Category Archives: Industry

Geissele (ALG Defense) AK Trigger

Bill Geissele’s wife’s company, ALG Defense, makes products for more of a mass-market than the very sweet, fairly simple, Geissele AR-15 triggers that live in more than a few SOF M4s and Mk. 11/12/18s, etc. (Indeed, sometimes the Geisele triggers are authorized MFP 11 or unit purchases, and sometimes they are installed on a catch-me-F-me basis by unit weapons men or armorers). Along with the triggers for full-on M4s and HK416s, Geissele makes improved triggers in both single-stage and two-stage variants for a wide range of semi ARs. They’re not cheap, they’re not always in stock, but they’re good.

ALG Defense makes simpler AR triggers — and now, an AK trigger, imaginatively coded AKT. In this video Bill explains the objectives this trigger meets and talks about some of the challenges involved in designing it.

The AK, Bill says, “has a ton of sear engagement.” That’s what you, the shooter, perceive as the very long and very smooth takeup of the typical AK trigger.  (The SKS trigger has a similarly long, smooth engagement, suggesting that this may have been a standing Soviet / Russian design objective).

The result is an AK trigger that fits a variety of common receivers on domestic, imported, and kit-built AKs, and that reduces the trigger pull force and duration (including that all important very long sear dwell) significantly.

For example, Bill shows a graph of a stock AK trigger versus the ALG AKT; the stock trigger moves about 0.150″/4mm and takes about 4.5-5 lb. of pressure during that sear dwell period. The AKT takes up the slack more quickly and seems to come in about 0.065″ and just under 3.5 lb.

At about 8:30 he shows a 3D model (in Autodesk Inventor) of the trigger and walks through its function.

It fits some AKs with no fitting, but because of the wide variation in AK safeties, some AKs need a roll pin positioned so as to contact the safety. It’s explained in the video and in the AKT’s instructions.

 

“Socially Managed” Teachers Out Of Remington (and Money)

CalSTRSThe California (where else?) State Teachers’ Retirement System, CalSTRS, has long wanted to be free of the position it holds in icky-poo gunmaker Remington Outdoor, thanks to an investment in the Cerberus hedge fund that holds Remington.

The same teachers who are doing a really, really crappy job teaching Johnny (these days, Juanito) to read (but at least they’re bilingualilliterate!) have been protesting, picketing, marching, singing off-key, drumming in drum circles and bitching and moaning and generally carrying on to get the fund out of the evil, evil position of owning gun makers. Let’s check in with the hometown paper of Californistan’s dysfunctional one-party state government, the Sacramento Bee:

The California State Teachers’ Retirement System said it has unloaded its holdings in Remington Outdoor, formerly known as Freedom Group, the maker of the assault rifle used at the mass shooting at Sandy Hook Elementary School.

Remington Outdoor Logo

CalSTRS said it was precluded, for legal reasons, from disclosing the financial terms of the deal.

Translation of that last one-sentence paragraph: CalSTRS took a bath on a typical CalSTRS investment: buy high, sell low under self-imposed distress, get submarket returns, pay everybody in management a big bonus, expect the taxpayers to bail you out when the music stops and nobody has a chair.

The announcement came three weeks after Remington’s owner, New York private equity firm Cerberus Capital Management, offered to let CalSTRS and other investors cash out of their investments in the gun maker. Cerberus will place its investment in Remington in a separate investment vehicle.

Translation: Hedgies: “We’ll buy that position back from you at pennies on the dollar.” CalSTRS: “Oh thank you mightily!”

Ehlers

Why is this man smiling? He has gotten stinking rich on extremely poor results, and no one holds him accontable for anything.

As of last spring, Jack Ehlers’s brilliant management had made Ehlers extremely wealthy, but the fund admitted that it was under-reserved by $75 million.

Oh, wait, our bad. Not $75, only $73.7… but wait one… that’s billion, not million. Ehlers has so bungled the fund’s financial management that it’s under water by over $2,000 for every teacher, student, and every other man, woman and child (and Mexican cartel sicario) in the Golden State.  They’d have to double the $5-6 Billion the state puts in the system every year to get ahead of it, and they haven’t got the money.

But wait… that’s using Ehlers’s numbers, and we’re starting to get a sense that maybe numbers are not his bag, as a Californian of a certain vintage might say.  Sure enough, “CalSTRS solvency” is a thing on Google (5,150 hits, appropriately enough). As is, “Is CalSTRS broke?” (We’ll cut the suspense for you: by any honest accounting, yes).

Here’s a particularly good one, at Dropout Nation by Rishawn Biddle:

Even among the nation’s busted defined-benefit teachers’ pensions, the California State Teachers’ Retirement System stands out for its fiscal morass. The nation’s most-insolvent teachers’ pension, CalSTRS has become a tremendous burden on Golden State taxpayers; in fact, nearly all of the revenues from new taxes raised as a result of the passage of Prop. 30 two years ago has gone toward paying down the pension’s insolvency as well as fund quality-blind traditional teacher compensation.

Biddle says the pension is more than $93 billion in the hole.

Let’s throw a little of Biddle’s methodology up on the blackboard, shall we?

This time around, CalSTRS officially reports a pension deficit of $74 billion in its defined-benefit program for 2012-2013, the latest year available. Based on the officially-reported numbers, the pension’s insolvency increased by four percent between 2011-2012 and 2012-2013. But the officially-reported deficit doesn’t reflect reality.

As we’ve mentioned before, private pensions have to use realistic rate of return expectations, while government pensions can pull any old number out of their fourth point of contact, and call it their “secret sauce,” and bend the balance sheet into a fictional shade of black ink. Is that a factor here? Biddle, again:

One reason: Because CalSTRS uses an assumed rate of return of 7.5 percent, which allows for the pension (and ultimately, the state government, which sets the rate of return) to present a rosier picture than reality. This is because if investments are increasing in value at a healthy clip, it can help reduce the level of unfunded liabilities on the pension’s balance sheet. Not only is the assumed rate of return higher than the 5.2 percent five-year rate experienced in the market, according to Wilshire Associates, it is even higher than the 3.7 percent rate of return the pension admits in its comprehensive annual financial report that it has experienced over the past five years.

Got that. We’ll break it out for you. CalSTRS says it will get 7.5% returns on its investments going forward. The market in general is returning 5.2 percent over five years, so Ehlers is saying his stock and bond and private investment is so good that CalSTRS will do half again better than all the other financial managers out there, on average. He is also saying he will do twice as good as he’s done. Here’s the numbers in a table for you:

Rate of Return Predictions % of market % of claimed % of actual
CalSTRS claimed rate % 7.50% 144.00% 100.00% 203.00%
Market 5-year actual rate % 5.20% 100.00% 69.00% 140.54%
CalSTRS 5-yr actual rate % 3.70% 71.00% 49.00% 100.00%

Even though he’s picking investments based on politics and grade-school teachers’ feels. And even though he’s actually only been getting less than half the return he claims he’ll get going forward. (The similarly “socially managed” CalPERS state employee fund is even worse. One year (2012) they actually brought in 0.14%).

And did he claim he was going to get 3.7%, or did he claim 7.5%? Ah, trick question. Before the recent years’ returns came in, the CalSTRS managers forecast 8.5%, then 8%, then 7.75%, then 7.5%, any of which numbers would probably get them indicted if they tried using it on a private firm’s pension plan in light of their piss-poor investment performance.

But wait! One more thing. Biddle’s using last spring’s numbers, and even CalSTRS admits it’s fallen behind another $7B or so since then.

Now, CalSTRS is not actually losing money. It’s making money, almost four percent over five years of a bull market (before, of course, the expenses of Ehlers and his army of below-average “experts”). But it’s not making money fast enough to stay ahead of its growing liabilities. It’s got Baby Boomer teachers aging out and taking pensions, and the population — especially the school-age population — not growing fast enough for revenues to keep pace. And the benefits are pretty good for those that are getting them now (not so good for those that will be screwed when the system goes under).

It’s bailing 3.7 gallons out of the lifeboat as more than that comes in, every year, and its way of correcting the problem always is to say that next year some miracle will cause them to overfulfill the Stakhanovite 5-year Plan miraculously make 8, or 8.5, or maybe only 7.5% in a market with a zero Fed Funds Rate, even though they historically have not done half of that that.

When the mutual fund company tells you “past results are no guarantee of future performance,” they’ve usually just got through showing you historic positive results. Ehlers wants you to believe (and the teachers, and the Legislature, and papers like the Sacramento Bee really appear to believe) that they can promise future results that are double their recent past results, while they keep doing the same old thing, and are competing in a market by people who are not constrained by political investments.

We’re sure that picking investments because of the feels of activists who were mentally maxed out going through a lowbrow teacher training program for room-temp IQs has nothing to do with it.

Breaking: Colt Defense Bankruptcy

colt_logo_mThis week may be will be the week It looks like today is the day that sees Colt Defense throw in the bankruptcy towel. A Google search on the scary term “Colt bankruptcy” finds dozens of stories.

Update: Starting at about 2100 last night EDT, the stories were saying that Colt was filing for Chapter 11 Reorganization — a form of bankruptcy protection that shields a firm from creditors while giving it time and funds to reorganize.

In Chapter 11, creditors and owners normally take losses. The owners are often zeroed out, and unsecured creditors may be, also.

Colt’s most valuable properties, its intellectual property (designs, trademarks and patents) are essentially mortgaged, greatly reducing the cash value of the business, which the managers propose selling at auction.

After Colt defaulted on an interest payment last month, its managers, hedge fund Sciens Capital, initially tried to press bondholders into accepting a 95% haircut and a six-year stretch in bond terms. Only 5.1% of the bondholders were willing to take a chance at getting 5% six years later ($50 per $1000 of bonds’ face value), even with the firm threatening to go bankrupt and zero them out. Colt managed to negotiate some breathing space with the bondholders, and managed to raise the participation to a still-anemic 5.9%, even after offering them a less sour 45% of old bond face value in the new bonds.

The managers’ second choice, a prepackaged bankruptcy like the one used in the notorious Government Motors bankruptcies, also did not attract enough creditor support.

The Wall Street Journal (if this link paywalls you, go back to the Google search above) calls the company’s problems, “business-execution issues and a heavy debt burden.” If you’re a WeaponsMan.com reader, you knew that already. (The Journal article is very good, but even it has its limits. It traces the 150-plus-year-old firm to “17th Century New England,” where, what? Some Colt forebear presumably made Miles Standish’s matchlock? Layers and layers of editors!)

Some creditors were willing to provide debtor-in-possession financing to allow Colt to continue operating in Chapter 11. Assuming court approval, their plan is to sell the entire business as a going concern at auction.

Colt has struggled in recent years with supply-chain and working capital issues, a slowdown in rifle sales and its 2013 loss of a key contract to supply the U.S. Army with the M4. As a result of some of its operational issues, the company has had accounting problems that caused it to revise prior years’ reported financial results and miss a creditor’s initial filing deadline for an annual report, according to regulatory filings.

Colt plans to try to reduce its $355 million debt burden via a court-supervised auction of its business, to generate proceeds to repay some of its lenders, the people familiar with the plans said.

Note exactly what that said: “repay some of its lenders.” (Emphasis ours, of course – Ed.) That implies that others of its lenders will not be repaid — and creditors who are, unlike the lenders, unsecured? They’re probably SOL.

Colt has selected its private-equity backer, Sciens Management LLC, as the “stalking horse”—or lead bidder—in the sale, some of the people said.

So much for the hope that the auction was going to be on the up-and-up.

Here’s how the Journal describes Colt’s Annus Horribilis: 

As its cash dwindled, Colt spent much of the past year seeking financing and angling for better terms and restructuring-plan support from creditors.

It tried to win bondholders’ backing for a debt-for-debt exchange or a “prepackaged bankruptcy” filing that could have smoothed its trip through chapter 11. But bondholders balked at the deals, either of which would have slashed the amount the company owed them. As of June 1, just 5.9% of bondholders had registered their support for Colt’s proposal, according to the company.

Colt borrowed $70 million from Morgan Stanley last year to pay interest on its bonds, and in February it warned it might not have enough cash to make an interest payment by a June 15 deadline. This year it struck a $33 million refinancing deal with hedge fund Marblegate Asset Management LLC that also freed up some additional liquidity, according to filings.

Every time some liquidity got refloated, some portion of it was siphoned off by Sciens (or the previous hedgies), and now it looks like they’re going to take another shot at draining this company’s cash lifeblood. And the Journal notes another coincidence: the building that Colt leases in West Hartford, CT, is owned by some of Sciens’s insider managers.

We’re sure there’s no rake-off happening there.

Other stories:

Update:

Amazing. Per a press release that is posted to Nathaniel’s story at TFB, Sciens Capital, the owners of Colt Defense, are going to buy the company with new borrowed money, zeroing out the bondholders and some of the lenders (notably the participants in that $33M round led by Morgan Stanley — MS itself is not exposed to the risk, but took a management fee for organizing the round, per our MS guy).

As part of this deal, Colt will extend its lease on the building leased to it by its own owners. One more way the Sciens Capital hedgies make Colt into the gift that keeps on giving — to them.

Normally a company emerges from bankruptcy either stronger (as Colt did from its last Chapter 11 bout just over 20 years ago) or mortally wounded, just a shuffle away from the elephant’s graveyard. The plan here is for the successor company to be managed by the same guys who ran this one into the ground (after putting their mitts on everything but the third rail), which doesn’t bode well for the future of the company, let alone for the poor chumps who provided the capital, only to find out that the future was an iceberg and they didn’t have a seat in the lifeboat.

Update II:

Here are the filings, again thanks to Nathaniel.

http://www.kccllc.net/coltdefense

All Colt firms are included in this bankruptcy, including Colt Canada (ex-Diemaco), a finance arm, and other domestic and international branches of the firm. The bankruptcy petition is filed in Colt’s paper home jurisdiction, Delaware.

History:

For all WeaponsMan.com reporting on Colt (products as well as finances), this is a Google search.

Previous WeaponsMan.com reporting on Colt Defense’s situation (newest on top):

28 May 2015: Colt Defense LLC Kicks the Can, Again.

23 May 2015: In Any Colt Bankruptcy, Its Patents are Already Gone

20 May 2015: S&P Drops Colt Defense Below Junk to “D for Default.”

19 May 2015: Industry News: TrackingPoint winks out; Colt, ?; ATF Raids Stag

18 May 2015: Breaking: Colt Kicks the Can One Week Forward, Again.

12 May 2014: Colt Past Financial Deadline, Extends Deadline

05 May 2015: Is Colt Toast?

12 Dec 2014: Pythons Can’t Save Colt

20 Nov 2014: No, Colt Didn’t Default  (Hey, it was true then). 

17 Nov 2014: Is Colt Going Paws Up? Why? An Analysis.

Administration, Chinese Screwed 14-20 Million Defense Workers

secret1Now, we can’t really blame the Chinese for this. Hacking foreign networks is what every secret service is supposed to do, ours, theirs, and Karjackistan’s alike.

But we do have an Administration that made it easy for them.

Since this series of breaches have been exposed all they’ve done is lie about it, obfuscate lines of responsibility, and cover bureaucratic asses. No one has been held accountable in any way. Not one head has rolled.

Indeed, nothing has rolled but the Presidential golf ball.

Why hasn’t the head of the head of OPM rolled? Because the President cares about his golf ball. He cares about the security concerns of Chine, or Iran, or Russia, or some gang of Palestinian terrorists. He doesn’t care about military and defense workers. Neither does anybody else in power in DC. They’re more concerned that the failed head of OPM might miss a Maserati payment — he’s somebody they see over wine and cheese in Georgetown.

You, peasant, are not.

The Chinese breach of the Office of Personnel Management network was wider than first acknowledged, and officials said Friday that a database holding sensitive security clearance information on millions of federal employees and contractors also was compromised.

Yeah, the Friday night bad-news release strikes again.

In an announcement, OPM said that investigators concluded this week with “a high degree of confidence” that the agency’s systems containing information related to the background investigations of “current, former and prospective” federal employees, and others for whom a background check was conducted, were breached.

OPM is assessing how many people were affected, spokesman Samuel Schumach said. “Once we have conclusive information about the breach, we will announce a notification plan for individuals whose information is determined to have been compromised,” he said.

Well, we know who it is: everybody who applied for a security clearance investigation or periodic reinvestigation, some 14.9 million, and everyone else who was mentioned in those applications, including references, family members, friends and neighbors, and other individuals whose identities were developed by OPM special agents during the investigation process for military Top Secret and Department of Energy Q Clearances.

The announcement of the hack of the security-clearance database comes a week after OPM disclosed that another personnel system had been compromised. The discovery of the first breach led investigators to find the second — all part of one campaign by the Chinese, U.S. officials say, evidently to obtain information valuable to counter­espionage.

And what they haven’t mentioned is, despite having a small army of IT drones who are paid well-above-market pay and benefits and who worry about their imported-car payments and their kids’ private schools and college funds, it wasn’t any of their IT underachievers or slumbering counterintelligence chair-weights that discovered the breach.

It was a jeezly salesman trying to sell OPM an over-the-counter malware and intrusion detection and assessment software package who found it during his demo.

Not only did they not hire that guy and fire all the drones who have presided over a year of threat exploitation of a poorly secured network, they didn’t even buy his ever-lovin’ software!

It gets better. Because they didn’t just get the clearance files of cleared personnel, they got the files of denied personnel. They got the files of cleared personnel who were cleared only after extra adjudicative effort as a consequence of derogatory information in their files. To have the names and details of all cleared personnel is a coup. To have that, plus their vulnerabilities?

“This is potentially devastating from a counter­intelligence point of view,” said Joel Brenner, a former top counter­intelligence official for the U.S. government, speaking about the latest revelation. “These forums contain decades of personal information about people with clearances . . . which makes them easier to recruit for foreign espionage on behalf of a foreign country.”

via Chinese hack of federal personnel files included security-clearance database – The Washington Post.

This is, in fact, a Pearl Harbor-level thrashing in the clandestine area.

Imagine yourself head of Espionage for, shall we say, Country C.

Someone on your staff brings you a list of everybody in Country A who has, officially, access to secrets. Including the files of people whose clearances have been suspended or not renewed, for, say, financial problems. Or legal problems. Or questions of divided loyalty, or contact with foreign personnel. Including your country’s personnel.

Do you:

  1. Despair of ever penetrating Country A’s secret projects? or,
  2. Immediately set an army of intelligence officers to work finding potential recruitment targets?
  3. Add all the nationals of your own Country C who have contact with cleared Country A personnel to your “tab ’em or grab ’em” lists?
  4. Kiss that staffer no matter how ugly he is, and blow another kiss to Country A’s somnolent guardians of the family jewels?

We knew there were powerful supporters of international trade in Washington DC, we just didn’t know they’d outsourced national security to China.

Hat tip, Ace, where he’s about as pissed off as we are.

The Joy of Catalogs

The catalog for the Rock Island Auctions regional auction came yesterday, and it made us think about catalogs.

catalogsOver the years, they have changed; in boyhood, there were always some kind of gun catalogs or wishbooks around. Heck, Ruger used to advertise on the back pages of comic books. Even then, there were several kinds of catalogs:

  1. The glossy, whole-line catalogs put out by manufacturers, from the prosaic (Harrington and Richardson, Marlin) to the sublime (Weatherby, Interarms);
  2. The multi-line catalogs from large dealers and wholesalers, that, if you were a kid fascinated by guns, you might get an outdated version from a friendly salesman;
  3. The sort of “catalogs” maintained by third parties that tried to catalog all available guns, which also had articles, like Gun Digest;
  4. Magazine-like “catalogs” published by magazine publishers that tried to have a photo, the basic facts, and the list price of a some thematically-organized subset of guns, like .22s. These, too, were often sweetened (or, perhaps, fattened) by articles. We remember one that showed the whole process of making .22 long rifle ammunition at the CCI plant. Even in childhood, manufacturing was fascinating. 

The problems with each of those kinds of catalogs were many. We wanted to keep them forever; more practical parents figured they had an expiration date. They also tended to encourage a deep-seated addiction that we still have today: we wanted one of each. And, the catalogs cost manufacturers a lot of money; their stockholders were not going to see any return this quarter from a 12-year-old who was pedaling home from The Gun Room with their expensive four-color glossy advertisements in the basket of his three-speed.

It was during high school that we wrote and sent off for a catalog that everyone of a certain age remembers, or at least remembers the ads for: J. Curtis Earl’s machine gun catalog. In those days, you had to write for things; nobody made long distance phone calls that he or she could avoid (they were expensive!).

The Sale Your Catalog Makes Might Not Be This Year

Memo to marketing VPs everywhere: sometimes you just have to pay it forward. And you have to have faith your company’s survival. We would totally have bought an H&R Officers’ Model trapdoor carbine, if the replica of the Indian Wars classic (and the company that made it, which went bankrupt->auction->Cerberus->Remington Outdoor and lost 95% of its product line and all its character in the process) was still around. Because of the two-page spread about it in the catalog, circa 1972. Most of the oddball .22s we wanted are long off the market, but the Ruger 10/22 we asked for for Christmas is still going strong with millions built. (We didn’t get it, by the way. The Gun Room sold Dad a Winchester 190 instead: less money. We come by being frugal New Englanders the old fashioned way, we’re born to it. The 190 was fine, for a kid).

But we’re pretty sure that Walthers and Berettas that have graced our collection have come to be there, at least in part, thank to catalog photos and copy.

FN, which has been making guns (and presumably catalogs of them) since the century before last, gets it. A few months ago they held an event at one of our local ranges, and while we missed the event they left behind plenty of cool FN rental hardware to try, and a lush supply of glossy catalogs. Naturally one followed us home in the basket of whatever we were driving. And we looked at it at great length.

In our opinion, catalogs are better than most gun mags or gun videos. (Well, especially, most gun videos). The catalog tells you two things: what the manufacturer thinks are the selling points of his guns, their natural advantages. These are the things he emphasizes in his catalog copt. And, the second thing? What he thinks are his disadvantages. Those are the things he doesn’t mention — their absence may only be obvious when you compare catalogs and see what competitors are not boasting about. Glock will never tell you (do they even print a catalog?) that you must pull the trigger to dismantle their pistols, but every striker-fired pistol that doesn’t copy that Glock feature makes sure to mention that you don’t need to pull the trigger to strip the gun. (For someone who came up in the 1911 era, the idea that you would is strange, and smells of bad design).

Catalogs Today

Today, some manufacturers or importers have turned their catalogs into profit centers by having them published by magazines and sold for $10 or so on the newsstand. We’ve got Beretta and CZ-USA catalogs like that; the 12-year-old version couldn’t have afforded them.

As the FN glossy shows, there are still catalogs aplenty. And then there’s the internet. One of the best catalogs online is Maxim Popenker’s world.guns.ru, although its focus is primarily military arms.

And then there’s those Rock Island catalogs. We weren’t going to bid on anything, but you know, if we’re going to do that video we’ve been thinking about on Czech pistols, we really ought to have Models 24, 27 and 38 on hand.

 

The Plane Crashed. And Then the Troubles Began.

As any mishap investigator can tell you, a major accident, like a plane crash, is the exclamation point at the end of a long sentence whose verb(s) is or are one or more errors. Usually the errors are by pilots, but in the pre-delivery test flight crash of an Airbus A400M Atlas in Seville last month has exposed an error chain in the company. The pilots, among four crewmen who perished in the wreckage (two others survived), were blameless.

File photo of A400M from Wikipedia.

File photo of A400M from Wikipedia. You can see where those props idling might be a drag problem.

Airbus Defense is years behind with the A400 Atlas, their first product; the head of the company was fired some time ago and replaced by the former head of flight test, who was given the order to get the planes in the air and delivered. It is a complex and ambitious plane, which is intended to fit into the sweet spot between the capabilities of the ubiquitous C-130 Hercules, a design that’s now 60 years from its first flight, and the C-17, which is priced out of most of the European market.

Airbus A400M Compared to the two US competitors. Wall Street Journal graphic.

Airbus A400M Compared to the two US competitors. Wall Street Journal graphic.

As it stands, the delivery has been so dragged out, and the cost of the machine has soared so high, that launch customers Germany and Spain are not going to have the force structure left to operate their intended A400M fleets.

Who pledged to buy A400Ms. ?? graphic.

Who pledged to buy A400Ms. ?? graphic.

The course of the error is troubling. At some time, someone decided that software tests could be skipped. Instead of being dry-run in a simulator, which would have taken time with the delivery-ready planes for the Turkish contract idled, they took a new build of engine managament software and installed it directly on the airplane. We guess they were going to certify it based on the test flight — if it hadn’t brought destruction to the plane and crew. In Flight Global’s words:

Airbus Defence & Space on 2 June communicated the findings of the Spanish defence ministry’s CITAAM organisation to operators of the A400M. This followed the completion of preliminary analysis of the aircraft’s digital flight data recorder and cockpit voice recorder.

“CITAAM confirmed that engines 1, 2 and 3 experienced power frozen after lift-off and did not respond to the crew’s attempts to control the power setting in the normal way, whilst engine 4 responded to throttle demands,” Airbus says.

With the three affected engines still operating at take-off settings, the Airbus test pilots aboard aircraft MSN23 opted to move their power levers to the “flight idle” position to reduce power. “The power reduced, but then remained at flight idle for the reminder of the flight, despite attempts by the crew to regain power,” the company says.

This is a pretty horrifying thing to imagine. At the normal climbout point where T/O power is reduced to climb power, for three of the plane’s four engines, nothing happened. The pilots were not in control of the plane. Their next step was logical — try bringing the engines to flight idle. This was successful — but a one-way move. With three of its engines swinging the planes’ huge scimitar propellers, the strong jet couldn’t hold altitude — a meeting with Mother Earth was inevitable, and when the power wouldn’t come back up, the pilots’ options for where, when and how were extremely limited.

Even then, the test pilots thought they had a chance. They spotted an open field but according to witnesses, they flew into, presumably unseen, power lines trying to put the plane on the ground.

Pilots of the A400 have a single power lever for their powerplants. Like all modern planes, but unlike legacy planes like the Transall and pre-J-model C-139s they don’t have the backup of a flight engineer, either.

This is significant in part because of Airbus’s design philosophy, which is that the pilots should not be able to override the computer. (Boeing takes the opposite approach, and the flight crew can generally override computers in Boeing aircraft). The data behind the Airbus computer-primacy are the decades and decades of accidents caused by human error. By giving more of the configuration-management and control decisions up to the machines, this rich source of human error is excluded. Defense News:

“Several protocols were ignored,” [the Madrid website El Confidencial] said citing unnamed aeronautical sector sources.

The computer system that controls the plane’s engines, the Full Authority Digital Engine Control (FADEC), “should have been tested before, in a simulator, to check if everything worked,” it added.

The sources claimed the protocols were skipped because Airbus was in a hurry to make up for delays in the development and delivery of the A400M military cargo and troop transport plane which is assembled in Seville.

The A400M plane that crashed in a field and burst into flames just north of Seville’s airport on May 9 was undergoing a test flight, before it was due to be delivered to Turkey in July.

Two of the six people on board the plane, a mechanic and an engineer, survived the crash and were sent to hospital in critical condition.

A senior Airbus executive said Thursday that analysis of the flight recorders of the A400M indicated there were no structural faults but assembly quality problems.

The units which control the engines of the plane were poorly installed during final assembly, which could have led to the engines malfunctioning, Airbus group’s chief of strategy Marwan Lahoud told the German daily Handelsblatt.

But Airbus aircraft haven’t established a superior record. Instead, they’ve had different kinds of accidents, with several spectacular mishaps resulting from the automation’s interaction, especially with ill-trained crews on some Asian airlines. 

Most of the nations who have the previous examples of the A400M Atlas have grounded their fleets pending the outcome of this investigation.

The Seville plant is the same one that produced numerous small CASA 212 military transports, made a series of midrange passenger and cargo planes under the CASA and Airbus names, and now completes all of Airbus Industrie’s military aircraft. The A400M is still an airplane that many militaries desire (Sweden is considering them to replace its C-130 fleet of old 1960s-vintage H models). Working with a clean sheet of paper, Airbus engineers packed the cargo hauler full of innovations. For example, it’s designed to handle its own cargo inasmuch as possible, requiring minimal ground equipment:

Airbus A400M autonomous

 

But no innovation alone can save a company. (Actually, nothing much can happen to Airbus, which is a project of European governments, except that its reputation can take hits). In fact, innovation can delay time to market. It is a truism in aviation that certification (official approval) for any aircraft takes longer and costs more than all but the wealthiest and most cynical investors expect. But the wreckage in Seville is an illustration of the price of cut corners.

Burnt-out cockpit of the A400M. Image: Bomberos del Ayuntamiento de Sevilla.

Burnt-out cockpit of the A400M. Image: Bomberos del Ayuntamiento de Sevilla.

Crash site from overhead. Spanish firefighters official.

Crash site from overhead. Spanish firefighters official.

Colt Defense LLC Kicks the Can, Again

colt_logo_mWe regret to use a news slot on this nearly-routine information, but we have to put it up while it still has some news value.  – the Eds.

As the expiration of its May 26 deadline came and went, Colt grabbed for another week for its bond exchange and restructuring plan.

Further, the Issuers also announced today that the “Expiration Date”, the “Consent Expiration Time” and the “Withdrawal Deadline” have been extended to 5:00 p.m., New York City time, on June 2, 2015 for their related solicitation of consents (the “Consents”) to the proposed amendments to the indenture governing the Old Notes (the “Consent Solicitation”).

Despite the firm’s survival of another week in default outside of the looming threat of Bankruptcy Court, the progress on the Exchange Offer front wasn’t good. In this, Colt is asking owners of the in-default 8.75% notes which are due in 2017 to swap them for highly speculative junk debt, paying 10% and maturing in 2023. In today’s environment, where inflation and de-facto negative prime rates from central banks impose negative interest on ordinary savings, 10% is extremely attractive — if it has any prospect of being paid.

What does the market think of the Colt swap? At the end of this week, no more bonds appear to have been offered in exchange than last — just 5.7%, still 92.3% short of Colt’s objective for rolling over the bonds.

The Issuers announced today preliminary results of the Exchange Offer. As of 5:00 p.m., New York City time, on May 26, 2015, approximately $14.2 million, or 5.7%, of the outstanding principal amount of Old Notes had been validly tendered and not validly withdrawn.

Why the can kick?

Well, on one level, it’s that, or see the judge, which would wind up expropriating the current stockholders (and managers). It’s a desperate survival move — Pauline has escaped the cliffside, the train tracks, and the pendulum, and now finds herself tied to a chair next to three sticks of dynamite wired to a clock. The temptation to somehow roll back the time on the clock has to be overwhelming.

Colt includes the same exact paragraph as last time, suggesting that negotiations with the holders of the Old Notes are ongoing.

The Issuers believe it is in the best interests of their respective stakeholders to actively address  their capital structure and are continuing their discussions with an ad hoc group of holders of the Old Notes. The Issuers hope that such discussions will result in a consensual restructuring transaction.

via Colt Defense LLC Announces Extension of Exchange Offer, Consent Solicitation and Prepackaged Plan Solicitation | Business Wire.

And it is possible that Colt could come to some agreement with the bondholders, probably by giving them some indications that a reorganization plan is viable, and giving up some of the equity to them. (Absent viability, the equity is worthless, because it would be erased in a bankruptcy).

What Sort of Investor Holds the Old Notes?

It won’t be widows and orphans, unless they have had irresponsible financial advice. Most probably belong to other Wall Street operators and their operations. Risky but high-coupon bonds are frequently larded in the portfolios of hedge funds and some mutual funds, where they’re mixed with many other investments to provide some spread of risk.

Also, union and municipal pension funds, which are usually not as well run as financial-sector funds, often can’t resist the tempting apple of 8.75% (or 10%) interest in a 0% Fed funds market (fundamentally the current situation; the current Fed Funds target rate is 0.25%; the prime lending rate is 3.25%). For example, many municipal and state pension funds are only solvent if they’re allowed to assume a basic return of 8% in the market. And that 8% was conventional wisdom; the examples in financial accounting textbooks still used by B-school students often use 8% as a sample input. So fund managers are desperate to make that 8%, wind up buying turkeys like the Colt bonds, and sooner or later will want a taxpayer bailout. (This is exactly what happened to cities like Bridgeport, CT, Vallejo, CA, and Detroit).

We also checked with our money guy, and he added some in-the-industry insights, including:

  1. While the $33M that “saved” Colt back in February was reported as coming from Morgan Stanley, the firm almost certainly simply organized private lending, and walked off with a percentage of the $33M, but took no risk exposure.
  2. Right now, there’s a vast quantity of hedge and other private capital chasing very few worthwhile investments. (If you are this kind of investor, you know what we’re talking about). The money has to go somewhere — leave it in a bank and it wastes away do to low or even negative interest and the effects of inflation. Therefore, some of it goes into less worthwhile investments.
  3. Some of the hedge and pension funds are so large that they can have a lackadaisical attitude to this kind of risk. A retired surgeon or executive with a net worth of $3 million and $1 million in Colt bonds is really in trouble — if there is such a person (which brings us back to really bad financial advice). He’s about to lose a third of his wealth! But a hedge fund manager investing $3 billion and holding $1 million in Colt bonds can shrug it off: he’s (well, his investors are) about to lose three hundreths of a percent. It’s the equivalent of the $3M net-worth guy losing $1,000.

Our Prediction:

Tuesday or Wednesday next week, we’ll be reporting another can kick. They can keep this up until they can’t make payroll, or some defaulted-on or stiffed person or company sues. Indeed, they might continue wobbling along even after failing to make payroll — for a short, and finite, time.

Something called Colt will survive, in some form. But it may not be something that retains the residual respect of the dying Hartford manufacturer.

Suppressors: 40-state-legal; two more “Maybe Soon”

Last time we looked at suppressor legality, it was up to 37 of the 50 United States. (They’re banned in DC and all the Territories if memory serves).

But that was months ago, so it was time to check again, just in time to learn that Minnesota, which banned suppressors for many years, legalized them, becoming State #40 to allow citizens who comply with the Federal National Firearms Act to own them.

asa_edu_map_0522151

Even Minnesota’s anti-gun, anti-2nd-Amendment governor, Mark Dayton, signed the bill.

A similar bill is on Vermont Governor Peter Shumlin’s desk. It is a very small change in the laws in this idiosyncratic, left-libertarian state. The current provision of Vermont law is almost laughable in its lack of consequences for the violator:

Section 4010. Gun silencers A person who manufactures, sells or uses or possesses with intent to sell or use, an appliance known as or used for a gun silencer shall be fined $25.00 for each offense. The provisions of this section shall not prevent the use of possession of gun silencers for military purposes when so used or possessed under proper military authority and restriction.

But its real effect is that NFA Branch will not license suppressors to Green Mountain State residents because of this state law. (We have not ever heard of a case of 4010 being enforced). Nobody knows what Shumlin will do. But if he signs the bill, Vermont will make 41.

Iowa has an omnibus gun-rights bill wending its way through the legislature, with both the Senate and House having approved different versions. It is a mix of good and bad, extending the duration of (but not eliminating) purchase permits, and creating an electronic owner-registration database, the purpose of which is to help anti-gun law enforcement agencies and officers in places like Maryland and New Jersey to harass out-of-state travelers. But it also legalizes suppressors and turns CLEO signoffs into a must-issue item. It is likely to change again before enactment (if it’s enacted at all). But with the suppressor language, Iowa could be 42. The Iowa Firearms Coalition has updates.

In addition, legislation was filed in Illinois this year, but seems to have perished. It will be back next session.

If those states pass, the only states west of the Mississippi to ban suppressors would be California and Hawaii. Several Northeastern states such as NY, NJ, DE, RI and MA remain holdouts, and the other New England states are still behind on permitting suppressed hunting, which is otherwise allowed in almost all of the states that allow suppressors.

Glock Training Pistols

We’ve covered the SIRT training pistol before, but such a successful market was probably not going to be neglected by Glock forever. In fact, Glock has introduced several versions of training pistol, most of which are available only to LE/military customers, so far. They can all take rail-mounted accessories or aftermarket sights without trouble.

Cutaway Pistols

Cutaways are used for teaching how a firearm works and are useful for training both users and armorers. Sure, an experienced armorer has no problem visualizing what’s going on inside a simple machine like a Glock 17, but seeing it in front of his face brings him to that threshold of knowledge sooner.

glock_cutaway

Here’s what Glock says about these:

GLOCK cutaway models are produced for technical and firearms training. These models are always a main attraction at training classes, presentations, and tradeshows because they clearly illustrate the ingeniously simple internal mechanisms of the GLOCK pistol. They are sold exclusively to law enforcement agencies.
Cutaway pistols in are available in the following models:
Gen3 – G17, G19, G20, G21, G22, G23
Gen4 – G17

Glock T FX Training Pistol

This is a special pistol for use with nonlethal Simunitions® FX 9mm marking ammunition for training, including kinetic training and force-on-force. It is available to LE and military customers only. As the Sims come in essentially a single caliber, there is only one standard catalog Glock T FX, the Glock 17 T FX.

glock_17_t_fx

As is customary with Simunitions guns, the 17 T FX Training Pistol functions on direct blowback. The blue parts of the slide are polymer inserts to reduce the slide weight and permit the pistol to cycle with the low-powered, light-weight training rounds.

Here’s the Glock factory description:

Over the years, Police, Special Units, SWAT, and Military units around the world have proven that static shooting training, combined with simulated shooting training, produces the greatest benefits. The GLOCK Training Pistols were developed with the purpose of enabling reality-based tactical operations training using color marking or plastic projectile ammunition.

Simunitions, Inc., now a division of General Dynamics Canada, has also long furnished conversion kits and dedicated training weapons on Glock as well as other platforms.

Glock P Practice Pistol

The Practice Pistol, here a G22P, fires neither Simunitions nor live ammunition. It’s simply a trainer, designed to impart mechanical skills to those new to handling Glock pistols.  It can be loaded, unloaded, disassembled and assembled, holstered and dry-fired like a regular Glock, but it can’t chamber or fire live ammunition.

glock_22p

Here’s the Glock rundown:

Loading magazines, sight alignment, trigger squeeze, and disassembling are all part of a shooter’s training routine. The GLOCK Practice Pistol was developed to eliminate dangerous scenarios during training exercises. Identical to a GLOCK pistol in handling, weight, size, and balance, it puts the real thing in your hand, without any firing capability.

Glock R Reset Pistol

The Glock Reset Pistol is their answer to the Next Level Training SIRT trainer. It’s not as complete, requiring the trainer or organization to source a separate laser module, but it is from Glock, meaning organizations can (and do) bundle it into their pistol bid.

glock_reset_pistol

Glock says this about that:

The GLOCK Reset Pistols automatically reset the trigger without having to manually manipulate the slide. They enable safe, practical training when used with a shooting simulator. An aftermarket, laser impulse generator can be integrated in the barrel, and when pulling the trigger, the firing pin will activate and register a virtual hit on a simulator screen.

The “aftermarket lasers” they’re talking about are things like the Laserlyte cartridge laser.

Hat tip: a friend who sent us to the anti-gun gun magazine, Recoil, which had a story on the Glock trainers that got us interested in looking them up.

 

Can’t Billions Buy Better Bullshit?

Kyle Stock (l) and Michael Bloomberg (r).

Kyle Stock (l) and Michael Bloomberg (r).

Back last summer, Bloomberg propagandist Kyle Stock crowed that “Gun Sales are Down.” And it’s true that they were — relative to 2013. A year further on they’re still higher, than 2012.

Stock’s deliberate misrepresentation of the data is worth a little study, because it’s how propagandists work. In this case, he uses NSSF data and a redrawn NSSF graph, but mislabels the NSSF adjustment (whatever force is strong in this one, it’s not the force of integrity).

Coming off a year of record sales, the gun market is cooling off. And overeager gunmakers are still struggling to dial down their expectations.

In the recent quarter, Smith & Wesson (SWHC) sales dropped 23 percent, to $131.9 million, and profit plunged 45 percent, to $14.6 million, according to a report late yesterday. Long guns and “modern sporting rifles,” in particular, lost favor among shooters, but handguns cooled off as well. Smith & Wesson shares slumped almost 15 percent on the news.

Stock, in his ignorance of the industry and determination to score propaganda points for his wealthy lord, is jumbling several different kinds of data. NSSF adjusted background checks are a proxy, albeit an imperfect one, for unit volume. The imperfection is not just in the things that NSSF takes out of the data, like one state’s weird habit of running NICS checks monthly on every concealed carry license holder, and other non-sales-related checks, but also in that you can buy many guns on one NICS check. Our own last five NICS checks were for (1) four collector pistols bought at once at auction; (2)  four AR-15 prototype receiver sets, (3) two AK receivers with parts kits, (4) six assorted lower receivers, and (5) three WWII weapons, including an NFA weapon. Here’s the equation: 5 NICS = 19 Firearms transferred. So we don’t know what the average multiplier on a NICS check is, but we know that, shorn of the non-sales transactions NSSF tries to adjust out, it is some value greater than 1. (Probably 1 decimal something small, because most transactions are still a single gun, but we don’t know, do we?). We also don’t know if that multiplier itself displays a secular trend, and if so, in what direction. So all NICS can be is a loose, longitudinal proxy for sales. Not much use as an absolute number, but useful for year-over-year comparisons.

To violate what we just said about the inutility of the absolute numbers, we note that the 2015 pace, if it is sustained all year, will still produce a near-record of over 20,000,000 NICS checks (our loose, longitudinal proxy for sales). NICS checks have nearly doubled in the last five years. However, over many years (NICS data back to 1998 is available) the sales in the second half-year always exceed the first half. There are doldrums in the summer and in February, and the peak is invariably December, with November a close second. Something happens in December in America, wherein guns are common gifts: it’s probably not fair to expect a Bloomberg hireling in New York City to understand this source of seasonality in the data.

The next data point he uses, which is not connected to unit sales, particularly, is stock price. Stock prices rise and fall based on firm performance, relative to market expectations. Journalists, who tend to be both narrowly and shallowly educated in storytelling alone, and to suffer from innumeracy, never seem to grasp this. So the market (somewhat unreasonably)  expected that the feverish 2013 sales pace would continue, while everyone in the industry knew that the years of every-month-up-over-the-previous-year had to end sometime.

Sturm Ruger (RGR), another force in the industry, had similarly weak numbers at the end of July. Sales for Sturm dropped 13.4 percent, to $153 million, in the latest quarter, while profit slid by almost one-third, to $22.3 million.

Ruger and Smith are not the only “forces in the industry” — but they are the only publicly held companies, at least pending ATK’s spinoff of its sporting wing. So, as we all do, Kyle Stock is arguing from a very limited data set — privately held firms file no 10-Ks. The returns of Smith and Ruger are, necessarily, a second set of loose, longitudinal proxies for a complex and variegated industry. But note that he didn’t mention Ruger’s stock price’s doings. That’s because, unlike Smith, it has a long secular upward trend. If you’ve followed the stocks for years and understand the market a little (rather than, say, being a shallow journalist who skims until he fastens on a point he can slot into The Narrative®), you know that Smith is a much more volatile stock than Ruger (the standard deviation over a period is a measure of volatility, and Smith’s is much higher). So when Smith soars, it soars high; when it takes on on the chin, it goes all the way to the mat before getting back up.

The problem, according to both companies, is too many guns. Executives are grousing about “high inventory,” stubborn retail partners, and a glut of guns in such stores as Cabela’s. They are less eager to acknowledge that high inventory in any business comes from only two places: low demand and/or too much supply.

There have been many new entrants in some segments of the gun market. This is a common thing to see in a market segment where barriers to entry are moderate (meaning, it’s easier to go into business making guns than making cars, or airplanes, or pharmaceuticals): high profitability induces new entrants.

This week, Smith & Wesson’s chief executive, James Debney, went so far as to suggest that stores were just clogged up with the wrong guns—an “unfavorable mix” of “lesser brands and hard to sell products.” Sturm Ruger, meanwhile, took a similar tact, blaming itself for not producing enough cool new firearms.

Again, Stock is a paid propagandist for a billionaire. His mind, his soul, and most of all, his pen are for sale. His education and training are entirely in the use of words: to express ideas, to suppress ideas, to sway emotions. He is, if anyone is, supposed to be able to use the sailing-derived noun tack in a figurative sense for a change of direction without the amateurish error of using the mistaken noun tact in place of tack — if his education hadn’t been shallow and full of holes.

What the industry really needs is a few lawmakers advocating a gun-control bill. That’s what pushed the gun business to record highs last year in the wake of the Sandy Hook school shootings.

Whistling past the graveyard of his master’s gun control dreams, that last bit. Do gun-ban attempts drive sales? To some extent, yes, in three ways.

  1. Ban attempts pull sales forward, by providing an impetus for sales now that would have happened sooner or later anyway. A lot of these sales go to people already into guns who wanted another one, or always wanted an AR-15, and that kind of thing. You probably have friends in this category.
  2. Ban attempts bring fence-sitters off the fence. This includes both Fudds who were eyeing the modern sporting and defense gun market with curiosity, and people who were entirely outside the gun culture, looking in.
  3. By bringing new people into armed self-defense, or into gun sports or hobbies, ban attempts permanently raise sales levels. Some percentage of these people who weren’t engaged before become repeat customers.

So yes, there’s a spike, and the part that has Stock mumbling around his mouthful of Bloomberg reproductive tackle, is that a spike by definition subsides. But it subsides to a new, higher, level. This same thing will happen every time the Boston-Manhattan-DC-Chicago-LA anti-gun Axis pushes citizen disarmament.

Those fears, however, have largely abated, and gun sales have gone with them. Even reports of ammunition shortages are dying off.

via Gun Sales Are Down – Bloomberg Businessweek. (This has also appeared under the headline “People aren’t buying guns,” but it’s the same article, repop’d to double the propaganda value).

That’s what Stock was told to write, and that’s what he wrote, but what we’re seeing in 2015 and saw in 2014 is not some regression to the mean over the last 20 years, but a regression from the record year of 2013 to a level about equal with (and so far, ahead of) the previous record year, 2012. You’ll never see that under Stock’s byline, because it’s not what his sugar daddy hired him to say.

Stock floated this same concept before, in November, 2013, by misrepresenting NICS data then.  Now there’s a bigger push to get the story out in Bloomberg’s media empire.

Bloomberg has his hirelings hot on this meme. For example, just in the last week, he has them grinding out:

Note well these bylines (and the editors, who are named at some of the links), and add Bloomberg chief anti-gun writer flunky Paul Barrett to the list. This is the propaganda team.

The appearance of all these variations of the same propaganda theme on Bloomberg-controlled media is no accident. But this concerted and centrally-directed propaganda campaign has a credibility problem: propaganda is only effective if it is wrapped around a truthful or at least plausible armature, and this one isn’t. Gun sales have subsided only to a new, higher level than the status quo ante. Will it be a hard time to be in the market with an undifferentiated, me-too product? Sure, but the last couple years, when even such a product would sell out, were anomalous. But a solid percentage of all those new shooters who bought a new gun over the two years of Bloomberg’s latest anti-gun jihad are just about due for another gun. The record of 2013 may not fall this year, but it will fall, and it will fall whether or not Bloomberg redoubles his paid, astroturf attacks. He can leave it alone and lose, or he can push harder and lose faster.

Now, there are network effects to consider. More people, who know more people, now own, carry, and shoot guns. As many as half the 20 million guns sold since Bloomberg renewed his ban efforts went to new shooters or gun owners. Each person’s social network expands the pool of people who know normal, sane people who rely on guns for defense or enjoy them for sport. Legitimate gun use for self-defense is even creeping in to the popular culture. The fastest-growing segments of the market are women and minorities, who are realizing that their belief in government authority’s duty to protect them was misplaced.

This is the best bullshit billions can buy, and really, it’s not that good. So, Bloomberg can keep squandering his money on these quasi-literate hacks from The Best Schools®, at any rate he desires. Attack us desultorily, our victory draws closer. Attack us furiously, our victory draws closer, faster.