THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, March 19, 1995 TAG: 9503190311
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 63 lines
Newport News Shipbuilding may hear soon whether it's won a big contract to build between four and eight fast frigates for the United Arab Emirates.
The contract from the tiny, oil-rich Persian Gulf state could be worth up to $1 billion and could save thousands of jobs at the shipyard, which plans to cut employment to 15,000 by the end of 1996 from 19,500 today.
It's beginning to look like Newport News Shipbuilding might have a leg up on the competition.
First it won a contract in November to build a shipyard in the UAE that would repair the frigates.
Now comes word that Defense Secretary William Perry is heading to the Persian Gulf for six days starting Monday to visit U.S. allies in the region. During the trip he plans to drop in at the International Defense Exhibition in Abu Dhabi, capital of the UAE.
Defense Daily, a respected trade paper, said Perry's stop at the arms show may reflect the Defense Department's activist weapons sales policy.
But a senior defense official cited by Defense Daily said that promoting arms exports was ``incidental'' to Perry's visit. The official said he doesn't expect new arms sales to stem from the visit.
Newport News Shipbuilding is circumspect. ``We don't have any word on when the contract is going to be announced,'' said shipyard spokesman Tom Olds.
One industry analyst said he heard a decision was expected in the spring.
Newport News Shipbuilding has been marketing the fast-frigate design for a couple of years. The small warship, capable of speeds in excess of 32 knots, would be equipped with a 5-inch cannon, a variety of missiles and torpedoes, and a helicopter. Industry analysts estimate the frigates will sell for $125 million a copy.
The UAE wants to buy four of the frigates, with an option for four more. Newport News is the only U.S. yard of five worldwide left in the bidding.
A $1 billion sale would be an important step toward reducing the shipyard's dependence on the Navy for work. Its backlog of mostly Navy aircraft carrier and submarine building is a little less than $6 billion.
The shipyard is counting on international military sales to make up nearly 20 percent of its annual sales by 1999.
The UAE might use the contract as a way of thanking the United States for its leadership in the Persian Gulf War. It's also looking to buy fighter jets. Lockheed's F-16 and McDonnell Douglas' F-15 are in the running.
There has been talk of leasing some decommissioned Navy frigates and destroyers to the UAE. That also could have something to with Perry's visit.
Arming America's allies in the gulf region serves U.S. geopolitical goals of containing Iran and Iraq. The UAE, in particular, is vital because of its location adjacent to the Straits of Hormuz, through which so much of the world's oil supplies flow aboard supertankers.
Other U.S. allies in the Middle East have begun to express interest in buying fast frigates too. Newport News will submit a bid May 2 to build frigates for Kuwait, according to the employee newspaper Yardlines. Turkey has begun exploring the purchase of six. Saudi Arabia may want to buy some too. MEMO: Related stories on pages D1 and D2.
KEYWORDS: NEWPORT NEWS SHIPBUILDING by CNB