For Phila. Gear, a ‘humbling’ $80.2M Navy contract

The $80.2 million U.S. Navy contract that Philadelphia Gear Corp. won last month is the largest in the history of the 118-year-old King of Prussia company, chief executive Carl Rapp said today.

The contract is for the main gears between the turbine and the propeller on three new Arleigh Burke class guided missile destroyers. If the Navy orders additional ships, the value of the contract could soar to a total of $426 million.

Privately held Philadelphia Gear has been a Navy supplier for more than 70 years, Rapp said, but "it's an extremely lumpy business" because years can pass by between orders.

The purchase two years ago of General Electric Co.'s marine-gear business in Lynn, Mass., which included the gear designs for the Arleigh Burke, made it possible for Philadelphia Gear to win the latest contract.

"It took two years of very hard work. It's very humbling, I have to tell you, for the Navy to put this trust in us," Rapp said.

The Navy had planned to stop buying Arleigh Burke ships, which use the Aegis weapons made at Lockheed Martin Corp.'s facility in Moorestown, but decided last year to buy more, upgraded versions of the warship last year, Rapp said.

The upgrades, which include more electronics and hybrid power generation, will boost the cost of the ships to $2 billion from $1.2 billion each. The Arleigh Burke destroyers have been a mainstay of the Navy fleet for years. The first one went into service in 1991.

For Philadelphia Gear, which in 2001 closed its landmark King of Prussia factory - where a Home Depot now stands - to focus more on aftermarket services, the Navy deal represents a big boost to the manufacturing side of its operations.

Most of the work will be done at a new Philadelphia Gear facility in Santa Fe Springs, Calif., where the company is relocating its California operations. Total investment there is expected to be $5 million to $10 million.

Philadelphia Gear employs 211, including 35 in King of Prussia. It expects to add 15 to 20 to its workforce because of the Navy contract, but only a few here, Rapp said.