SpaceX Accident Cost it Hundreds of Millions (fortune.com)

Elon Musk's SpaceX lost more than a quarter of a billion dollars in 2015 after a botched cargo run to the International Space Station and the subsequent grounding of its Falcon 9 rocket fleet, The Wall Street Journal reported on Friday. From a report: The accident derailed SpaceX's expectations of $1.8 billion in launch revenue in 2016, an analysis of the privately held firm's financial documents showed, according to the Journal, which said it had obtained the documents. SpaceX declined to comment on the Journal's report. In a statement emailed to Reuters, SpaceX chief financial officer Bret Johnsen said the company "is in a financially strong position" with more than $1 billion in cash reserves and no debt.

Comments

No Gut no Glory

[Dorianny]

The danger of huge losses due to the inherent risk of explosions is what's kept rocket technology squarely in the hands of government programs for most of its development. At the time when NASA seems to have lost its way, thank you SpaceX and BlueOrigin for having the guts to move the technology forward despite the enormous risks

Re:No Gut no Glory

[Rei]

It's a somewhat problematic business model.

If they $250M per failure and have a failure 5% of the time on a $62M rocket then the per-rocket cost is $12,5M, or 20% of the rocket's value.

Now they're trying for two things: a big scaleup, and greater safety. So let's say that they get the accident rate down to 2%, and they 10x their value. The cost of a failure should scale proportionally to the size of their market because it means a standstill in launches, the same reputation hit, etc. So now it's a $2,5B failure, occurring 2% of the time, or $50M per launch on a $62M rocket, aka 81% of the rocket's value.

Their business model and scaleup plans appear to be built on a premise of extreme reliability. Whether they can ever actually get that, I don't know. I like to hope so; airplanes have done it, and I know they're thinking, "if we launch enough, like them, we'll have gotten all of the potential kinks out". And there's probably some truth to that. But can they scale reliability at the rate they want to scale their launch rate? I have my doubts, and if so, their expansion plans (and thus business model in general) is erroneous.

A particular aspect that concerns me about them getting failure rates down into the lower tenths of a percent is their use of unlined COPVs. I don't trust them. I don't have some massive level of confidence that simply toying around with their pressurization regimen and getting better at void prevention is going to provide some sort of permanent fix; LOX and composites just plain don't play nice together. Their solution is like (to be hyperbolic here) having a nitroglycerine-fuelled rocket and losing one because during pressurization the tank buckled, and the buckling set off the nitroglycerine, and then announcing that you've got a solution and the tank shouldn't buckle anymore. Well, that's great, return to flight and all, but at the end of the day, you still have a nitroglycerine-fuelled rocket.

I'd feel a lot more comfortable about their business model if they announced plans to switch to lined COPVs, and take the (several dozen?) kilogram mass penalty. But as I always say, I would love to be proven wrong on this!

Re:No Gut no Glory

[nojayuk]

SpaceX isn't doing the rocket business the way other rocket builders do. That's a plus and also a minus on their part.

In this case they tried something new, supercooling the fuel and oxidiser to improve launch performance. Older fuddy-duddy rocket builders, if they decided to try this sort of thing would spend a couple of years and hundreds of millions of dollars trying the concept out, building prototypes, testing them to destruction and analysing the parts microscopically to see what happened to them. SpaceX did the equivalent of compiling the code and running a few unit tests and when nothing broke they beta-tested it with a paying customer's payload on top. Oops.

A previous launch failure was due to a third-party strut failing under load -- again SpaceX cut corners by not testing each and every component, accepting the risk of a failure rather than spending time and money on eliminating a one in a million possibility. This is something the older rocket builders do as a matter of course with the customer paying for it in the launch pricetag.

They're learning their lessons but it's costing them money, time and more importantly reputation. More rigorous testing will push the price of launches up and that eats into their low-cost launch niche while other contenders with proven track records of not cutting corners are pushing down into that market bracket (ISRO for one).

Re:No Gut no Glory

[K. S. Kyosuke]

I'm not quite sure it's as simple as you're trying to portray it. They're definitely doing a lot of tests and aren't cutting any corners excessively. But some of the things they're trying are just so new that unexpected failure modes are bound to appear. They're most likely just willing to accept some risks when iterating the design as long as it seems that whatever you test beyond reason for a lot of extra money might be replaced a reasonably short period of time.

Re:"$1 billion in cash reserves and no debt"

[thinkwaitfast]

Why is this any different than the "Billions of free money" IBM gets from government subsidies?

Elon could have chosen golf as hobby

[NotInHere]

But no, he chose rockets. A bit more expensive here to make mistakes.

Rockets are still at risk of exploding...

[Gravis Zero]

... but less so than Samsung's Note 7. ;)

Re:no sh*t!

[Rei]

And more to the point, in this case, the cost of the rocket costs little compared to the cost of all of the lost business, delays and pad repairs.

Why is this news?

[rsmith]

Their rocket blew up, they've been trying to find out why.
(Not uncommon in that business)

Is anybody surprised that this costs a lot of money?