
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, August 18, 1995                   TAG: 9508180056
SECTION: BUSINESS                    PAGE: A13   EDITION: METRO 
SOURCE: THE BOSTON GLOBE
DATELINE:                                 LENGTH: Medium

GENERAL DYNAMICS BUYS BATH IRON WORKS

General Dynamics Corp., will spend $300 million to acquire the 111-year old Bath Iron Works, the last independent East Coast military ship builder and Maine's largest private employer.

The combination had been rumored since April, when privately held Bath Iron Works' largest shareholder, the Prudential Insurance Co. of America, began seeking a buyer for its majority interest in the company and specifically focused on General Dynamics, according to a Prudential spokesman.

The acquisition is the latest among military defense contractors that have been steadily scaling down operations, consolidating facilities and selling divisions since the end of the Cold War in 1989.

For Bath Iron Works, which has built 17 destroyers, cruisers, and frigates in the past 10 years for the U.S. Navy, Thursday's acquisition means the company will continue to focus almost exclusively on military shipbuilding. The company was considering diversifying into commercial shipbuilding, but will not pursue that strategy under its new owner, according to Duane ``Buzz'' Fitzgerald, Bath Iron Works' president.

``At the moment we can't make the business case for commercial shipbuilding,'' said Fitzgerald. ``We've looked at it and found that we are unable to penetrate that market and generate profits. We have found that in the last 15 to 20 years, naval shipbuilding requires pursuing more complex designs and complex systems, causing us to move further and further away from any form of commercial business. Also, there is tremendous overcapacity in shipbuilding.''

For General Dynamics, based in Falls Church, Va., the acquisition strenghtens its role as a major U.S. Navy supplier. It builds Trident and Seawolf nuclear submarines in its Electric Boat division in Groton, Conn., with facilities in nearby Quonset Bay, R.I. That group employs 15,500 people, down from 28,000 at its peak in the mid-1980s..

In Massachusetts, the diversified military hardware maker is best known for the closing its Fore River shipbuilding facility in Quincy back in 1986. The termination left 4,200 workers jobless and ended continuous ship construction in the area that dates back to the 1600s.

General Dynamics said it lost $200 million during its 21 years of ownership building military supply and noncombatant ships for the Navy.

``The markeplace for the surface ships we built in Quincy [Mass.] went away, and we had to respond to the realities of the business,'' said James Mellor, General Dynamics chairman and chief executive officer.

Since 1986, General Dynamics has left the aerospace and aviation business, selling its missile division, a jet fighter division that built the F-16 and Cessna Aircraft Co. The company still builds battle tanks for the Army, Marines and international customers. Those sales have left General Dynamics cash rich - $1.2 billion before the Bath Iron Works deal, which is expected to close next month.

Wall Street reaction to the deal was positive, as General Dynamics' shares rose 3 to close at $52.13.

by CNB