THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, May 4, 1996 TAG: 9605040366
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 80 lines
If General Dynamics Corp. were to buy Newport News Shipbuilding, it would make sense for all - or at least some - submarine-building work to wind up at the Peninsula shipyard, said analysts and congressional sources.
``It could be the best thing that ever happened to Newport News Shipbuilding,'' said a Virginia congressional delegation staffer.
While it's possible that General Dynamics would direct all new sub construction to its facility in Groton, Conn., it would be far more likely to shut down that plant and build subs in Newport News, said the congressional source, who asked not to be identified. The physical plant at Newport News Shipbuilding is more modern and efficient.
Newport News Shipbuilding built its Modular Outfitting Facility to construct submarines in the 1980s for about $300 million. By contrast, the Groton yard has been building subs in a much older facility.
``From an economic point of view, it would be better to consolidate, put the work in to one facility,'' said James R. McCaul, a shipbuilding analyst with IMA Associates in Washington. ``From a political point of view, it might be best to spread it between both places.''
Building subs in both Newport News and Groton would help maintain political support for the Navy submarine programs.
``It would mean extra overhead costs, but it would mean broader geographic support for submarines, which, of course, are competing with other weapons programs for appropriations,'' said another congressional source, who also asked not to be identified.
While both congressional sources have had extensive dealings with Navy shipbuilding matters, they don't want to be named because they are staffers who don't want to be seen expressing opinions on politically charged issues.
Newport News Shipbuilding employs about 18,000 workers. Electric Boat has about 12,000 total in Rhode Island and Connecticut.
Officials at both companies declined to comment on the speculation.
James Mellor, General Dynamics' chairman and chief executive, told a defense industry newspaper this week that his company would be interested in buying Newport News Shipbuilding. The big shipyard is being spun off to shareholders by its current parent company, Tenneco Inc.
Falls Church-based General Dynamics builds submarines in Groton and in Quonset Point, R.I., through its Electric Boat division.
Electric Boat and Newport News Shipbuilding have been archrivals scrapping for pieces of the Navy's sub-building programs. The two fought a ferocious battle on Capitol Hill last year over whether Newport News would build any of the Navy's next generation of attack subs. The Navy had wanted to give all the sub work to Electric Boat, while building aircraft carriers at Newport News.
Congress settled on ordering the first from Electric Boat in 1998 and the third in 2000. The second and fourth would be bought from the Peninsula shipyard in 1999 and 2001. The two yards would compete for subsequent submarines in the $60 billion, 30-ship program.
This week, Congress approved the first funds to begin ordering one of the attack subs from Newport News Shipbuilding.
General Dynamics' Mellor may have timed his comments to coincide with congressional approval of the funds for Newport News.
``General Dynamics may be thinking that Newport News may pose a danger to Electric Boat downstream once competition begins,'' said one congressional source. ``The best way to eliminate that threat is to buy the competition and control the program.''
Newport News Shipbuilding tried to do that last year. The shipyard and Tenneco asked the Defense Department to help finance a purchase of Electric Boat from General Dynamics. The Pentagon declined and the deal fell apart.
Not only does the Peninsula shipyard have more modern facilities, it also is larger and more efficient, the source said. And from the perspective of building the nuclear reactors that power subs and carriers, it makes more sense to handle all the nuclear stuff in one place.
Still, General Dynamics facilities are well-equipped, said shipyard analyst McCaul. It has built Los Angeles-class attack subs and Ohio-class ballistic missile subs.
``From the standpoint of the parent company, it doesn't matter where it builds submarines,'' said the other congressional source. ``What matters is ownership and control of the program.'' by CNB