The Navy announced yesterday that it has made a deal with General Dynamics which, if Congress goes along, will save 8,000 jobs and assure that 18 new submarines will be built.
But, as the government's part of the bargain, the Navy would pay $484 million of the $843 million General Dynamics is expected to lose under the existing contract to build the 18 of the 688 class nuclear-powered subs.
Sen. William Proxmire (D-Wis.), with the support of Adm. H. G. Rickover, has been warning the Navy against making too generous a settlement with General Dynamics and may object to the proposed one.
General Dynamics had threatened to stop working on the subs at its Electric Boat yard in Groton, Conn., unless the Navy paid what the company considered back bills. The yard had issued provisional layoff notices to about 8,000 of its workers, effective Monday.
Navy Secretary W. Graham Claytor Jr., at a Pentagon news conference, called the proposed settlement "the most important thing" he has accomplished for the Navy since taking office.
He said the detailed proposal will go to Congress the week after next as part of the Navy's formal request to employ a streamlined procedure for settling claims under Public Law 85-804.
Either the House of Senate can object to taking the legislative shortcut within 60 days after receiving the agreement, signed yesterday by both the Navy and General Dynamics.
Under that agreement, the Navy would pay $125 million of the $544 million General Dynamics said it was owned for work on the 683 class submarines as of December 1976.
On top of the $125 million, the Navy would pay half of the remaining $718 million the company is expected to lose on the submarine program, or $359 million. That would bring the government's contribution up to $484 million.
Claytor and his shipbuilding troubleshooter, Edward Hidago, said the total of $125 million and $718 million, or $843 million, is the total amount Navy cost analysts estimated General Dynamics would lose.
Claytor stressed that, in the absence of the agreement, the company would have claimed the Navy owed it well over the estimated loss of $843 million. It would take years to settle those claims in the courts, the secretary said.
The key questions, according to Claytor, became: "Are we going to litigate for eight years or are we going to find a way" through "rough justice" to enable the Navy to "get on with building ships?"
General Dynamics, under the agreement, could not demand additional money from the Navy for unanticipated costs under the 688 class submarine contracts.
Under the new deal, General Dynamics would try to build the 18 subs for $2.668 billion. If the company exceeded that amount the Navy would pay half the overrun as long as it was $100 million or less. Any overrun over $2,768 billion would be absorbed totally by the company. Any savings under $2.688 billion would be sbe split 50-50 between the Navy and the company.
The Navy would pay for "any inflation experienced during the remaining submarine "construction" over 7 percent for labor and 6 percent for material.
Claytor said both the Navy and its shipbuilders are to blame for the problems that have plagued the shipbuilding program, including claims totaling $2.7 billion.
He said the shipbuilders were guilty of "underbidding, perhaps" and the Navy of ordering too many changes in the ships after construction had started. The Navy secretary said the impasse with General Dynamics on the 688 class submarine program was the hardest one to break.