Northrop Grumman could leave shipbuilding business

Groton- Electric Boat's partner for submarine construction says it may leave the shipbuilding business, raising questions about how Virginia-class submarines will be built in the future.

Electric Boat and Northrop Grumman Shipbuilding Newport News build Virginia-class submarines under a teaming agreement. On Wednesday, Northrop Grumman announced it was considering selling its shipbuilding business or spinning it off to shareholders, citing a lack of synergy between shipbuilding and its other businesses.

EB did not say how the announcement could affect the teaming agreement.

"This is a Northrop Grumman business decision, and it would be inappropriate for us to comment on it," Robert Hamilton, spokesman for EB, said Thursday.

The Navy awarded a $4.2 billion contract for the construction of the first four ships in the Virginia class to Electric Boat in 1998, with Newport News Shipbuilding sharing the construction workload.

General Dynamics, the parent company of Electric Boat, attempted to acquire Newport News Shipbuilding in 1999 and again in 2001. The Department of Defense rejected the merger because of concerns that it would stifle competition in nuclear shipbuilding.

This cleared the way for Northrop Grumman to take over the shipyard in 2001 to build submarines and aircraft carriers. The corporation also is involved in aerospace, electronics, information systems and technical services. The teaming agreement between Electric Boat and Newport News Shipbuilding remained intact.

It is unlikely the Pentagon would welcome another merger attempt by General Dynamics. The Navy's 30-year shipbuilding plan says competition in industry should be preserved.

"We'll continue to stay engaged and evaluate what happens, with the objective of executing our shipbuilding plan affordably," said Cmdr. Victor Chen, spokesman for the Department of the Navy Research, Development and Acquisition.

Rob Doolittle, spokesman for General Dynamics, said it would "be inappropriate for us to comment on speculation about potential acquisitions by General Dynamics."

Northrop Grumman also announced Wednesday that it plans to consolidate its Gulf Coast operations by closing the Avondale, La., facility and moving its work to Mississippi. There is "a lot of buzz" in Congress about the announcements, particularly about the consolidation, according to U.S. Rep. Joe Courtney, D-2nd District.

As for the corporation's potential disposition of the Newport News shipyard, Courtney said, "It raises questions about the future business model for the Virginia shipyard."

"I'm sure that's something Connecticut is going to be looking at and the Navy is going to be looking at very closely," he said.

In the past, Congress required two shipyards to build Virginia-class submarines, but Congress chose not to renew that mandate in 2008.

"When we changed the law in 2008, it opened the door to flexibility in terms of how submarines are going to be built," Courtney said, "and this new development may be an additional factor that everybody is going to have to understand better."

The Navy signed a $14 billion contract in December 2008 to buy the next eight Virginia-class submarines from Electric Boat, with the Northrop Grumman Newport News shipyard again working as the subcontractor.

When asked about the effect of the potential sale on the teaming agreement, Dan McClain, a spokesman for Northrop Grumman, said, "We don't believe there would be any impact."

Under the multiyear contract, EB and Newport News would build one ship per year in 2009 and 2010 and two ships per year from 2011 through 2013.

"Electric Boat is on schedule to begin production of two submarines a year, a critical investment for our national security," said U.S. Sen. Chris Dodd, D-Conn. "I will work with state and federal officials and Electric Boat to ensure this news does not disrupt the production schedule and that Connecticut's industrial base continues to prosper."

U.S. Sen. Joe Lieberman, D-Conn., said he supports the Electric Boat and Newport News team, as they begin building two submarines annually.

"Whatever steps Northrop Grumman takes with the Newport News shipyard, I'm confident that we'll stay on track with the strong support of the Navy," Lieberman said.