THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, May 3, 1996 TAG: 9605030545
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 61 lines
Newport News Shipbuilding may no sooner be spun off by Tenneco Inc. into an independent company than it may face a new suitor.
General Dynamics Corp.'s top executive told a defense industry newspaper that his company may be interested in buying the big Peninsula shipyard.
``It fits a lot of (our) criteria; obviously a lot would have to do with the price,'' James Mellor, General Dynamics chairman and chief executive, told Defense Daily.
Such a purchase could mean drastic changes for Newport News Shipbuilding. The shipyard and its parent fought a bitter battle with General Dynamics in Congress last year, vying with its rival for a slice of the construction of the next generation of attack submarines. The Navy had set aside the new sub for General Dynamics' Electric Boat division, but Congress decided to give each yard two subs and compete the work after that.
If General Dynamics purchases Newport News Shipbuilding, the Peninsula yard may have won the battle, but lost the war. General Dynamic could choose to build submarines solely at its facility in Groton, Conn.
Such a move could deflate employment at the shipyard, which has about 18,000 workers. Shipyard executives have said that if it had to rely on just contracts to build aircraft carriers, employment could fall below 12,000.
Newport News Shipbuilding is the only U.S. yard capable of building nuclear-powered aircraft carriers.
General Dynamics and the shipyard are also on opposing teams bidding to build a new amphibious assault ship. The first contract in that $5 billion, 15-year program will be awarded later this year.
Newport News Shipbuilding's employment will be buoyed by the yard's ongoing commercial success. It has won orders for nine double-hulled tankers and expects to hear this year whether it will build some fast frigates for the United Arab Emirates.
Tenneco has said that it will spin off the shipyard by the end of the year. General Dynamics' interest in the yard isn't likely to change that.
``We still could not find a way of getting more shareholder value than through the spinoff option,'' said Dana G. Mead, Tenneco's chairman and chief executive, on the day Tenneco announced the spinoff, when asked about possible buyers for the yard.
That means General Dynamics could try to buy Newport News Shipbuilding once it's independent.
A General Dynamics spokeswoman did not return a phone call seeking comment. Both Tenneco and shipyard spokesmen declined to comment as well.
General Dynamics has about $1 billion of surplus cash left as a result of the recent sales of its space and fighter-making divisions.
It used some of that cash last year to buy Bath Iron Works, a Maine shipbuilder that specializes in the construction of destroyers. Its Land Systems Division makes armored vehicles.
Any company that General Dynamics pursues will be in defense and will be related to the kinds of business it is already in, said General Dynamics' Mellor, according to Defense Daily.
Mellor also said General Dynamics is interested in possibly buying a defense electronics firm. by CNB