THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, April 26, 1995 TAG: 9504260497
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 84 lines
Newport News Shipbuilding could be lobbying itself into a position to build some of the next generation of Navy attack submarines after the turn of the century, the chairman of its parent company said Tuesday.
``We feel we have a very good shot at being able to compete for the next submarine class,'' said Dana G. Mead, chairman and chief executive of Tenneco Inc.
Mead's comments came during discussions with reporters about Houston-based Tenneco's first quarter earnings.
The shipyard contributed $44 million of operating income to Tenneco's first quarter earnings, down from $48 million in the same period a year ago. The decline was attributed to the absence of a carrier overhaul this year and an increase in upfront costs related to a Military Sealift Command conversion contract.
With more than 19,000 workers, the giant shipyard is one of the state's largest employers. It has said it will reduce employment to between 14,000 and 15,000 by the end of 1996.
Building some of the New Attack Submarines, as the next sub class is called, could keep thousands employed at the yard after the last carrier is delivered in 2002.
Newport News Shipbuilding has competed with Electric Boat to build Navy submarines for decades, but the New Attack Submarine was promised to the Connecticut boat yard by the Clinton administration two years ago. With the Newport News yard building nuclear-powered aircraft carriers, the promise to build the new class of nuclear-powered attack subs at Electric Boat was part of the Defense Department's industrial base strategy to sustain two nuclear-capable U.S. shipyards.
Electric Boat, a subsidiary of General Dynamics Corp., has been designing the new submarine, which is smaller and less costly than the Seawolf class of attack subs. The new sub will carry out a wider variety of missions than the Seawolf, which was meant to counter the Navy of the Soviet Union.
Starting in 1998, the Navy plans to build about 30 of the subs at a cost of up to $50 billion.
The sub is considered vital to the existence of Electric Boat, but Newport News Shipbuilding and Tenneco have taken their case for competing for the sub-building contracts to Congress.
The shipyard is waging a ``vigorous campaign on the Hill,'' Mead said.
The effort is supported by Virginia's congressional delegation, but opposed by the Navy, which wants to keep two nuclear-capable shipbuilders.
Newport News Shipbuilding says it can save the Navy up to $2 billion if allowed to compete for the new sub by eliminating the need to build a third Seawolf, now under design at Electric Boat. The Newport News yard also says it can build the subs more efficiently.
The Navy disagrees, saying that the competition would add $1 billion to the cost and delay delivery by at least two years.
Meanwhile, revenues rose at the shipyard even as profits slipped. The shipyard took in $421 million in the first quarter, compared with $403 million a year ago, because of the higher volume related to the Military Sealift contract. The shipyard is converting two commercial vessels to roll-on/roll-off ships for the command.
The shipyard's backlog stood at $5.3 billion at the end of the first quarter as it strives to diversify. Mead said that 90 percent of the shipyard's business is from the Navy compared to nearly 100 percent a few years ago.
The shipyard's goal is to increase commercial and foreign military sales to about 35 percent by 2000, he said.
``This yard has come through an incredible metamorphosis in two ways,'' Mead said. ``It has dramatically brought its costs down and World Class Shipbuilding Project (a $68 million capital improvement and automation plan) .
``That in turn has enabled the yard to compete effectively . . . . We're competing with every country's shipyards in the world bar one and that's the Koreans, and we're rapidly coming down toward them.''
Earnings at the shipyard's parent soared 84 percent to $153 million, or 84 cents per share, in the first quarter from $84 million, or 45 cents per share, last year. Tenneco's earnings the year before were depressed by a one-time $39 million charge for a change in accounting methods.
Revenues declined to $2.16 billion from $3.05 billion in the first quarter due mostly to Tenneco's sale of a majority stake in Case Corp., a tractor company.
Tenneco also has major interests in natural gas pipelines and production, packaging and automotive parts. by CNB