Wednesday, March 27, 2013

Contract Analysis: Kyle Lohse

Kyle Lohse finally signed a contract - with the Milwaukee Brewers.

Was it a good deal?

Projections available on FanGraphs have Lohse pitching 185 innings this year with 5.9 K/9, 2.0 BB/9, 3.83 ERA and 2.9 WAR.

Given that Lohse is 34 we can apply the standard aging decline of 0.5 WAR per season.  Doing so we get:
2013 2.9 WAR
2014 2.4 WAR
2015 1.9 WAR

Lohse will be paid $33 million over that time, however due to the deferment of some of the money the actual present value of his contract is $31.95 million.

It's generally accepted that the current value of 1 WAR is $5 million.  If we apply 5% inflation then the total value of the WAR that Lohse is expected to provide is:
2013 2.9 WAR * $5 = $14.5 
2014 2.4 WAR * ($5*1.05) = $12.6
2015 1.9 WAR *($5*1.05*1.05) = $10.5
TOTAL $37.6 million

Lohse's expected production outweighs his cost by about $5.5 million.

There's also the loss of the draft pic.  According to this research, the average value of the #17 pick is around $5 million - almost the exact amount of the difference between Lohse's cost and expected production.

Purely on cost, this looks like a reasonable deal.

FanGraphs recently released their Positional Power Rankings for 2013.  Those rankings had the Brewers #25 in starting pitching with 10.4 total WAR.  Inserting Lohse into the equation gives us:
Gallardo 199 IP 3.7 WAR
Estrada 187 IP 2.9 WAR
Lohse 185 IP 2.9 WAR
Fiers 136 IP 1.7 WAR
Narveson 122 IP 1.1 WAR
Peralta 40 IP 0.3 WAR
Rogers 25 IP 0.2 WAR
TOTAL 894 IP 12. 8 WAR

That's an increase in 2.4 WAR for the rotation, which would bump the Brewers up to 18th in starting pitching WAR.

Adding all the position player WAR and pitcher WAR together gives us some idea how teams will finish the season.

Using FanGraph's numbers the expected WAR for each AL Central team is:
Reds 44.7
Cardinals 42.8
Brewers 39.9
Pirates 39
Cubs 38.9

The acquisition of Lohse moves the Brewers from last in the division to 3rd.  More importantly, less than 5 WAR behind the Reds for first in the division.  5 WAR is close enough that random variation gives the Brewers a reasonable chance of winning the division.

My own projections have the division as:
Cardinals 42 WAR
Reds 40.5 WAR
Brewers 38.3 WAR
Pirates 79.8 WAR
Cubs 29.3 WAR

This move isn't a world beater for the Brewers.  They paid market value for a decent pitcher that will push them that much closer to competing for the division or one of the wild card spots.

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