General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT): Will Congress Torpedo the Navy’s Littoral Combat Ship?

Who’s out of pocket?
Which companies will suffer from curtailing the LCS program? Lockheed Martin Corporation (NYSE:LMT) and General Dynamics Corporation (NYSE:GD), most obviously. As the builders of the sea frames, and the primary contractors doing operational support and maintenance over the vessels’ life-cycles, they’ve got the most to lose — probably tens of billions of dollars in lost revenue. But they won’t be the only losers.

Northrop Grumman Corporation (NYSE:NOC) has already won tens of millions of dollars to consult on how to integrate “mission packages” into the LCS. Northrop Grumman Corporation (NYSE:NOC), General Dynamics Corporation (NYSE:GD), Raytheon Company (NYSE:RTN), and other big builders of equipment for outfitting warships would all lose as the budget for building mission modules (weapons systems going into building each mission package) gets slashed by more than $3 billion.

And who’s going to be OK?
Other companies might fare better, despite the cuts. Cubic Corporation (NYSE:CUB), for example, has won nearly $300 million in contracts to build instructional course-ware for operating the vessels already. Those instructional materials will be needed no matter how many LCSes are ultimately built.

Plans to focus the fleet on minesweeping missions means companies who focus on producing that mission package might not get hurt as badly as, for example, makers of weapons for sub-hunting, coastal bombardment, and air defense. (And fortuitously, one of the companies building robotic submarines for minesweeping is … General Dynamics.)

Foolish takeaway
The LCS was designed to replace three classes of warships with just one, whose “mission packages” could be swapped out to transform a single LCS, in the space of four days, into whatever kind of warship it needed to be: Cyclone (PC-1) class patrol craft, Oliver Hazard Perry (FFG-7) class frigate, or Avenger (MCM-1) class minesweeper.

Plans to gut the program, and refocus the LCS on just one mission, could end up giving the LCS the dubious distinction of making it the world’s most expensive minesweeper.

$61 million minesweeper USS Guardian, stuck on a reef. Source: Wikimedia Commons.

The article Will Congress Torpedo the Navy’s Littoral Combat Ship? originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Cubic and owns shares of General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon.

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