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You're exactly right, except that I don't think ULA is going to have much trouble matching SpaceX's prices. They were in a monopoly situation before where they
by hudibras 10y ago
You're exactly right, except that I don't think ULA is going to have much trouble matching SpaceX's prices. They were in a monopoly situation before where they could name their own price (not really, but close enough).
I could see even ULA's pricing pendulum swing all the other way: they could start bidding for contracts at a loss, using their other business sectors to prop up the space division until they drive SpaceX out of business.
Exciting times...
- JoshTriplett 10y ago> I could see even ULA's pricing pendulum swing all the other way: they could start bidding for contracts at a loss, using their other business sectors to prop up the space division until they drive SpaceX out of business. That would be blatantly anticompetitive dumping, by the textbook definition.
- hudibras 10y agoWell, they wouldn't exactly put it that way in the press release. An alternate end-game would be ULA stringing together a few contract wins, pushing SpaceX to the brink, and then ol' Elon gets a nice offer from Boeing and Lockheed...
- SEJeff 10y agoElon plays the long game, and I don't think Boeing and Lockheed have any interest in going to Mars. He wouldn't sell from a moral standpoint.
- kochthesecond 10y agoI would be very surprised if Elon sells space X in the next ten years. Based on the book by ashlee at least.
- SEJeff 10y agoHaving read the exact same book I simply can't agree more. He has no reason to make a profitable company public seeing how much of a mess it has made things wtih tesla.
- hydrogen18 10y agoIt is also illegal to bid contracts below cost when the customer is the DoD.
- fma 10y agoIllegal is a very lose term...so many projects "overrun" their contract price...I don't believe that these companies that have decades of military and government contract experience cannot budget for overhead expenses and project delays. They just end up charging more later on, rather than be upfront with actual costs.
- Retric 10y agoThere is generally a fig leaf where the customer changes the requirements after the contract is signed. Partly because it's hard to define complex requirements ahead of time and partly because middle management always needs to leave their mark. You wanted that to be blue ok, that's an extra 2 million.
- deleted 10y ago[deleted]
- jonathanoliver 10y agoSo maybe they undercut all contracts except the DoD ones?
- Quinner 10y agoThey were already colluding to form a monopoly, I don't think antitrust prosecutions are going to be forthcoming.
- mdorazio 10y agoDefinitely a possibility. Do you have any info on what their actual manufacturing & launch costs are? I've heard SpaceX's current manufacturing costs are about $40M per rocket (+ fuel, transportation, launch fees, etc.), but have no idea on ULA.
- cmsmith 10y agoIt seems like 'buying first stage engines from Russia' will have a hard time undercutting the 'reuse the first stage entirely' strategy, no?
- peterwoo 10y agoULA has an engine reuse plan. If they can get it working it'll be much more efficient than the hoverslam approach.
- kolinko 10y agoHow?
- grey-area 10y agoThey're planning throwing away most of the first stage and catching the expensive engines on parachutes in mid air with a helicopter above the ocean then landing them on a barge softly enough not to damage them. They haven't actually done this or even built the engines to do it. They have represented this purely hypothetical approach as more efficient than reusing the entire first stage, because you sacrifice less payload weight and they claim refurb costs will be higher for full reuse. In practice if you can deliver whatever payload the customer wants they don't care how you do it, and of course refurb costs are likely to be almost entirely down to engine refurb, which they'll still need. It's certainly not obviously more efficient or quicker reuse, it's likely to be slower and far more costly if they actually do manage it, so saying it is more efficient is just a way for ULA to try to sound like they are still a contender, even out their launches are still significantly more expensive and they haven't even tried to reuse engines.
- Mvandenbergh 10y agoNot to mention the complexity inherent in getting the engines separated from the rest of the vehicle. Also, they're at totally different places along the technological readiness curve. They're proposing a theoretical concept, SpaceX has already recovered two first stages. Even if their parachute concept was theoretically superior (which I don't think it is) by the time they got it working, SpaceX would have years of operational experience with hoverslam.
- chrisatumd 10y agoSpaceX is competing with ULA for U.S. Government Agency launches but I don't think they could drive SpaceX out of the commercial launch business.
- TrevorJ 10y agoIf you look at the projected numbers for ULA's newer technology that isn't online yet, it still doesn't beat SpaceX's pricing. I think ULA will stick around, but it won't be because they win a price war.
- ryanmarsh 10y agoUS Gov't is not SpaceX' only customer. http://www.spacex.com/missions http://www.spacex.com/missions
- kenferry 10y agoWell, but what do you think they did after they named their price? I'd guess they hired a bunch of people, and their expenses came up to match what they could charge.
- tn13 10y agoProblem with monopolies is that they lag behind on innovation.
- jonwachob91 10y agoHave you met Google? (Said in my best NPH voice)
- eggy 10y agoTrue, but a monopoly due to beating the competition with fair business practices is not the same as the monopoly targeted by anti-trust laws. Until a genuine competitor beats the honest monopoly fair and square, they stand at the top. Government work usually is fertile ground for the wrong type of monopoly, so I am very happy to see SpaceX disrupt this field. SpaceX's rockets are upwards of $40 million a launch, and the Lockheed F35 fighter price is going to keep climbing upwards of $200 million per fighter. Now let's see another SpaceX or similar innovative company step in to the military weapons system market! This should, but it will not translate to less taxes for the average Joe.
- patrickk 10y agoAn interesting counterargument from Peter Thiel: "Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of." http://www.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536 http://www.wsj.com/articles/peter-thiel-competition-is-for-l...
- nitrogen 10y agoI don't really buy it. Decades of monopoly profits are a powerful incentive to stagnate. Those profits definitely fund a lot of survival, and potentially some interesting side projects, but I wouldn't call most of it innovation or progress. As for ambitious research projects, some people just do those on their own, and for the rest, there's academia, government grants, and venture capital.
- azernik 10y agoIt's more likely that the response will be too slow than fast and overwhelming. ULA likely took advantage of their monopoly to underinvest in lower-cost technologies, and the lead time to correct that could be very long.
- gozur88 10y ago>You're exactly right, except that I don't think ULA is going to have much trouble matching SpaceX's prices. I do. In the '90s I was working for a company that was used to bidding cost plus contracts when DoD contracts pretty much dried up as a result of the collapse of the Soviet Union. Management tried very hard to realign the company to compete in the commercial sector and failed miserably. Changing the focus of a large organization like that from performance to cost is extremely difficult. Your people aren't organized properly, your finances aren't organized properly, and you have a cost+ culture that's hard to kick. A much cheaper and safer strategy is to get Congress to wire defense contracts for you. ULA has manufacturing all over the place. What that means is job losses at ULA will be politically unpalatable. Beyond that, a logical argument can be made against putting all the national space eggs in one basket.
- bediger4000 10y agoBeyond that, a logical argument can be made against putting all the national space eggs in one basket. If that argument actually carried any weight, then ULA wouldn't exist, but Martin, McDonnel Douglas Aerospace, and GD Convair would. That is, the DoD and the defense companies trot out any arguments they feel like, and hope that Congress accepts them. I concur on your analysis of companies that are fat and happy bidding and working on DoD contracts. It's really, really hard to turn those companies around.
- gozur88 10y ago>If that argument actually carried any weight, then ULA wouldn't exist, but Martin, McDonnel Douglas Aerospace, and GD Convair would. Times have changed. I think Congress may have seen the error of its ways on this one.
- softrock 10y agoAt the time ULA was formed it wasn't an error. The US had a serious problem with rocket reliability and lost more than a few very expensive satellites. The devlopment or reliable and on demand access to space was a matter of national security.
- jordanthoms 10y agoULA's only business is selling launches, almost entirely to the US Government, so the subsidy would have to come from their owners - Lockheed and Boeing. I haven't seen any indication that they are at all interested in giving ULA a massive subsidy to gain market share - in fact it looks more like the opposite, they have been reluctant to invest in ULA and have been funding Vulcan development on a quarter-by-quarter basis.
- eggy 10y agoAnd Lockheed still has to clean up the F-35 fighter mess with cost overruns, cancelled orders, spies taking terabytes of data, and retrofitting already-delivered planes. Not to mention, suspicious accounting of the amount of indirect jobs it supposedly created, and ever-increasing costs as other countries bail or lower their order numbers. It is the most expensive weapons system purchase to date.
- secfirstmd 10y agoI'm always curious how much of a "covert" budget for the next stealth or other projects, can be hidden in something as big as the F35 program.
- DigitalJack 10y agoThat's an interesting point. I could only hope that it is actually true, and that the F35 is more subterfuge than boondoggle.
- kuschku 10y agoWith the cost overrun of the F35 Project, though, one could probably finance a whole Stargate program, spaceships included.
- robbiemitchell 10y agoAssuming there aren't similar cost overruns...
- esturk 10y agoThat's logistically impossible to happen. This would require ULA to have the capacity to produce all the launches for the entire market (both domestic and international) which they do not and will not. This sort of monopoly driving out all competitors scenario is only viable if they have the capacity to produce widgets and/or services that is easy to scale to the entire market. Space launches isn't one of those.
- rebootthesystem 10y agoYou are missing a very important data point: ULA receives nearly a billion dollars a year just to exist. They don't have to deliver a single vehicle. Free tax-payer money being gifted to the highest bidder. THAT has to end. Then let's see them compete.
- BurningFrog 10y agoHow much are they bidding? I'm in for $999M
- oarsinsync 10y agoHow/why/what? Is it through subsidies, or preferred govt contracts, or what? Why are they just being given money?
- rebootthesystem 10y agohttp://www.fool.com/investing/general/2015/04/04/these-corporate-subsidies-could-cost-you-1-billion.aspx http://www.fool.com/investing/general/2015/04/04/these-corpo...
- nradov 10y agoYou're mischaracterizing the payment. It isn't for existing, it's for maintaining standby launch capabilities. Being able to launch a military satellite on demand is valuable for national security purposes. So taxpayers are getting something for that money. (Whether we should be spending so much on the military in the first place is a separate issue.)
- rebootthesystem 10y agoNo. It's to exist. Remove that subsidy and they implode instantaneously. Their cost per launch would be just about the highest in the world.
- Evolved 10y agoI think they'll have some trouble. Those Russian engines they use aren't cheap, aren't getting any more plentiful, the machinery is getting progressively more scarce and the folks who designed/built them are either dead or no longer have sufficient knowledge to recreate them. Not to mention the supply of those engines is highly predicated on maintaining a solid relationship with Russia for what that's worth.
- oxymoron 10y agoI disagree. Ashlee Vance spends quite a bit of time talking about how the SpaceX approach differs in his biography of Elon Musk. Basically, Musk turns out to be manically cost aware, and a lot of what SpaceX does is focused specifically on that. One of the examples given are that they figured out how to use stock electronics rather than the very expensive radiation hardened versions that are conventionally used, for a 10:1 cost saving. They've done this throughout their entire system. I'd be very surprised if ULA were able to match.
- maaku 10y agoTrouble for ULA is that they are used to cost-plus contracts. E.g. "I'll pay you 120% what it costs you to make." The incentive to maximize profits here is to maximize costs up to 80% of the highest amount the customer is willing to pay. For example, use obscure materials and manufacturing methods and lots of people in the assembly line. Better still if the rocket is built in parts in lots of different states and shipped around in pieces. Now with competition they have to go back and cut all those costs, which is not going to be easy. (I used to work for Lockheed, although not in the missiles and space business. I wouldn't hold my breath expecting ULA to match SpaceX's prices.)
- deleted 10y ago[deleted]