DefenseNews

With Columbia revving up, General Dynamics expects submarines to be a cash cow

WASHINGTON — General Dynamics’ marine business expects its work in building submarines to drive hundreds of millions of dollars in annual revenue growth over the coming years, company head Phebe Novakovic told investors in a call Wednesday.

The company is expecting a $300 million increase in revenue in 2021, with a rough estimate of between $400-500 million of growth a year, Novakovic said, citing submarines as a significant driver. The next-generation ballistic missile submarine Columbia will account for much of that growth, she said.

General Dynamics Electric Boat and Huntington Ingalls Industries’ Newport News shipyard are the nation’s only two submarine builders. With China now operating the world’s largest naval force, the U.S. is likely to look to submarines as its ace in the hole against an increasingly sophisticated competitor.

“If you look at the U.S. Navy, submarines are its top priority and the Columbia in particular,” Novakovic said. “And why is that? It’s because submarines remain a singular competitive advantage, a critical competitive advantage for the United States with near-peer competitors and peer competitors.

“I am quite confident that given my belief that the defense budget is driven by the threats that are key elements of our marine group, growth will be nicely supported.”

The company last year inked more than $10 billion in contracts for the first two Columbia-class boats. The Navy has consistently said fielding Columbia is its top acquisition priority. Electric Boat is also building the Virginia-class Block V submarine, along with HII Newport News. The Navy is expected to buy the Virginia class at a rate of two subs per year.

General Dynamics, which also owns Arleigh Burke-class destroyer-builder Bath Iron Works, believes that platform will continue to be important to the Navy, Novakovic said.

The Navy has been waffling about how many of its new Flight III Burkes it intends to buy. The service’s 2021 budget proposal cut four destroyers from its five-year plan, proposing eight down from 2020′s proposal of 12.

But General Dynamics continues to be bullish on submarines and is investing in its infrastructure at Electric Boat. The company spent nearly $1 billion on its facilities there in 2020, including $345 million in the fourth quarter alone.

The investments are “in support of the unprecedented growth on the horizon,” Novakovic said.


Author: David B. Larter
Source: DefenseNews

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