Huntington Ingalls Industries (HII) on Thursday said its Newport News Shipbuilding division’s portion of the Navy’s latest multi-boat multi-year submarine contract deal is worth $25 billion.
HII in a statement Wednesday evening following the government’s announcement said its portion specifically includes being the delivery yard for six of the Virginia-class submarines and constructing and delivering six module sections for each Columbia-class submarine.
“What comes to Newport News, approximately $25 billion of that, and about five and a half billion of the Columbia program. The rest of that is related with the Block Six contract award, obviously, goes on the [Virginia-class submarine] contract, and then the capital incentives that benefit both the Virginia-class, the Columbia-class, and Newport News operations in totality. Those incentives are spread over various contracts,” Thomas Stiehle, HII chief financial officer, added during a July 30 quarterly earnings call.
HII acts as a subcontractor and partner to General Dynamics Electric Boat for all submarine orders, splitting the work for most boats.
The Navy awarded Electric Boat a $76.6 billion contract for nine Block VI Virginia-class attack submarines and five nuclear-armed Columbia-class ballistic missile submarines covering fiscal year 2025 to 2029 orders.
“These contracts provide the American shipbuilding industrial base the opportunity to demonstrate that commitment in a meaningful way and we are honored to serve our customer and our country,” HII Newport News Shipbuilding President Kari Wilkinson said in a statement.
The July 29 contract also includes a 10th shipset of SSN material and investments, which the executives clarified during the earnings call.
Beyond the nine submarines, “there is material for the 10th ship bought as well, I believe. So that’s not going to impact production of the class. It’s more of a funding mechanism,” HII President and CEO Chris Kastner said.
Stiehle added the 10th shipset could be used for spares “or could eventually be pushed up with a goal line as another integrated ship.”
Kastner also told analysts that nothing in the submarine contract surprised him, just commenting it had been a lot of work.
“Nothing different or special about the terms. It was a lot of work, it’s a very big contract. The Navy, [Electric Boat], and the Newport News team worked very hard to get it over the goal line, but it’s very consistent with what we expect from a profitability standpoint. So nothing really special,” he said.
However, Kastner said the companies incorporated lessons learned from coming through the COVID-19 pandemic and the economic changes that ordeal caused in shipbuilding. This refers to how shipbuilding programs priced in the pre-COVID period are more expensive than planned due to changes in supply and labor costs that were impacted by the pandemic.
“Obviously, we had to incorporate the kind of lessons learned for coming through COVID and and the economic environment we dealt with there,” he said. “So, I do obviously expect it to perform better than those contracts. But I think it’s very consistent with the long-term margin profile that we expect.”
Stiehle said the company still projects to have more post-COVID than pre-COVID contract work to do, like the new submarine contract, by 2027.
“So we’re kind of in the march down, the end of this year, and getting into next we’ll be right at the 50-50 mark, and then by the end of that year, we’ll actually have more post-COVID than pre-COVID [contracts]… Every time you hear a milestone of us either putting a boat in the water or ship or taking and selling it off, that’s one pre-COVID effort that’s behind us, and we’re continually getting awards,” Stiele said.
Exchange Monitor affiliate Defense Daily first published a version of this story.