Thursday, December 3, 2020

General Dynamics (GD) Stock Gained This Week After Receiving $9.47 Billion Submarine Construction Contract

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General Dynamics Corporation (GD) though closed the Wednesday trading with a slight loss of 0.67% at $150.29 but has added roughly 8% over the past three days. The recent price rise came on the heels of signing an agreement worth $9.47 billion to complete construction of the first Columbia-class submarine and begins work on the second.

Overall, the Columbia ship series, which is expected to be the most expensive naval program in history, will generate substantial multi-year cash flow for the aerospace, marine and military equipment manufacturing company.


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The news of the deal caused GD shares to increase, although it is not a surprise for the company to participate in the large-scale Columbia scheme as it was already announced in the spring of 2020 that General Dynamics will engage in the first phase of the construction program for Columbia. The whole series is large that is comprise of 12 submarines, costing more than $115 billion in total. These submarines are carriers of the US nuclear deterrent force’s Intercontinental ballistic missile (ICBMs) base.

The current fleet of Ohio-class previous-generation submarines is ageing, and replacement to that fleet with Columbia-class submarines is required by 2031.The Navy has said that by 2031 it wants the first new submarine patrolling in the water, so a deal is needed earlier rather than later. But there was at least some risk that some delays would be caused by the submarines’ price tag and Pentagon budget constraints made worse by COVID-19 spending.

Some politicians have criticized the high cost of Columbia, but the US will still upgrade its fleet of missile carriers, as ICBM submarines are the only way to ensure a guaranteed nuclear retaliatory attack.

General Dynamics Corporation (GD) will engage in the Columbia submarine series construction program as a lead general contractor, while part of the work will be carried out by the defense shipbuilding firm Huntington Ingalls Industries, Inc. (HII).

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