Although the budget walls seem to be closing in on some of its competitors, General Dynamics is enjoying robust demand for its submarine development and production work. Shortly before Christmas, the company’s shipbuilding unit received three sizable contracts to perform development work on a replacement for the Ohio-class ballistic missile submarine and continue serial production of the Virginia-class attack submarine. Ballistic missile submarines provide the secure retaliatory force that deters nuclear war; attack subs are conventionally-armed undersea warships that guard the sea lanes, collect intelligence, and conduct a wide array of other maritime missions (most of them secret).
The biggest award, worth $2.5 billion, modifies a pre-existing contract to fund construction of two additional Virginia-class subs, the South Dakota (SSN 790 in naval nomenclature) and the Delaware (SSN 791). Funding of long-lead components such as the nuclear reactors that generate power for ship propulsion had already been provided in earlier years. A second, smaller contract worth $308 million begins procurement of long-lead items for the next three ships in the Virginia class, the initial vessels in the Block Four production lot. The Navy needs to fund construction of two attack subs per year to avoid a sharp decline in the undersea fleet as Cold War attack subs begin decommissioning at the rate of several per year.
The third award received just before the holidays was for design and engineering work on a next-generation ballistic missile sub that can replace the aging Ohio class. That contract would be worth about $2 billion between fiscal 2013 and 2017 if all options are exercised, as they undoubtedly will be. Construction of the lead ship is scheduled to commence in 2021, which means design, development and parts testing for a new sub must be completed in the next eight years. Because the land-based legs of the deterrent force may become more vulnerable to surprise attack in the years ahead, sea-based missiles will remain essential to preventing nuclear war. Unlike ICBM silos and bomber bases, super-quiet ballistic missile subs are nearly impossible for enemies to detect and target when they are submerged at sea.
Although General Dynamics will have to share money in the December contracts with partner Huntington Ingalls Industries and various suppliers, the fact that funds have now been obligated means they will not be subject to across-the-board spending cuts at the Pentagon if such cuts occur. General Dynamics thus continues to benefit handsomely from its expertise in undersea warfare over a century after the legacy Electric Boat Company delivered the Navy’s first submarine. Although ship types have come and gone since then, the stealth and versatility of nuclear-powered submarines has enabled them to remain an indispensable part of U.S. naval power. GD’s new Chairman & CEO, Phebe Novakovic, ran the shipbuilding unit before her recent promotion to the company’s top jobs.