- The Washington Times - Tuesday, June 12, 2001

Navy Secretary Gordon England has recused himself from participating in Bush administration deliberations on whether his former employer, General Dynamics, should be permitted to buy Newport News Shipbuilding Inc.
A Navy spokesman confirmed to The Washington Times that Mr. England, who was an executive vice president at GD before being tapped to lead the Navy, was not taking part in the Navys recommendation process.
Mr. England had run into one trouble spot during Senate confirmation hearings. Several senators, including Senate Armed Services Chairman Carl Levin, Michigan Democrat, closely questioned the nominee on whether he would participate in decisions affecting General Dynamics, the Pentagons No. 5 contractor.
Mr. England was noncommittal at the hearing but later worked out an understanding with senators that paved the way for his full Senate confirmation.
"Yes, he has recused himself from any deliberations on Newport News," the Navy spokesman said yesterday.
In April, General Dynamics made a friendly $2.1 billion cash offer for Newport News, the only producer of large-deck aircraft carriers. If the Bush administration allows the deal to go through, GD would own the Navys only two nuclear shipyards, Newport News in Virginia and Electric Boat in Connecticut.
GDs bid brought a competing offer of $2.1 billion in cash and stock from the Navys other major shipbuilder, Northrop Grumman Corp. The company this year bought two large shipyards, Engalls Shipbuilding in Mississippi and Avondale Industries in Louisiana.
Senate Minority Leader Trent Lott, Mississippi Republican, has asked the administration to disapprove the GD purchase, which would give the company ownership of four of the Navys six principal yards. He said he fears a much larger General Dynamics, with a monopoly on construction of all nuclear-powered submarines and aircraft carriers, will dominate the industry and choke off work for Engalls, Mississippis largest employer.
On June 8, Mr. Lott sent a second letter of protest to Defense Secretary Donald H. Rumsfeld. The senator cited a recently updated Congressional Research Service analysis of a merger that GD first proposed in 1999, but which the Clinton administration turned down as anti-competitive.
The report says that the merger would concentrate 70 percent of annual shipbuilding revenues, more than 80 percent of ship design and engineering staff, and more than 95 percent of ship research and development funding in one company.
"It would be a mistake for the government to allow the concentration of all nuclear shipbuilding and about half of all non-nuclear Navy shipbuilding on one company," Mr. Lott wrote.
A GD spokesman yesterday took issue with the CRS findings, saying they do not fully reflect todays shipbuilding environment. For example, he said, the industry subcontracts non-nuclear work to about 6,000 engineers outside either company. The spokesman said GD will be submitting what it considers more accurate numbers to the administration.
A three-tiered team made up of officials from the Navy, the office of the secretary of defense and the Justice Department now is scrutinizing the GD and Northrop Grumman offers. The test is whether the merger would harm national security by being anti-competitive. Deputy Defense Secretary Paul Wolfowitz will make the Pentagons recommendation to Justice.
One industry source predicted the administration will approve both offers and then let the free market dictate who can close the deal. The source predicted the Justice Department will make a final decision by the end of July.
GD is promising the Pentagon that acquisition of Newport News will produce $2 billion in savings over 10 years by consolidating nuclear work. To members of Congress worried about home-state jobs, it has pledged not to close any of its yards such as Electric Boat, Bath Iron Works in Maine or National Steel and Shipbuilding Co. in California. It also says there will be no merger-related layoffs a promise that shipbulding analysts say will be difficult to keep if $2 billion in savings are to be generated.
GD contends its offer does not violate federal anti-trust laws because there is no real competition today for nuclear-powered ships. Newport News is the only builder of large-deck carriers, and Electric Boat and Newport News are in a teaming arrangement to build the Virginia-class nuclear attack submarine.

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