General Dynamics Wins $203M Contract For Nuclear Submarines

General Dynamics Corp.’s (NYSE:GD) subsidiary, Electric Boat Corp., has been awarded a $203 million modification contract to increase the design support requirements for Columbia-class submarines. The contract was awarded by the Naval Sea Systems Command, Washington, D.C.

The Contract Details

The contractor will use shipbuilding and conversion (Navy), UK foreign military sales and 2017 research, development, test, and evaluation (Navy) funds to complete the work by Oct 2017.

Majority of the work will be performed at Groton, CT while the rest will be performed at Newport a few other places across the U.S.

About Columbia-class submarines

The Columbia-class submarine program, formerly known as the Ohio replacement submarine program, was designed by the U.S. Navy to replace its existing force of 14 Trident-armed Ohio-class ballistic missile submarines with a new class of 12 ballistic missile submarines (SSBNs). Originally built by Electric Corp., the Columbia-class submarines are operated by U.K., Russia, China, France and India.

Our View

General Dynamics enjoys a dominant position as a Navy contractor since it is one of the only two contractors in the world equipped to build nuclear-powered submarines. The company is a prime contractor for the development of Virginia-class submarines (another class of nuclear-powered submarine), with Huntington Ingalls Industries, Inc. (NYSE:HII) acting as the subcontractor.

Given the Navy’s recent acknowledgement of the Columbia-class program as its top priority, the huge budget allotted to the same, and General Dynamics being as the prime contractor, the modification contract will undoubtedly render the company a leading position in the nuclear-powered submarine industry.

Peers Who Won Naval Deals This June

Raytheon Company's (NYSE:RTN) business unit, Missile Systems, won a contract from the U.S. Navy to procure full-rate production requirements and spares for fiscal 2017 Standard Missile-2 (SM-2). The procurement will be done for the U.S. and Allied Foreign Navies. (Read more: Raytheon Secures $618M FMS Contract from Navy for SM-2)

Textron Inc. (NYSE:TXT) announced that its Bell segment has been awarded $146.6 million long-term repair order from Naval Supply Systems Command Weapon Systems Support, Philadelphia, PA. (Read more: Textron Wins $146.6M Aircraft Repair Order From Navy)

Huntington Ingalls has clinched a modification contract from the U.S. Navy to procure the detail, design, and construction of the Landing Helicopter Assault (LHA) Replacement (LHA(R)) Flight 1 Amphibious Assault Ship (LHA 8). The contract is valued at a whooping $3 billion. (Read more: Huntington Ingalls Wins $3B Navy Contract for LHA 8)

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