General Dynamics Electric Boat awarded $1.3 billion contract modification for long lead time material for Virginia-class submarines

Rhea-AI Summary

General Dynamics Electric Boat, a unit of General Dynamics (NYSE: GD), has been awarded a $1.3 billion contract modification for purchasing long lead time materials for Virginia Class Block VI submarines. This modification is important for enabling suppliers to invest in capacity and materials needed to increase production volume. The Virginia-class submarines are designed for 21st-century mission requirements, including anti-submarine and surface ship warfare.

General Dynamics Electric Boat, headquartered in Groton, Connecticut, is the prime contractor and lead design yard for the Virginia class. The company employs over 23,000 people and constructs the submarines in partnership with HII's Newport News Shipbuilding. General Dynamics, the parent company, generated $42.3 billion in revenue in 2023 and employs more than 100,000 people worldwide.

Positive

• Awarded $1.3 billion contract modification for Virginia-class submarines
• Contract enables suppliers to invest in capacity and materials for increased production
• Prime contractor and lead design yard for Virginia-class submarines
• Partnership with HII's Newport News Shipbuilding for submarine construction
• Parent company General Dynamics generated $42.3 billion revenue in 2023

Negative

• None.

Insights

Financial Analyst

The $1.3 billion contract modification for General Dynamics Electric Boat is a significant financial boost for the company. This undefinitized contract allows for the purchase of long lead time materials, which is important for maintaining production schedules and managing costs effectively. The contract's size indicates strong government commitment to the Virginia-class submarine program, potentially leading to stable revenue streams for General Dynamics in the coming years.

Investors should note that this contract modification doesn't immediately translate to recognized revenue, as it's for future production. However, it strengthens the company's order backlog, providing improved visibility into future earnings. Given that General Dynamics reported $42.3 billion in revenue for 2023, this contract represents approximately 3% of annual revenue, a notable addition to their submarine business segment.

Defense Industry Expert

This contract modification is a strategic move in the U.S. Navy's efforts to bolster its submarine fleet. The Virginia-class submarines are critical assets in maintaining naval superiority, designed for 21st-century warfare including anti-submarine, surface ship warfare and special operations support. The long lead time material funding is essential for maintaining production momentum and potentially increasing the pace of submarine deliveries.

The mention of "Block VI" submarines is noteworthy, as it indicates progression in the program's evolution. Each block typically introduces technological advancements and capabilities improvements. This contract's timing and size suggest the Navy is committed to continuous modernization of its submarine force, which bodes well for General Dynamics' long-term prospects in this sector.

Supply Chain Analyst

The contract modification's emphasis on long lead time materials is crucial for supply chain stability. By providing this funding, the government enables General Dynamics to send a strong "demand signal" to its suppliers, allowing them to invest in capacity and materials with confidence. This proactive approach is vital in the complex submarine manufacturing process, where specialized components often require extensive lead times.

For investors, this signals reduced supply chain risks and potential for improved operational efficiency. It also highlights the importance of the entire submarine enterprise ecosystem, including subcontractors and suppliers. The statement about achieving "high-rate production" suggests potential for economies of scale if the supply base can ramp up effectively, which could positively impact margins in the long term.

GROTON, Conn., Aug. 5, 2024 /PRNewswire/ -- General Dynamics Electric Boat, a business unit of General Dynamics (NYSE: GD), announced today it has been awarded a $1.3 billion undefinitized contract modification allowing Electric Boat to purchase long lead time materials for Virginia Class Block VI submarines as detailed in the U.S. Department of Defense contract award.

"This contract modification sends a crucial demand signal, enabling our suppliers to invest in the capacity and materials needed to increase production volume," said Kevin Graney, president of General Dynamics Electric Boat. "Consistent funding for the supply base is essential to achieve the high-rate production the Navy requires of the entire submarine enterprise."

Virginia-class submarines are designed from the keel up for the full range of 21st-century mission requirements, including anti-submarine and surface ship warfare and special operations support. General Dynamics Electric Boat is the prime contractor and lead design yard for the Virginia class and constructs them in a teaming arrangement with HII's Newport News Shipbuilding in Virginia.

General Dynamics Electric Boat designs, builds, repairs and modernizes nuclear submarines for the U.S. Navy. Headquartered in Groton, Connecticut, it employs more than 23,000 people. More information about General Dynamics Electric Boat is available at www.gdeb.com.

General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; ship construction and repair; land combat vehicles, weapons systems and munitions; and technology products and services. General Dynamics employs more than 100,000 people worldwide and generated $42.3 billion in revenue in 2023. More information is available at www.gd.com.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/general-dynamics-electric-boat-awarded-1-3-billion-contract-modification-for-long-lead-time-material-for-virginia-class-submarines-302214833.html

SOURCE General Dynamics Electric Boat

FAQ

What is the value of the contract modification awarded to General Dynamics Electric Boat for Virginia-class submarines?

General Dynamics Electric Boat was awarded a $1.3 billion contract modification for long lead time materials for Virginia Class Block VI submarines.

How will the contract modification affect General Dynamics Electric Boat's supply chain?

The contract modification will enable suppliers to invest in capacity and materials needed to increase production volume for Virginia-class submarines.

What is General Dynamics Electric Boat's role in the Virginia-class submarine program?

General Dynamics Electric Boat is the prime contractor and lead design yard for the Virginia-class submarines, constructing them in partnership with HII's Newport News Shipbuilding.

How many employees does General Dynamics Electric Boat have?

General Dynamics Electric Boat employs more than 23,000 people.

What was General Dynamics' (NYSE: GD) revenue in 2023?

General Dynamics generated $42.3 billion in revenue in 2023.