General Dynamics CEO: Bath Iron Works keeps learning from every ship it builds

By John Liang / April 27, 2018 at 2:51 PM

With detail design work for Flight III of the Arleigh Burke-class destroyers recently completed, General Dynamics' Bath Iron Works keeps learning from every ship it builds, according to GD's chief executive.

"Our learning on the hull continues nicely apace," Phoebe Novakovic told Wall Street analysts during an earnings call this week. "That shipyard has had some issues which we've talked about in the past, but we are comfortable that is largely behind us and we're gonna continue to do well as we go forward on what are really legacy platforms for us after we got that line re-started from a dead stop."

The Pentagon's latest Selected Acquisition Report found that the DDG-51 Arleigh Burke-class destroyer program booked a $10.6 billion increase, raising total program cost from $111 billion to $121.7 billion, to account for plans to increase the acquisition objective by six ships from 89 to 95.

"Our performance on the re-start starting with the [DDG-]116 has proceeded according to our plan and we are continuing to see learning and improvements on hull-over-hull," Novakovic said.

When asked to quantify what margins would be once Bath is back where the company wants it, Novakovic said: "That's gonna be a complicated question because you've got an increased mix in [the] Columbia [ballistic missile submarine program] which will be cost-plus through the duration of our plan period and then into the next as we move from our engineering and detailed designs into early phases of construction."

Consequently, "our margins are gonna bop around in I'd say anywhere between the 8 and 10 percent on any given quarter depending on the mix of Columbia with the cost-plus work in the middle of it, so that rather dwarfs incremental improvement.

"That said, we expect our shipyards to get better quarter after quarter and Bath is doing precisely that," she continued.

General Dynamics' marine systems business unit recorded revenues of $2.03 billion in the first quarter of 2018, up $100 million or 5.2 percent from the same quarter last year. Earnings were $184 million, a $23 million or 14.3 percent increase compared to last year.