Projo 7 to 7 News Blog

By DONNA BORAK
AP Business Writer

WASHINGTON (AP) -- The Navy is close to awarding another multibillion-dollar contract to General Dynamics Corp. and Northrop Grumman Corp. for more Virginia class submarines, a senior Pentagon official said Friday.

The service will make the award for eight more of those submarines "soon," Allison Stiller, deputy assistant secretary of the Navy for ship programs told The Associated Press.

A formal announcement is expected as early as next week as the Navy looks to add to its nuclear-powered attack submarine fleet. The Virginia class is the first U.S. Navy warship designed in the post-Cold War era.

The new contract builds on an existing partnership between General Dynamics' subsidiary Electric Boat in Groton, Conn. and Northrop Grumman's Newport News shipyard in Virginia, which currently builds one submarine a year for the Navy.

Production under the new deal will double to two ships annually in 2011.

That's good news for the nation's two submarine makers, which warned of potential job cuts earlier this month amid the economic downturn unless the Navy placed additional ship orders.

Electric Boat President John Casey told lawmakers last week that the company's outlook in 2009 is "very, very stable." But he warned Electric Boat would need to cut 1,000 employees at the end of next year or in 2010 if ship work didn't materialize.

The Navy is facing pricier ships, as contractors pass through higher material costs caused by the recent commodities boom. One program, the Zumwalt destroyer, has nearly doubled to $5 billion. General Dynamics' Bath Iron Works and Northrop Grumman's Ingalls shipyard in Mississippi are each building one Zumwalt destroyer.

Such ballooning price tags have forced the service to buy fewer vessels at a much slower pace, putting more U.S. jobs at risk. It has also sparked a battle among lawmakers from states like Maine and Mississippi, who have fought to sway the Navy to build more ships at their respective facilities.

In the case of submarines, the Navy has spent about $12.6 billion for the first 10 submarines and is seeking to lower the cost of each submarine by $200 million by building two per year instead of one.

That effort also serves to strengthen the Navy's industrial base by allowing shipbuilders and their vendors to plan years ahead and maintain jobs.

"That's stability in the industry," Stiller said in an interview, for both shipbuilders and their suppliers. "So they know what to plan."

Electric Boat employs more than 10,000 workers at is Groton shipyard and its factory in Quonset Point, R.I.

Shares of Northrop Grumman Corp. rose $1.69, or 4.2 percent, to close at $42.44 on Friday. Shares of General Dynamics Corp were essentially unchanged.

 Tags  Quonset Point

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