THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Friday, January 17, 1997 TAG: 9701180409
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BLOOMBERG BUSINESS NEWS
DATELINE: WASHINGTON LENGTH: 55 lines
There are too many American military shipbuilders - General Dynamics Corp., Newport News Shipbuilding Corp., Litton Industries Inc., Avondale Industries Inc., and privately held Nassco Holdings Inc. - for the U.S. Defense Department to support, said Paul Kaminski, undersecretary of defense for acquisition and technology.
Kaminski, in an assessment of the defense industry, said that he wouldn't be concerned ``in principle'' by another merger among America's missile companies. He also said there may be too many helicopter companies.
The leading missile makers, General Motors Corp.'s Hughes division and Raytheon Co., announced Thursday that Raytheon had won a bidding contest for Hughes. And the Boeing Co.'s $14.7 billion proposed acquisition of McDonnell Douglas Corp. would combine two of the four major chopper makers. United Technologies Corp. and Textron Inc. are the other helicopter manufacturers.
``Something does need to happen,'' to eliminate overcapacity in the military shipbuilding business, Kaminski said. ``What I'm seeing is really not enough work to keep all the current facilities in operation at efficient'' production levels.
Mergers and acquisitions that have reshaped the defense industry in the past several years have involved airplane, defense electronics and missile makers. With the exception of General Dynamics' $300 million purchase of Bath Iron Works, shipbuilders haven't participated.
Maine's Bath Iron Works and Litton Industries Inc.'s Ingalls Shipbuilding, based in Pascagoula, Miss., split production of destroyer ships. Kaminski said while the Pentagon is satisfied with that arrangement, ``one (destroyer maker) would be possible. We could probably work out an arrangement where that could work.''
General Dynamics' Electric Boat division, based in Groton, Conn., and Newport News Shipbuilding both make submarines, while Newport News is the sole builder of aircraft carriers.
Kaminski said the Pentagon, General Dynamics and Newport News are putting the finishing touches on a previously disclosed plan that allows the companies to share production of four new submarines, rather than each building two as Congress proposed. That plan is supposed to save the Navy $700 million by the middle of the next decade.
Avondale and California's Nassco have been afterthoughts among the shipbuilders. While Nassco, which primarily builds Navy support ships, remains as such, New Orleans-based Avondale's stature improved dramatically last month when a team it leads was picked to build 12 Marine Corps assault ships. That program is valued at $9 billion. Under an agreement with Bath, Avondale will build eight of the ships, while Bath will build the rest.
Kaminski is advocating mergers among the shipbuilders because ``I would feel better served by having two or three healthy (companies) competing than I would seeing five or six'' struggling to survive with insufficient Pentagon work, he said.
KEYWORDS: SHIPYARDS U.S.