Northrop Grumman to shut Louisiana shipyard; looks to spin off shipbuilding division

Northrop looks to split ship unit, close shipyard

WASHINGTON — Northrop Grumman said Tuesday that it will close down a Louisiana shipyard and may shed its entire division that makes warships as the Navy shifts its shipbuilding priorities.

The company will close its Avondale facility by 2013 as it consolidates its shipyards on the Gulf Coast. The moves come as the shipyard winds down construction of Navy amphibious assault ships.

The decision will affect about 5,000 people who work at the facility. Northrop says some could move to its Pascagoula, Miss., shipyard, but did not say how many.

Northrop is also exploring “strategic alternatives” for its shipbuilding business. Those include splitting it off through a possible spinoff to shareholders.

The company said it would take a $113 million charge on its second-quarter earnings related to the shutdown. Combined with the effect of the $296 million tax settlement, that will push up second-quarter earnings by about 73 cents per share. Northrop said there will be significant restructuring costs in the future but said most could be recovered under the terms of its government contracts.

Northrop is one of the Navy’s main sources of nuclear powered submarines, aircraft carriers and other warships. In 2009, shipbuilding accounted for $6.2 billion of Northrop’s $33 billion in total revenue.

But the Navy’s recently released long-term shipbuilding plan, combined with a broad Pentagon effort to cut costs on big weapons programs, presents some challenges for Northrop.

Rivals like General Dynamics, which is competing to build a new shallow water warship that the Navy plans to buy in big numbers, have seized a large share of the market.

The Avondale shipyard builds the LPD-17 San Antonio-class ship, but there is no work in the pipeline for the facility after it finishes the remaining few already under construction. All remaining work on the LPD-17 program will be done in Pascagoula.

Louisiana officials have said the closure of Avondale would be a major blow to the region, which is already reeling from the Gulf of Mexico oil spill and the recession. Gov. Bobby Jindal and the state’s congressional delegation said they planned to meet with Navy Secretary Ray Mabus in a bid to keep the facility open.

Company shares closed up 71 cents to $55.26 Tuesday.