Consolidation in American Naval Shipbuilding

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naval consolidation(click to view full) In 1993, a bottom-up review concluded that declining demand after the end of the Cold War needed a restructured defense industry with fewer assets. During a Pentagon dinner that has come to be called the “Last Supper,” Deputy Secretary of Defense William J. Perry signaled to the industry that the Department would support consolidation. That policy lasted until 1998, and it had profound effects on the American defense industry. In November 2008, the Institute for Defense Analysis submitted a report that looked at the effects of consolidation in the naval shipbuilding sector. Had it made a difference to the sector’s efficiency? The report offers an excellent introductory look at the merger and acquisition dynamics and rationales, then examines the American naval shipbuilding sector in some depth. Its conclusions? “In summary, there are two main reasons that the ship sector did not rationalize as a result of the mergers.” “First, the individual shipyards had already rationalized about as much as they could before they were acquired. Second, unlike missile manufacturing, which could be rerouted into new plants at manageable investment, naval shipyard construction requires shipyards specialized to particular ship types. General Dynamics could not cost effectively […]

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