Northrop Stops Work on 2 Cruise Ships

Northrop Grumman Corp. stopped building two cruise ships for American Classic Voyages Co., which will put about 1,750 employees, or 17% of the staff, at its Pascagoula, Miss., shipyard out of work.

The move comes less than a week after Chicago-based American Classic Voyages, controlled by billionaire Sam Zell, filed for Chapter 11 bankruptcy protection and failed to get a U.S. government loan to complete the 1,900-passenger ships.

Northrop’s Litton unit agreed to build the ships, the first built in the U.S. in more than 40 years, for $880 million in 1999. Northrop said it will pursue funding from the U.S. Maritime Administration and would take a $60-million charge if efforts to keep the project alive fail.

American Classic is hopeful that the companies can work with the Maritime Administration to avoid having the project shuttered, said Fran Sevcik, a spokeswoman for the cruise ship company.

About 1,250 of the 1,600 full-time jobs assigned to the project will be lost. An additional 500 subcontractors also could be affected. The Ingalls Shipyard employs about 10,500.

Shares of Northrop fell 39 cents to $103.35 in trading on the NYSE.