bobdina
07-14-2010, 09:16 AM
Northrop to close yard, may sell ship business
By Christopher P. Cavas - Staff writer
Posted : Tuesday Jul 13, 2010 22:22:35 EDT
Northrop Grumman on Tuesday confirmed rumors that it will close down its Avondale shipyard near New Orleans and consolidate its Gulf Coast shipbuilding operations at the company’s Ingalls yard in Mississippi.
In a greater surprise, the company also announced it is exploring strategic alternatives for its shipbuilding business.
Northrop is the Navy’s largest ,shipbuilder supplying the service with nuclear-powered aircraft carriers and submarines, surface warships such as DDG 51-class destroyers, and all the Navy’s amphibious ships. Its yard in Newport News, Va., is the only yard in the world capable of building full-sized nuclear carriers. About two-thirds of all Navy ships are built by the company. The Ingalls yard in Pascagoula also builds the Coast Guard’s National Security Cutters.
“Our decision to consolidate the Gulf Coast facilities is driven by the need for rationalization of the shipbuilding industrial base to better align with the projected needs of our customers,” Northrop CEO and president Wes Bush said in a statement released late Tuesday. “The consolidation will reduce future costs, increase efficiency, and address shipbuilding overcapacity.”
The company announced it would take a pre-tax charge estimated at $113 million in the second quarter of 2010 as a result of the consolidation. A $296 million tax benefit unrelated to the shipbuilding decisions also will be included in the second quarter financial results. The company’s 2010 guidance will be updated with the new financial figures July 29.
The consolidation is also leading the company to increase its expected costs to complete two LPD 17-class ships by about $210 million, which the shipbuilder will take off its expected margin for the ships.
The Northrop statement indicated shipbuilding at Avondale will “wind down” by 2013. Incomplete LPD ships will be towed for completion to Ingalls, and the company will consolidate all future LPD construction at the Mississippi yard.
The consolidation moves do not affect Northrop’s composite construction facility at Gulfport, Miss., which makes structures such as the superstructure for new DDG 1000-class destroyers, and masts for LPDs and aircraft carriers.
Northrop shipbuilding chief Mike Petters met Monday in Baton Rouge with Louisiana Gov. Bobby Jindal and several other state politicians to discuss the planned closure of Avondale. Jindal said after the meeting he planned to appeal to Navy Secretary Ray Mabus to keep the yard open.
“This presents a tremendous economic challenge to the Avondale area,” Jindal said Monday. “The roughly 5,000 direct jobs at the Avondale site support about 6,500 additional indirect jobs in the New Orleans region, meaning a total of roughly 11,500 jobs are at risk due to this change in the Navy’s procurement program.”
The southern Louisiana region already is reeling from a series of setbacks that began in August 2005 with the devastation caused by Hurricane Katrina. Ironically, while the Ingalls yard was completely flooded by the storm and suffered severe damage, the Avondale facility was relatively undamaged, although a great percentage of its work force lost their homes. The New Orleans region is losing about 4,500 existing and potential jobs from the cancellation of NASA’s Constellation program to return to the moon, and the cumulative effect of the BP oil spill and continuing moratorium on new deepwater drilling, according to Jindal, eventually is expected to eliminate about 20,000 direct and indirect Louisiana jobs.
Northrop’s decision to explore strategic alternatives for shipbuilding came from an assessment of the company’s long-term strategic priorities, Bush said.
“We foresee little synergy between shipbuilding and our other business,” Bush said in the statement. “It is now appropriate to explore separating shipbuilding from Northrop Grumman.”
In the statement, Northrop said it would evaluate whether a separation of the shipbuilding business is in the best interests of shareholders, customers and employees. The company has engaged Credit Suisse as its lead financial advisor, and also is being advised by Perella Weinberg Partners.
http://www.navytimes.com/news/2010/07/navy_northrop_avondale_071310w/
By Christopher P. Cavas - Staff writer
Posted : Tuesday Jul 13, 2010 22:22:35 EDT
Northrop Grumman on Tuesday confirmed rumors that it will close down its Avondale shipyard near New Orleans and consolidate its Gulf Coast shipbuilding operations at the company’s Ingalls yard in Mississippi.
In a greater surprise, the company also announced it is exploring strategic alternatives for its shipbuilding business.
Northrop is the Navy’s largest ,shipbuilder supplying the service with nuclear-powered aircraft carriers and submarines, surface warships such as DDG 51-class destroyers, and all the Navy’s amphibious ships. Its yard in Newport News, Va., is the only yard in the world capable of building full-sized nuclear carriers. About two-thirds of all Navy ships are built by the company. The Ingalls yard in Pascagoula also builds the Coast Guard’s National Security Cutters.
“Our decision to consolidate the Gulf Coast facilities is driven by the need for rationalization of the shipbuilding industrial base to better align with the projected needs of our customers,” Northrop CEO and president Wes Bush said in a statement released late Tuesday. “The consolidation will reduce future costs, increase efficiency, and address shipbuilding overcapacity.”
The company announced it would take a pre-tax charge estimated at $113 million in the second quarter of 2010 as a result of the consolidation. A $296 million tax benefit unrelated to the shipbuilding decisions also will be included in the second quarter financial results. The company’s 2010 guidance will be updated with the new financial figures July 29.
The consolidation is also leading the company to increase its expected costs to complete two LPD 17-class ships by about $210 million, which the shipbuilder will take off its expected margin for the ships.
The Northrop statement indicated shipbuilding at Avondale will “wind down” by 2013. Incomplete LPD ships will be towed for completion to Ingalls, and the company will consolidate all future LPD construction at the Mississippi yard.
The consolidation moves do not affect Northrop’s composite construction facility at Gulfport, Miss., which makes structures such as the superstructure for new DDG 1000-class destroyers, and masts for LPDs and aircraft carriers.
Northrop shipbuilding chief Mike Petters met Monday in Baton Rouge with Louisiana Gov. Bobby Jindal and several other state politicians to discuss the planned closure of Avondale. Jindal said after the meeting he planned to appeal to Navy Secretary Ray Mabus to keep the yard open.
“This presents a tremendous economic challenge to the Avondale area,” Jindal said Monday. “The roughly 5,000 direct jobs at the Avondale site support about 6,500 additional indirect jobs in the New Orleans region, meaning a total of roughly 11,500 jobs are at risk due to this change in the Navy’s procurement program.”
The southern Louisiana region already is reeling from a series of setbacks that began in August 2005 with the devastation caused by Hurricane Katrina. Ironically, while the Ingalls yard was completely flooded by the storm and suffered severe damage, the Avondale facility was relatively undamaged, although a great percentage of its work force lost their homes. The New Orleans region is losing about 4,500 existing and potential jobs from the cancellation of NASA’s Constellation program to return to the moon, and the cumulative effect of the BP oil spill and continuing moratorium on new deepwater drilling, according to Jindal, eventually is expected to eliminate about 20,000 direct and indirect Louisiana jobs.
Northrop’s decision to explore strategic alternatives for shipbuilding came from an assessment of the company’s long-term strategic priorities, Bush said.
“We foresee little synergy between shipbuilding and our other business,” Bush said in the statement. “It is now appropriate to explore separating shipbuilding from Northrop Grumman.”
In the statement, Northrop said it would evaluate whether a separation of the shipbuilding business is in the best interests of shareholders, customers and employees. The company has engaged Credit Suisse as its lead financial advisor, and also is being advised by Perella Weinberg Partners.
http://www.navytimes.com/news/2010/07/navy_northrop_avondale_071310w/