only a few years at most, but it is inappropriate for large aircraft that may need spare parts throughout a service live in excess of 50 years (80 or more for some military aircraft) and for which the manufacturing program itself may last 40 or 50 years. There are so many aircraft components that must be out-sourced, such as engines, avionics, and systems, because today’s prime aircraft manufacturers are no longer equipped to undertake such work themselves, that the retention of a determinable minimum fraction of the structures work is a pre-requisite to developing sufficient cash to develop new products. Without new products, as distinct from derivatives, all companies will go out of business, no matter what their line of business.

The correctness of the author’s position on these matters is easily confirmed by two facts. It was the suppliers who made all the profits on the extensively out-sourced DC-10s, not the so-called systems-integrating prime manufacturer. (The same thing has happened on aircraft assembled by Boeing, in Seattle, too.) Also, when plans were being formulated for the proposed MD-12 very large transport aircraft, almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing “partners”. Could they have known more about maximizing profits, minimizing risk, etc., than the prime manufacturer who sought their help even though it could borrow money at lower rates of interest than potential suppliers could? The DC-8 was manufactured and assembled almost entirely within the Long Beach plant, with only the nose coming from Santa Monica. That policy was changed after the acquisition of the former Douglas Aircraft Company by the former McDonnell Aircraft Company, but the change did not improve the company’s profitability. It is time for Boeing to reverse this policy.

(emphasis original)

So, McDonnell, a company which was a complete failure in the commercial arena (only 1 project, a failed bizjet), took over what was the number two (and had been the number 1) commercial aircraft manufacturer in the world, and implemented its defense contracting monopsony* driven business model, where it failed, and then Boeing bought McDonnell Douglas, and implemented their failed business model.

Boeing bought MACDAC, but MACDAC took over Boeing, and set the tone for its corporate culture, despite the fact that it was largely a failed company, having lost the JSF competition, and having only 2 major programs that it had initiated, the F-15 and the C-17 over the past 30+ years (the F/A-18 was initiated by Northrop).

One good thing that has come of this is that it will make a fascinating case study for the size of operations for economists, as Paul Krugman rather smugly notes:

In Boeing’s case, they outsourced far too much, only to find that they were getting parts that didn’t do what they were supposed to — and also to find that the subcontractors were seizing a lot of the rents. They discovered, in effect, that there are times when it’s better to rely on central planning than to leave things up to the market.

Obviously this isn’t always true. There’s a tradeoff. But that’s the point — and it’s this tradeoff that determines how big firms should be. Boeing has now provided a clear motivating example. Their loss, the economics profession’s gain.

Heh.  Here’s hoping that I’m never a good case study for some academic.

*A monopsony is the flip side of a monopoly. Instead of having only one seller and many buyers, a monopoly, you have only one buyer and many vendors, in McDonnell’s case, the US military.

House Votes to Kill F136 Engine

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While I expect to see some continued efforts by GE, Rolls Royce, and their supporters, I think that this is the death knell for the F136 engine:

The U.S. House of Representatives today voted to kill funding the F-35 Joint Strike Fighter backup engine made by General Electric Co. and Rolls Royce Group Plc.

By a vote of 233-198, the House voted to cut $450 million for the engine from legislation funding the Pentagon for the remainder of the fiscal year ending Sept. 30.

It is the first time in more than four years of votes that the House has come out against the GE-Rolls Royce engine for the F-35, the stealth fighter made by Lockheed Martin Corp. In May, 2010, the House voted 231-193 to continue the program.

This is important for a number of reasons.

First, with this defeat on the table, the onus now falls on the supporter of the F136 to bring the engine back, which is hard.

Second, and more importantly, House Speaker John Boehner, whose district, and neighboring districts, directly benefit from the engine, could not whip the votes necessary to support the engine.

Like I said, the engine is toast.

In the long run, this is a bad thing, because leaving Pratt & Whitney as a monopoly supplier for the engine is likely to increase costs, and reduce performance, a lot down the road.

That being said, I do experience no small amount of amusement because Boehner got seriously served on this.

It’s Bank Failure Friday!!!!

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And here they are, ordered, and numbered for the year so far.

  1. Habersham Bank, Clarkesville, GA
  2. Citizens Bank of Effingham, Springfield, GA
  3. Charter Oak Bank, Napa, CA
  4. San Luis Trust Bank, FSB, San Luis Obispo, CA ⇐ I missed this one last night.

Full FDIC list

And here are the credit union closings:

  1. Family First Federal Credit Union, Orem, UT

Full NCUA list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

And since it’s early in the year, here is a detail of the first few weeks:

This year is shaping up a LOT like last year so far.  It’s a bit early to be definitive, but it does look like bank failures are tracking ahead of what we saw at this point last year.

Not Enough Bullets

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So, BP is whining because it thinks that Ken Feinberg’s slow walking of meager settlements is too generous:

In the eight months since Kenneth R. Feinberg took over the $20 billion fund to compensate victims of the Gulf of Mexico oil spill, he has been attacked by many of those filing claims and by coastal state politicians who argue that the process is opaque, arbitrary and slow. Many of them have also argued that Mr. Feinberg’s recently published estimates of future damage to those in the gulf are too optimistic, and thus his offer of compensation in a final settlement is too low.

Now he is getting complaints from another quarter: BP.

The oil giant is arguing that if anything, Mr. Feinberg’s proposed settlements are too generous. The planned payments far exceed the extent of likely future damages because they overstate the potential for future losses, the company insists in a strongly worded 24-page document that was posted on the fund’s Web site Thursday morning.

And after that, BP murdered its parents, and asked for mercy because it was an orphan.

Heck of a Job Boehner

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As part of their continuing resolution, the GOP have voted to defund planned parenthood, the healthcare law, gutting the social security administration, and forbidding the EPA from regulating mercury pollution.

This was all pretty standard. Obama has threatened a veto, and Reid has said that it will never see the light of day, so they can get in their votes, and not see much blowback.

What surprises me though is that they lost on a vote to defund the National Labor Relations Board (NLRB):

Sixty House Republicans joined with every Democrat to beat back an anti-union amendment on Thursday that would have defunded the National Labor Relations Board, a New Deal-era independent agency that arbitrates labor disputes. The sixty defections come as the Midwest GOP governors in Wisconsin and Ohio are launching direct assaults on public employee unions.

Nine high-ranking Republican members of the Education and the Workforce Committee broke with their party to support the agency, including the chairman, Rep. John Kline (R-Minn.). GOP hostility toward organized labor is not a new phenomenon, but the hostility has intensified since Republicans took control of the House; the party went so far as to rename what had been called the Education and Labor Committee, replacing “labor” with “the workforce.”

The fact that, “piling up losses in a chamber where the majority party typically rules with an iron fist,” is telling.

The Republican Party has been anti-union since Abraham Lincoln.  Support for organized labor one of the things that (used to) distinguish between conservative Democrats and liberal Republicans.

Still the fact that Boehner, and  Cantor could not successfully whip the vote on this is telling.

Boehner is clearly the weakest house speaker in decades, possibly since Thomas P. “Tip” O’Neil 1981-3.

My guess is that the nut job in Wisconsin is spooking some of the Republicans in Wisconsin, and neighboring, states.

Wisconsin is beginning to look a lot like MacArthur’s assault on the bonus army, and some people on the ‘Phant side realize that this will not end well.

Judge Who Accepted Bribes to Jail Children is Convicted

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Mark Ciavarella, Jr. who took kickbacks from private prisons to sentence children to confinement, has been found guilty of racketeering, money-laundering conspiracy, fraud and filing false income tax returns, though not of bribery:

A federal jury on Friday found a former Pennsylvania judge guilty in a so-called kids-for-cash scheme, in which he took money in exchange for sending juvenile offenders to for-profit detention centers.

………

The jury found him not guilty, however, of seven counts of extortion and 10 counts of bribery.

The former judge faces a maximum sentence of 157 years in prison. The jury also ruled he must forfeit $997,600.

I think that the jury felt that they had to find proof that he would not have sent these kids away if he hadn’t been paid, i.e. what was in his head at the time, which is impossible.

Maybe I’m a bit old fashioned, but the fact that hid the money, that whole money laundering and racketeering bit, is pretty good evidence that he knew what he was doing is illegal, but I wasn’t in the court room.

Here is hoping that the judge sentences him to the max.  What Ciavarella did was truly beneath contempt.

Wisconsin Seems Even More Like Egypt Now……

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So, we are seeing huge, and growing, protests, with a teacher sickout to attend the protests growing, it has now shuttered both the Madison and Milwaukee school systems, and the Democrats in the state Senate have left the state, to prevent quorum for voting on the bill, while, in a bit of traditional religious silliness, religious leaders are offering sanctuary for them if they return to the state:

Religious leaders in Illinois and Wisconsin are offering sanctuary to Wisconsin Democrats as they boycott a vote on a Republican bill that would strip public workers of nearly all their collective bargaining rights.

Actually though the most surprising development is that Barack Obama has actually felt the need to make a declarative statement on all this, as opposed to trying to make nice, and split the difference, calling it an, “assault on unions.”

What, Obama isn’t trying to split the difference and being hopey-changey?  That’s like a f%$#ing sign of the f%$#ing apocalypse.

It would be nice if we would see some more of this, because the Republicans aren’t getting any more reasonable in response to his standard modus operandi.

Just Who, and What, Is Raymond Davis

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He’s currently being investigated for a double murder in Lahore, Pakistan, and the US government is claiming that he has diplomatic immunity, and so must be released.

There are a number of peculiarities here. As constitutional lawyer
Scott Horton notes, the issuance of a diplomatic passport does not convey diplomatic immunity, the host country formally recognize and accept their diplomatic status.

Also, it’s unclear if he was a diplomatic or a consular officer and if the latter, then the charge, double murder, would certainly not be covered by any immunity.

In fact, immunity might not apply in either case, since the Vienna convention does not apply to serious crimes, like, for example, murder.

Additionally, thanks Dave Lindorff of Eurasia review for this, it appears that Mr. Davis was not a consular or embassy employee, but rather the employee of a defunct security firm, Hyperion Protective Consultants, LLC, which makes his status even more suspicious.

Also, when caught, he had at least two guns in his car, a number of cell phones and batteries, and a telescope.

Linhoff also reports that the two Pakistanis were shot in the back, and that he has received reports that they were not just two guys on a motorbike, but in fact operatives of Pakistan’s security service, the ISI.

Given the circumstances, and the fact that a heavily armed strike team in the SUV rushing from the US consulate to try to snatch him from police immediately following the incident, and running down and killing a person in the process, I would be inclined to believe that whatever he was doing there had nothing to do with diplomacy.

One interesting factoid in all of this is that his arrest has corresponded to an unusual lull in drone strikes, which would be consistent with his having a senior managerial role in those operations:

A mysterious halt to U.S Predator strikes on Pakistan after the Raymond Davis incident in Lahore has led to intense speculation the American “diplomat” was connected to the Drone program even as Washington and Islamabad are going eyeball-to-eyeball over his status.

Davis, 36, was apprehended by Pakistani police after he shot dead two Pakistanis on a busy Lahore thoroughfare on January 27, four days after the last drone U.S Drone strike in Pakistan. There has not been a single strike in the 25 days since then, making it the third-longest period of inactivity since the U.S ramped up the Predator program to take out terrorists infesting Pakistan’s frontier regions, according to Long War Journal (LWJ), a blog that tracks U.S Predator attacks.

Speculation is now rife that Davis was somehow connected to the Predator program since he was reportedly carrying a GPS, telescope, camera and assorted equipment not usually associated with thoroughbred diplomats. Pakistani authorities have also accused him of unauthorized travels to the Frontier region and being in touch with extremist elements in Waziristan, which suggests he might have been coordinating the attacks with U.S moles in the region.

While Davis claimed that he shot the two Pakistanis in self-defense when they were trying to rob him, some reports have said they were ISI tails assigned to follow him because the Pakistani intelligence felt he had crossed certain unspecified “red lines.” Those red lines may have involved discovering the Pakistani establishment’s links with terrorists group, a pursuit which led to the death of Wall Street Journalist Danny Pearl.

I’m thinking that Hyperion Protective Consultants, LLC, is about as real as Brewster-Jennings was for Valerie Plame, and that he works for the CIA, some other TLA (three letter agency), or a contractor hired by some arm of the US government.

It would explain why heads have been exploding at Foggy Bottom (State), and probably Langley (CIA) as well, for the past few weeks.

Nothing to See Here, Move Along…

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The National Academy of Sciences has reviewed the FBI’s forensic claims regarding Bruce Ivins and the Anthrax mailing investigation, and has politely called bullsh%$ on this:

The National Academy of Sciences is just out with a 190-page review [1] of the forensic science behind the FBI’s investigation of the 2001 anthrax letter attacks. The takeaway: Some of the evidence cited to identify Army microbiologist Bruce E. Ivins as the perpetrator isn’t as conclusive as the FBI has claimed.

In particular, the panel of experts said it “did not definitively demonstrate” that the source of the anthrax was spores taken from a flask controlled by Ivins, a microbiologist who did vaccine research at the U.S. Army Institute for Medical Research of Infection Diseases in Maryland. Nor did scientific data generated for the FBI “rule out other sources” for the anthrax, the panel’s report says.

Considering the record on the investigation, the you can review their tactics to the prior “person of interest” in this situation (Stephen Hatfill, who was exonerated and received a cash settlement) and be rather surprised that he didn’t top himself as well.

Unsurprising News of the Day

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Bernie Madoff is now saying that the banks were complicit or willfully blind with regard to his Ponzi scheme:

In his first interview for publication since his arrest in December 2008, Mr. Madoff — looking noticeably thinner and rumpled in khaki prison garb — maintained that family members knew nothing about his crimes.

But during a private two-hour interview in a visitor room here on Tuesday, and in earlier e-mail exchanges, he asserted that unidentified banks and hedge funds were somehow “complicit” in his elaborate fraud, an about-face from earlier claims that he was the only person involved.

………

In many ways, however, Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.

“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”

There’s a surprise.

The banks generated big fees by sending their customers to someone that they thought might not be on the up and up, and “surprise”, they made a point of not turning over the rocks?

Why is only Bernie going to jail?

How Is Wisconsin Like Egypt?

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You know, I’m not entirely sure how they are alike, but recently elected wingnut governor Scott Walker looks like he might be joining Hosni Mubarak is some form of internal exile soon.

You see, in his new budget, he proposed completely gutting the right of public sector employees to unionize, forbidding unions from requiring that dues be paid, forbidding them from negotiating about pensions, healthcare, or even asking for a pay hike above that of inflation, and requiring an annual recertification vote.

He then followed this up with a threat to use the national guard against strikers, and there were somewhere between 10 and 30 thousand protesters in the capital, Madison.

We are already hearing calls for Walker to be recalled, but state law requires that a year follow his swearing in before petitions can be turned in, so that’s off the table for about 10½ more months.