Northrop Grumman spins off shipbuilding

Published 4:44 pm Friday, April 1, 2011

Northrop Grumman Corp. is officially disposing of its troubled shipbuilding division — including major shipyards in Louisiana, Mississippi and Virginia — by handing off shares in a new company to its stockholders.

Northrop Grumman stockholders will have one share of the new company, called Huntington Ingalls Industries Inc., for every six shares of Northrop they own. The new company — using the symbol “HII” — begins regular trading Thursday on the New York Stock Exchange.

When Los Angeles-based Northrop said in July that it would explore strategic alternatives for the unit, it announced the closure of its Avondale, La., shipyard in 2013. Besides Avondale, the new company has major shipyards at Newport News, Va., and Pascagoula, Miss., with about 38,000 employees.

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Huntington Ingalls will be one of the Navy’s main suppliers of nuclear-powered submarines, aircraft carriers and other warships. Shipbuilding accounted for about one-fifth of Northrop’s total revenue.

Northrop’s shipbuilding has been squeezed by a slowdown in Navy contracts and stiff competition from other defense contractors, all of which have been under pressure from the Pentagon to cut costs.

Two ships in the LPD-17 series of Navy amphibious assault ships, under construction at Avondale, are currently the last projects slated for the yard. The final two ships in that series will be built at Pascagoula, and no major Navy shipbuilding project to replace the LPD-17 is in the works now.

Avondale currently has about 4,600 workers. Northrop Grumman already has closed a small shipyard at Tallulah, La., ending 95 jobs.

Acting ahead of the potential loss of a major industrial employer, Louisiana is looking for new tenants at the Avondale yard.

The head of Louisiana’s economic development agency, Stephen Moret, said earlier this month that the state has nearly finished the process of selecting a consulting firm to help market Avondale to other businesses.

In the best-case scenario, Moret said, a buyer would take over the shipyard, as well as the two contracts for the unfinished ships. That would enable the owner to seek new shipbuilding contracts until the Navy work is completed, and cut down on the number of long-term layoffs, he said.

However, Moret said it was a long shot that a new owner would maintain all of the existing Avondale jobs. The state is looking for businesses outside shipbuilding to take residence at Avondale, Moret said.

Northrop Grumman has said that the remaining Avondale workers will be laid off as the need for their skilled trades diminishes — and not all employees will lose their jobs at once.

Michael Petters, who has been president of Northrop Grumman Shipbuilding, will be Huntington Ingalls’ CEO.