Litton Reverses Setbacks in Warship Project

Litton Industries Inc. is making significant progress correcting design, cost and schedule problems that have plagued a $10-billion program for a new class of amphibious warships, the Navy’s top shipbuilding official said.

“The program is back on track,” Michael Hammes, deputy assistant secretary for shipbuilding programs told Seapower magazine, a publication of the U.S. Navy League, a private advocacy group.

Litton’s Avondale Industries division has reversed 18 months of setbacks on the program’s schedule and cost, Hammes said. “There have been very positive trends on the program in the last six months,” said Hammes, adding that before that, “there was a lot of turmoil in the program.”

Woodland Hills-based Litton is the Navy’s third-biggest shipbuilder.

The first two San Antonio class amphibious transport docks, the San Antonio (LPD-17) and the New Orleans (LPD-18), are estimated to be completed about 30% over original budget projections and 10 months and three months, respectively, behind schedule. The problems prompted Congress to defer spending $1 billion for the program in the fiscal year that starts Oct. 1.

The ships, designed to carry about 720 Marines, air-cushioned landing craft, transport and attack helicopters and the new V-22 Osprey tilt-rotor aircraft, are being built at Litton Avondale’s shipyard in New Orleans and General Dynamics Corp.’s Bath Iron Works in Bath, Maine. Litton Avondale manages the program. The LPD program is Avondale’s top naval contract.

Hammes’ remarks confirm company statements, said Joseph San Pietro, an analyst for Wasserstein Perella Securities Inc., who rates Litton a strong buy.

“We definitely have been looking for its improvement,” he said.

Litton shares fell $1.81 to $54.06 on the New York Stock Exchange.

Avondale Industries is part of Litton’s ship systems, which accounted for $499 million, or 35%, of its third-quarter revenue. The ship systems sector also accounts for $69 million of Litton’s $146-million pretax operating profit for the quarter.

Litton is expected to show earnings per share price of $1.49 when it reports fourth-quarter earnings today, according to the consensus of nine analysts polled by First Call/Thomson Financial.