GD chief says Navy’s 1 sub buy won’t impact company short term, but out years less certain

WASHINGTON — The head of General Dynamics told investors today the Navy’s plans to buy only one Virginia-class submarine in fiscal year 2025 won’t impact the company in the short term, but warned of the long-term effects incomplete advanced procurement funding can have on the company’s supply chain.

“It could have an impact in the outer years outside of our planning horizon, but critical here is … the additional ship set of funding,” Phebe Novakovic, the company’s chief executive, said during a quarterly earnings call when asked about the Navy’s submarine budget request.

“We have long-lead material on Virginia that is very important to the supply chain, and to the extent that we can ensure that we get a full second Virginia ship set — so that we’re buying it two-a-year — I think it’s very important for the overall health of industrial submarine industrial base,” she continued.

A “ship set” refers to the collection of major parts and components General Dynamics Electric Boat, the prime contractor on Virginia-class submarines working with HII, needs to assemble a full boat.

If the Navy gets its way in the 2025 budget request — far from a certainty — the latest budget will include funding for one Virginia class submarine and advanced procurement funding for some, but not all, of the parts needed for a second boat. And therein lies the rub for Novakovic. That gap in funding is manageable for the largest primes, such as EB, but can be much more devastating for smaller companies further down the ladder.

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For its part, Navy officials have argued that their projected investments in the submarine industrial base over the coming years will mitigate the impacts that cutting one submarine from this year’s budget will have. They have also used the opportunity to foot stomp the need for Congress to pass the national security supplemental — which President Joe Biden signed today — that includes $3.4 billion for the submarine industrial base and workforce efforts.

Asked today about that funding’s impact, Novakovic said it was “extremely important because the stabilization of the supply chain is critical to the resumption of full cadence on Virginia and the increased cadence” on the Columbia-class ballistic missile submarines.

Valerie Insinna contributed to this report.