U.S. Study Questions Shipyard Acquisition
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U.S. Study Questions Shipyard Acquisition


The General Dynamics Corporation's contested $2.1 billion plan to take over Newport News Shipbuilding could stifle competition in United States warship building. The new company would account for about 70 percent of United States warship revenues and 82 percent of the corporate designers and engineers, the nonpartisan Congressional Research Service said in a report dated May 22.

It would also get more than 95 percent of Navy research and development funds earmarked for the six private-sector shipyards that build major Navy ships, based on 1999 Defense Department figures, the analysis said. The all-cash merger plan, which has already been agreed upon by the companies, would "reduce the potential for competition in submarine construction and, perhaps more significantly, submarine design and submarine technology development," wrote Ronald O'Rourke, the report's author.

But General Dynamics, which is battling against a rival bid for Newport News from the Northrop Grumman Corporation, dismissed the Congressional study as wrongheaded and based on outdated data. "It doesn't reflect today, nor does it reflect the facts of competition," said Kendall Pease, a spokesman for General Dynamics. But Mr. O'Rourke countered that the data on designers and engineers dated from this year and was provided by General Dynamics itself for his study. The share of the shipyards' revenues has been relatively stable for years and the makeup of the Navy's shipbuilding budget has not changed in a way that suggested that those shares would shift significantly, he added.

The Justice Department and the Defense Department are studying the competing merger proposals.

The New York Times, 30 May 2001  

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