{ "id": "RL31400", "type": "CRS Report", "typeId": "REPORTS", "number": "RL31400", "active": false, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 101192, "date": "2002-05-03", "retrieved": "2016-05-24T20:10:57.174941", "title": "Navy Shipbuilding: Recent Shipyard Mergers -- Background and Issues for Congress", "summary": "In April 2001, General Dynamics (GD) and Newport News Shipbuilding (NNS) announced an\nagreement under which GD would purchase NNS. The following month, Northrop Grumman\n(NOC) announced an unsolicited counteroffer to purchase NNS. The Department of Justice (DoJ)\nand the Department of Defense (DoD) reviewed the two merger proposals and in October 2001\nannounced that they would oppose the GD merger proposal on the grounds that it would eliminate\ncompetition in nuclear submarines and harm competition for emerging technologies for both nuclear\nsubmarines and surface ships. DoJ and DoD did not oppose the NOC merger proposal, and in\nNovember 2001, NOC assumed control of NNS.\n NOC's acquisition of NNS brought to an apparent conclusion a 5-year process of consolidation\nin the ownership of the 6 private-sector shipyards that build the Navy's major ships. The 6 yards are\nnow owned by two firms -- NOC, which owns 3 of the yards, and GD, which owns the other 3.\n In theory, the 6 yards might have been consolidated under 3 owners rather than 2. Although the\nconsolidation of the ownership of the 6 yards now appears complete, there may be further mergers\nand acquisitions involving shipyards that perform work for the Navy. DoD concluded that the\nconsolidation-related savings of the NOC-NNS merger would be comparable to those of a GD-NNS\nmerger. NOC stated that these savings might amount to $1.9 billion to $2.6 billion over the next 10\nyears.\n Critics of the NOC-NNS merger can argue that it might pose competition concerns in areas\n such\nas construction of aircraft carriers and large-deck amphibious ships. Supporters of the merger can\nargue that DoJ and DoD reviewed these issues and did not object to the merger on competition (or\nother) grounds.\n Shipyard mergers are unlikely to lead to significant changes in the total number of blue-collar\nproduction workers employed at the yards, but can alter the distribution of the total number of blue-\ncollar workers among the yards. Shipyard mergers may increase the strength of the shipyards and\nshipbuilding in the competition for limited DoD procurement dollars. The mergers may raise\nquestions concerning the treatment of shipbuilding in industry proposals for large DoD \"system-of-\nsystems\" acquisition efforts. The mergers may also raise questions concerning the movement of\nsenior officials (particularly those with backgrounds in shipbuilding) between DoD/Navy and\nindustry.\n The debate over the merger proposals involving NNS raises a question regarding the adequacy\nof the \"savings-vs.-competition\" framework for describing the merger- review process. It also poses\na potential question for Congress regarding the executive branch view that DoD (rather than\nCongress or the taxpayers) is the sole or primary customer for a firm whose products are purchased\nsolely by DoD. Lastly, the NOC-NNS merger raises a potential question regarding the technology-\ntransmission risks of building non-nuclear-powered submarines at NOC's Ingalls shipyard for export\nto a foreign buyer.", "type": "CRS Report", "typeId": "REPORTS", "active": false, "formats": [ { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/RL31400", "sha1": "26d99d7911ee3a0e4a2d4702722d95dd76c523af", "filename": "files/20020503_RL31400_26d99d7911ee3a0e4a2d4702722d95dd76c523af.pdf", "images": null }, { "format": "HTML", "filename": "files/20020503_RL31400_26d99d7911ee3a0e4a2d4702722d95dd76c523af.html" } ], "topics": [] } ], "topics": [ "Foreign Affairs", "National Defense" ] }