Monday, May 11, 2015

Remote controlled submarines -- the U.S. Navy's newest toys

Rich Smith, The Motley Fool
10 May 2015

We open today's column with this snippet from the Beatles for the simple reason that that's what the media is now calling the U.S. Navy's newest military asset -- the "yellow submarine."
Unlike the sub from the song, however, the U.S. Navy's Large Displacement Unmanned Undersea Vehicle, or "LDUUV," is filled not with mop-topped British pop stars, but with electronic circuitry. LDUVV, you see, is a remote control, or RC, submarine.

LDUUV spells what?

The Navy's been working on building this RC submarine for more than two years now (and we've been tracking it all the way). Its mission, in a nutshell, is to build a large, robotic submarine capable of running extended underwater tours of duty, without crew, and without any physical connection to a larger, manned boat. Ultimately, the Navy expects to arm this RC submarine with torpedoes, missiles, and even other, smaller robots that it can launch into air and sea (i.e., drones).
LDUUV's small size and ability to operate on its own will significantly expand the U.S. Navy's reach. According to the Office of Naval Research, the RC submarine can be loaded aboard a littoral combat ship, a frigate, or even a (manned) submarine -- then deployed at sea. If successful, LDUUV should greatly expand the zone that a single warship can occupy, performing many of the same combat, search and rescue, surveillance, and minesweeping missions that today require manned warships.

If they build it, the Navy will come

 Several companies are involved in the effort to get LDUUV operational by its planned 2020 introduction into the fleet. Among them, FuelCell Energy (NASDAQ: FCEL  ) has been hired to test a 1,800 kWh solid oxide fuel cell for LDUUV. United Technologies (NYSE: UTX  ) has been separately hired to develop a proton exchange membrane fuel cell. In each case, the objective is to give the RC submarine quiet electric power without the need for a nuclear power plant (which is expensive) or diesel fuel (which requires a sub to surface for air frequently). 
As for the companies that will build the actual submarine, these remain to be determined. One of America's premier builders of nuclear attack submarines, General Dynamics (NYSE: GD  ) , has a project called "Knifefish" in the works, which may be aimed at winning an LDUUV contract.
We also know that Boeing (NYSE: BA  ) thinks its five-ton Echo Ranger autonomous underwater vehicle is right for the job. In fact, Boeing's claimed endurance for Echo Ranger, "70 days," mirrors the initial endurance target the Navy has set for its own RC submarine. (So far, the Navy admits LDUUV can only operate for about a month at a time. Office of Naval Research head Rear Admiral Winter, however, says that ultimately he wants LDUUV to operate on its own for "weeks, months, years.")
Underwater robotics specialist Oceaneering International (NYSE: OII  ) is reportedly helping Boeing work out the kinks on Echo Ranger. In the meantime, Norway's Kongsberg Maritime is supplying the Navy with REMUS 600 subs for testing out the LDUUV concept.
But honestly, at this point, it's anyone's guess who will end up building LDUUV. If you're an investor in the defense industry, it's too early to place bets on a winner.
What we can tell you is that if RC submarines become a mainstay of the U.S. Navy in years to come, that's likely to hurt prospects for General Dynamics and for its primary manned-submarine-building competitor, Huntington Ingalls (NYSE: HII  ) . To secure their place in the Navy of the future, one or both of those companies will want to win a piece of whatever LDUUV contracts ultimately emerge over the next five years.

Stay tuned.

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Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 327 out of more than 75,000 rated members.

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