Northrop to close Louisiana shipyard
With demand from the Navy for military ships declining, Northrop Grumman Corp. said Tuesday it was closing its Avondale, La., shipyard and may get out of the shipbuilding business altogether.
The site near New Orleans employs about 5,000 people. Operations there will be consolidated with the company’s Pascagoula, Miss., shipyard about 125 miles away, Northrop said.
Century City-based Northrop builds transport and amphibious assault ships at both locations. Consolidating ship construction on the Gulf Coast will reduce costs and increase efficiency, Wesley G. Bush, Northrop’s chief executive, said in a statement.
The Avondale shipyard, which is currently building two transport ships, will cease production by 2013. In February, the Navy canceled the planned purchase of two amphibious ships that were to be built at the yard.
Bush said shipbuilding has “little synergy” with its other businesses, which include making fighter jets, unmanned spy planes and satellites. In addition to the Gulf Coast operations it also owns a Newport News, Va., shipyard, where it builds nuclear submarines and aircraft carriers.
“It is now appropriate to explore separating shipbuilding from Northrop Grumman,” Bush said.
Northrop picked up the Gulf Coast shipyards in 2001 as part of the acquisition of Litton Industries Inc. At the time, then-CEO Kent Kresa bought Litton to acquire its military electronics business, said Loren Thompson, a defense policy analyst with the Lexington Institute.
“Getting into the naval shipbuilding business was never Kresa’s main focus in that deal,” Thompson said. “Ever since, that part of the company has been a drag on the rest of the enterprise.”
The shipbuilding operation has been hurt by delays and rising costs. Since 2008, the company has taken more than $430 million in charges against earnings because of delays caused by Hurricane Katrina and production problems.
In recent years, the company has focused more on high-tech electronic systems, which doesn’t fit well with the fading “industrial metal-bending” work, Thompson said. Last year, the ship business accounted for about 18% of Northrop’s revenues.
