A Boon For Manufacturers As U.S. Navy Upgrades Fleet

On January 4, the Pentagon announced plans to build a fleet of 12 new Columbia-class submarines in an effort to update America’s ballistic missile submarine fleet.

The Columbia fleet is to replace 24 aging subs, some of which have been in service since the mid-1970s. The long-awaited Columbia class is just one part of the Pentagon's 30-year, trillion-dollar plan to upgrade the sea-air-land nuclear triad.

Preliminary cost estimates for the proposed Columbia fleet places $13 billion for R&D and $115 billion for procurement. The Navy is currently in talks with General Dynamics to head up the program, as well as with their top sub-contractor, Huntington Ingalls Industries.

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A modern ballistic missile submarine is the most complex and technology intensive weapons system today. Development and construction require millions of man hours, demand massive amounts of advanced materials, and utilize some of the most stringent standards in the defense industry.

What this will mean for American manufacturers and suppliers is difficult to quantify, but defense contracts such as these have very long supply chains. The subsequent contracts will affect thousands of American companies and tens of thousands of employees. To put this into perspective, consider that the General Dynamics Marine Systems includes Bath Iron Works in Bath, Maine; Electric Boat in Groton, Connecticut; and NASSCO in San Diego, California. It also encompasses approximately 28,000 employees. Huntington Ingalls, the U.S.’s largest shipbuilder, is based in Newport News, Virgina and Pascagoula, Mississippi, and has over 16,000 employees.

According to the Brookings Institute, over 3% of U.S. GDP can be attributed to defense spending; that is roughly the GDP of Norway. This includes 5% of all U.S. manufacturing output as well as 10 to 20% of all research and development. In defense heavy states like Virginia, Hawaii, Maryland, Connecticut, and Alabama, defense-related GDP can run from 5%-14% of total state output.

It goes without saying that defense contracts can make or break a business. With fresh capital, manufacturers can hire more employees and upgrade to newer more efficient systems that will deliver a competitive advantage driving growth for years to come.

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