The Virginian-Pilot
©
NEWPORT NEWS
Northrop Grumman Corp. is poised to shed its shipbuilding operations, including the Newport News shipyard that builds the Navy's aircraft carriers.
With nearly 20,000 employees in Newport News, it is Virginia's biggest industrial employer. It's also one of just two yards that build submarines.
Northrop Grumman announced late Tuesday that it was exploring "strategic alternatives" for its shipbuilding unit, including a possible sale or spinning it off to shareholders.
"Recognizing our company's long-term strategic priorities, we foresee little synergy between Shipbuilding and our other businesses," said Wes Bush, Northrop's CEO and president, in a statement. "It is now appropriate to explore separating Shipbuilding from Northrop Grumman."
The defense conglomerate also announced Tuesday that it was closing its shipyards in New Orleans and Tallulah, La., and consolidating their work to its shipyard in Pascagoula, Miss. A news conference is scheduled for this morning to discuss its plans.
"Strategic alternatives for the shipbuilding business include, but are not limited to, a spin-off to Northrop Grumman shareholders," Northrop said in a statement.
The Los Angeles-based company is moving its headquarters to Northern Virginia. This week, it announced it had selected a new headquarters near Falls Church.
One of the biggest defense contractors in the country, Northrop Grumman was the largest in Virginia for the federal fiscal year ended Sept. 30, 2008, with more than $6.5 billion in contracts, according to fedspending.org, a website run by OMB Watch, a Washington nonprofit.
The company took over Newport News Shipbuilding in late 2001, in a deal valued at about $2.6 billion.
The move ended five years of independence for Newport News Shipbuilding and made Northrop Grumman the largest shipbuilder in the world. Until 1996, Newport News Shipbuilding had been owned by industrial conglomerate Tenneco. Tenneco spun the yard off to its shareholders.
Its five-year run as an independent company was a difficult one for the shipyard, which sprawls over a mile of the James River waterfront in downtown Newport News.
It faced a long strike in 1999 by the Steelworkers Local 8888, which represents its production employees, and made an ill-fated foray into the construction of commercial oil tankers.
In acquiring the shipyard in 2001, Northrop Grumman had hoped to achieve synergies between its multiple shipyards and other defense operations in aircraft and electronics. Yet it too also struggled with the shipbuilding business.
The first-in-class amphibious assault ship San Antonio, built by its New Orleans yard, has been plagued by costly defects. Commissioned in 2006, the San Antonio is currently docked at an Earl Industries yard in Portsmouth as all four of its engines are being rebuilt. The latest ship, the New York, also needs engine repairs.
Northrop has taken $431 million in charges since 2008 for delays, poor quality work and damage from Hurricane Katrina at its Gulf Coast yards.
Northrop Grumman Newport News also experienced quality problems on welds on the Virginia-class of attack submarines.
The Newport News shipyard has worked to rectify those issues and continues to build the subs in partnership with General Dynamics Corp.'s Electric Boat unit in Connecticut. It also is building the Navy's next generation aircraft carrier, the first of which, the Gerald R. Ford, is to be delivered by 2015 at an estimated cost, including research and development, of about $14 billion.
Northrop Grumman's shipbuilding sales were $6.21 billion of its overall revenue of $33.8 billion in 2009.
The closure of the New Orleans yard will put about 5,000 people out of work in a region hit hard first by the 2005 hurricane and now the BP oil spill in the Gulf of Mexico. Early this week, Louisiana Gov. Bobby Jindal said Northrop told the state that the yard could be shut down because of a lack of orders.
Asked about the report, Northrop spokeswoman Margaret Mitchell-Jones wrote in an e-mail: "The Pentagon's strong focus on affordability in today's budget environment, combined with the long term shipbuilding plan that requires a smaller industrial base, certainly emphasizes the importance of shipbuilding footprint assessment. We have no further comment on specific actions to address these factors."
Its stock closed Tuesday at $55.26 a share, up 71 cents, in New York Stock Exchange trading before the announcement was made.
Bloomberg News contributed to this report.
Robert McCabe, (757) 446-2327, robert.mccabe@pilotonline.com
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potential buyers
General Dynamics was bidding back a decade ago, about the same amount NG bid actually. Any possibility they will do so again? I dont understand why it wouldn't be a monopoly since NGSB and GDEB are the only builders of nuke boats.
For Better or Worse?
The terse final line in the article says it all: NGC doesn't give a rat's rear about its people. I've heard about some of the technical shenanigans that go on, but what staggers me is the Shipyard's reputation in the community as a place to work: it sucks.
The move from California isn't simply about unions; the cost of living is out of reach no matter what kind of workforce you have.
It'll be interesting to see (a) whether the ultimate buyer is American, and (b) just what NGC ultimately becomes... from two really good aircraft companies to a half-baked shipbuilder to, what, another IT company?
Staying Ahead
I'm just pointing out the Administration's stragegy for Corporations in the US. First Northrop moved its headquarters from California to Virginia to escape California's financial collaspe, which is mainly a Union problem. Second, Ford has moved most of its manufacturing to other countries. That was the big mystery of why is Ford closing the Truck plant. Because the Dems took over the House and Senate in the 2006 election and Ford knew what was coming. The Gov took over GM, kick the shareholders to the curb and gave GM to the Union. Obama has declared war on the business world and the only casualities will be working people. If people think Corporations, Banks, Healthcare and wealthy individuals are going to stay around and be made the cause of the problems in the US, their in for a shock. They will just out of busines or move out of the Country. I could go on forever but the best way to put is, A dollar laid ins't a dollar played anymore. So game over for now.
Milking America!
Ole Ike, must of had a Chrystal ball when he warned about Giants like NG
"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex. The potential for the disastrous rise of misplaced power exists and will persist."
how much
The author of the article forgot to put how much NG is asking. I may want to buy it - for my wife.
Makes Sense
It's the way of the future....large industrial base foot-print. Major budget reductions in the future on defense since it seems like those in Washington are starting to realize we have a mega-budgtary problem and a Trillion dollar deficit so far this year alone. Northrop is looking to cut their losses while they still have a chance to sell and get out.
This is the Northrop Grumman
This is the Northrop Grumman Corporation staying ahead of the Obama Administration in its take over of Corporations via the Unions. Ford did this years ago and survived the takeover of auto corps. International Paper did the same thing. They're still going strong in the non-union States. Pretty soon Virginia will have lost most of its biggest employers. Only Wal-mart, which they,re trying to unionize and the Goverment will be left.
All this anti-union stuff is incredible in America
When you attack unions you are attacking your neighbors, average Joes and Jane who earn what you earn or LESS. In 1983 20.1 percent of American workers were unionized. In 2008 it was 12.4 percent and 2009 it was 12.3 percent. So much for the unions are taking over stuff. The average earnings for a union worker in 2009 was $908 dollars a week; about 50k a year. Certainly not getting rich. The average for non-union workers in the same trades and manufacturing was $710 or 35K a year. Now do you doubt for one reason why Wal Mart and others are so anti-union - because they get the same work done for a thirty percent discount and pocket the difference as profit thus making Wall Street happy. And please don't get me started on the difference in safety at unionized versus non-unionized jobs like mining industry. Your anger and mistrust in unions is misguided - save it for Wall Street, speculators, investment bankers, CEOs, other corporate royalty and the politicians who are bought and paid for by all those I just mentioned. Unions aren't the problem.
What are you talking about?
Are you referring to Virginia as a "union state"? Virginia is a right-to-work state, which guarantees weak unions. And where did the article say Virginia is losing big employers? It does say that Northrop Grumman moved it's headquarters to northern Virginia, that sounds like a big employer moving in to me. It also says some shipyards in La. are closing, but the shipyard here will be spun off or sold, not shut down. And where exactly do you think Ford is building cars with non-union labor in the United States?
not to worry
dont worry,obama will take care of all of you,if you'll only trust in him,and give him all your money.im surethe transition from shipbuilding to solar panels will be a painless one.