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GENERAL DYNAMICS AND LOCKHEED WIN US SHIP CONTRACT

27 May 04.General Dynamics Corp. (NYSE:GD – News) and Lockheed Martin Corp. (NYSE:LMT – News) have won final design contracts that could lead to billions of dollars in orders for a new breed of quick, coastal warships, the Navy said on Thursday.

The two beat out Raytheon Co. (NYSE:RTN – News), which won the right to offer a competing preliminary design of the new ship last July. The Navy said General Dynamics’ Bath Iron Works unit’s contract was worth $79 million. Lockheed Martin’s was valued at $47 million. Both include options for construction of up to two prototypes. The ships, projected to cost up to $250 million each, are intended to support a wide range of joint missions in the face of threats from surface craft, submarines and underwater mines. (Source: Reuters)

Rear Admiral T. McCreary, the Navy’s top spokesman, declined to comment on the reported selection of Lockheed and General Dynamics. “The announcement will be made at 5 p.m.,” he said. The service is expected to announce the next design contract or contracts — essentially opting to exercise options on the contracts awarded last July.

Representatives at Lockheed, General Dynamics and Raytheon all declined to comment.

The companies have been working on competing designs since last July, with an eye to eventually snagging a contract to build the new ships that could be worth up to $15 billion.

The Navy wants a new ship that is versatile enough to back up special operations forces, thwart torpedo-armed ultra-quiet submarines and handle a variety of spy missions.

“It’s literally the first warship the Navy has ever bought that matches up with the idea of information-age warfare,” said Loren Thompson, a defense analyst at defense think tank Lexington Institute. “It was designed to match up with the (U.S. President George W.) Bush Administration’s concept of military transformation.”

Lockheed shares finished at $49.88, up $1.57, or 3.2 percent, while General Dynamics closed 1.8 percent higher at $95.72. Raytheon shares were little changed, closing up 8 cents at $33.16 all on the Big Board.

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