General Dynamics Electric Boat is seeing throughput improvements within the Columbia- and Virginia-class submarine programs but still needs additional aid from the Navy to stabilize the submarine supply chain, company executives said today.
“At Electric Boat we increased our velocity and throughput on Virginia by about 10% this year . . . and about 30% on Columbia,” General Dynamics CEO Phebe Novakovic told Wall Street analysts during a fourth-quarter earnings call. “So, Electric Boat is continuing to do well; they just need to continue to improve their productivity so we can continue to offset some of these financial impacts that we're seeing from the supply chain.”
While its submarine production line has been “well resourced” by the Navy for many years now, the company needs further assistance to bolster the supply chain, Novakovic said.
Electric Boat continues to receive late deliveries of submarine components, a key challenge consistently highlighted by executives during 2023 earnings calls. In the final quarter of the year, Electric Boat also experienced quality issues with components delivered by several suppliers, Novakovic said.
“Where we really need some assistance and continued assistance from the Navy is stabilization of on-time delivery and quality coming out of the supply chain,” Novakovic continued, indicating that General Dynamics is looking for opportunities to work with the service on alleviating these challenges in the coming year.
Supply chain issues are driven by continuing labor shortages resulting from COVID-19 which caused widespread early retirements and post-pandemic labor shortages in a “heavily manpower-driven industry,” she said. Electric Boat expects continued stabilization in the workforce and supply chain in 2024, she added.
Earlier this month, Navy Secretary Carlos Del Toro directed an analysis of U.S. shipbuilding challenges, signaling special concern for the Columbia-class submarine program which is collaboratively built by Electric Boat and HII.
In early January, HII announced it had delivered the stern section of the lead Columbia vessel to Electric Boat, marking a step forward for the program, which aims to deliver the lead boat in 2027.
Today, executives said Electric Boat has the necessary production capacity to meet current submarine demand. However, when asked whether the company has the capacity to meet the heightened demand stemming from the AUKUS security partnership, Novakovic said only that Electric Boat is prioritizing the improvement of Virginia production rates to two vessels per year.
During the fourth quarter, General Dynamics saw continued growth in its marine systems portfolio -- which includes shipbuilders NASSCO and Bath Iron Works in addition to Electric Boat -- driven largely by the Columbia program.
Fourth-quarter awards include a $395 million Navy contract with a maximum value of $840 million for maintenance and modernization of Arleigh Burke-class destroyers Chung-Hoon (DDG-93) and James E. Williams (DDG-95).
The marine portfolio also received an award with a maximum value of $420 million for lead yard services in support of the DDG-51 program, a $215 million award for Block VI Virginia submarine long-lead materials and a $105 million award for Virginia submarine lead yard services.
Across all business sectors, General Dynamics ended the year with a $93.6 billion backlog, the highest in the company's history. GD tallied total revenue of $42.3 billion in 2023, a 7.3% increase over the previous year.