Thread by @johnkonrad

One of the myths stopping us from investing in US Naval shipbuilding is that shipyards and defense contractors are wringing huge profits from taxpayers. They do charge exorbitant rates but do they make exorbitant profit? Or does DOD bureaucracy eat away their bottom line? 🧵

The above is a chart of S&P 500 (in orange) performance against major naval defense contractors.

And here it is compared to two companies that really do reach into the pockets of most Americans, @apple (purple) and @Google (brown).

Ok but @generaldynamics @GDNASSCO @GDBIW @GDElectricBoat and @WeAreHII are pulling in a ton of revenue right?

$GD annual revenue last year was $39B and $HII was $9.5B

That’s a lot of money right? Well GD does a lot more than build ships. HII is still big but how does it compare to overseas yards?

What about by Market Cap?
HII: $8.76B
Mitsubishi Heavy: $11.6B
Samsung Heavy: $4.1B
Hyundai Heavy: $47B
China Shipbuilding $79B
China CSSC $69B

It’s clear that shipbuilding isn’t a great deal for investors but this graphic shows why it’s even worse for Chinese taxpayers:

But John, the dod spends over $1 Trillion per year. Where does all that money go? Aviation and Aerospace mostly.

Take a look at the market cap of the largest air and space defense contractors:
Raytheon: $148B
Lockheed Martin: $117B
Boeing: $100B
Northrup Grumman: $69B

So $HII shipyards which builds out most expensive aircraft carriers and submarines has a market cap 1/16th of Raytheon
1/13th of LockheedMartin
1/11th of Boeing
1/7th that of Northrup Grumman

$GD General Dynamics builds ships but also aerospace and build Army M1 tanks and fighting vehicles and gulfstream private jets… has a market cap of $66B or well less than half that of Raytheon

Why is this important. Because everyone is angry about the new @USNavy shipbuilding budget but it’s impossible to visualize number that large and most don’t put it in context of relative value so the meaning gets lost.

Most here concerned with shipbuilding numbers don’t understand the economics of the problem and those who do look at the numbers - e.g. defense industry journalists who pour over numbers- don’t see how it translates into bottom lines.

It’s true that some contractors are gaming the system and fleecing the taxpayers but are American shipyards? IMHO the answer is no.
Now how can spending look fair and even between the different services but our largest shipyard has a fraction of the value of aircraft mfgs?

The answer is subsidies OUTSIDE the pentagon. Boeing doesn’t just make military planes but commercial ones too. As do Chinese shipyards.

There are lots of Civilian air subsidies given by the FAA and treaties giving Boeing an unfair advantage over overseas aircraft builders.

And agencies selling our aircraft overseas which boosts BA’s bottom line.

But none of that happens for shipyards because @DOTMARAD is useless.

If you want to fix the Navy’s shipbuilding program stop looking at j-books and start talking to $gs bankers. Stop asking why the navy has no money and ask what @FAANews does for aviation vs what their sister organization @DOTMARAD does for ships.

In short, follow the money but follow it all the way past the pentagon, past OBM, past K-street, through wall street and all the way to Beijing, China.

And ask the right questions like why are domestic aviation contractors and overseas shipyards so much bigger snd more profitable than our one great builder of supercarriers Huntington Ingalls Industries?

Luckily the DOT has a group with the same legislative power as the #FAA that’s tasked to work with helping both naval and commercial shipbuilders. Unfortunately #MARAD is invisible to voters and asleep at the wheel.