In addition to Avondale, 2 smaller Louisiana shipyards to be closed by Northrop Grumman

By Alan Sayre, AP
Wednesday, July 14, 2010

2 smaller La. Northrop Grumman shipyards to close

NEW ORLEANS — Northrop Grumman Corp., which plans to close its Avondale shipyard early in 2013, also will shutter smaller yards at Tallulah and Waggaman as it consolidates its military work on the Mississippi Gulf Coast, the company’s CEO said Wednesday.

The Los Angeles-based defense contractor said Tuesday that it will close the Avondale yard — with 5,000 employees — after work is finished on two Navy amphibious assault ships. The last two ships in the LPD-17 series will be constructed at the Northrop Grumman yard in Pascagoula, Miss.

Northrop Grumman CEO Wes Bush announced the additional closures during a conference call with investors. It was not immediately clear how many additional employees would be affected.

Bush said the decision to close out the Louisiana sites was made in an effort to improve efficiency and address the nationwide problem of excess shipbuilding capacity. Asked whether the Mississippi yard had performed better than Avondale, Bush said the quality of the assault vessels had been very similar.

“We have a fabulous work force in Mississippi and a fabulous work force in Louisiana,” Bush said. “This is a real tough decision from a people perspective.”

Bush said an undetermined number of Louisiana workers would be hired at Pascagoula to build the final two ships in the LPD-17 series.

The company will spend the next 2 1/2 years working with state officials to find alternative uses for Avondale, Bush said. “This is going to be difficult from a people process. But the company is committed to working through the process.”

Northrop Grumman is considering a possible spinoff of its shipbuilding business, including a yard at Newport News, Va., into a separate company. Credit Susse has been hired as lead financial adviser on alternatives for the shipbuilding unit.

The company said it expects productivity losses at Avondale as the result of the decision. Northrop Grumman has raised the estimates to complete two LPDs currently under construction at Avondale by $210 million.

The closure plans were announced after financial markets closed Tuesday. Investors greeted Northrop Grumman’s plans with enthusiasm, pushing up shares $1.73, or 3.1 percent, to close at $56.99 Wednesday. The shares have traded in a 52-week range of $42.51 to $69.80.

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