Northrop Grumman to Shutdown 3 Louisiana Yards

Northrop Grumman Corp., plans to close its Avondale, Louisiana shipyard early in 2013, along with two smaller yards at Tallulah and Waggaman as it consolidates its military work on the Mississippi Gulf Coast.

5,000 people are employed at the Avondale yard and will find themselves without a job 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.

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.

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 ship unit had $6.2 billion of revenue in 2009, or 17 percent of the company's $33.8 billion total. Bush, who took over as CEO in January, said in a statement yesterday he saw "little synergy between shipbuilding and our other businesses," which include Global Hawk unmanned planes, radar and cyber-security programs. The new 2010 forecast for ship sales is about $6.5 billion.

The shipyard consolidation may help the company improve profit at the shipbuilding unit, where the 4.8 percent operating margin in 2009 trailed General Dynamics' 10 percent. Northrop's earnings also have been damped by $431 million in charges since 2008 for delays, poor-quality work and damage from Hurricane Katrina at Avondale and Pascagoula.

The closure plans were announced after financial markets closed Tuesday. Investors greeted Northrop Grumman's plans with enthusiasm, pushing up shares $1.78, or 3.4 percent, to $57.04 in Wednesday morning trading. The shares have traded in a 52-week range of $42.51 to $69.80.