Capital Commerce: New Navy worry: Consolidate or disperse?
Navy planners are yet another constituency that may be doing some rethinking in the wake of Hurricane Katrina. Like other services, the Navy has been consolidating shipbuilding and other programs into fewer shipyards, to save money.
But following Katrina's devastation, "the wisdom of concentrating Navy ship construction in a single region may be questioned," advises Merrill Lynch defense analyst Byron Callan. One example: the "littoral combat ship," a small, fast, surface vessel that the Navy plans to build into a fleet of 63 to 82 ships. There are still two contractors vying for the $25 billion-plus program—Lockheed Martin and General Dynamics—and under both proposals, construction would be heavily concentrated along the Gulf Coast. Lockheed would use shipyards in Louisiana and Texas, while G.D.'s principal shipyard would be in Alabama.
Callan suggests that as a safeguard against future Katrinas, Navy programmers may want to back away from consolidation trends and spread its work more broadly among yards in Maine, Connecticut, and California. That, of course, would probably add to costs. And Congress or the White House might have other reasons to keep shipbuilding in the Gulf states: Among other things, a big government contract is one way to infuse money and jobs into the battered region.
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