Shipbuilder is optimistic after Northrop break

“This really is the next chapter in this venture,” Mike Petters, the shipbuilder’s new CEO, said at a press conference that cast 2013 as a key year for the company. 

Petters told reporters that Friday was “not day one” for the new company’s two divisions, Ingalls Shipbuilding and Newport News Shipbuilding, which have a combined 198 years’ experience building massive warships and commercial vessels. 

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Huntington on Friday officially broke away from Northrop Grumman, which decided to shed its shipbuilding unit as part of a broader cost-cutting effort. 

Huntington Ingalls Industries now can “control our own destiny,” Petters said. As part of the larger company, decisions about pursuing shipbuilding opportunities were weighed against other defense programs Northrop was mulling.

A company overview provided by Huntington Ingalls said the new firm has “annual revenues of approximately $6.7 billion” and a “backlog of more than $17.3 billion.”

Executives “are telling Wall Street” that those figures should remain steady for “the next five years,” Petters said.

Petters acknowledged the firm has “some cost challenges,” including several “underperforming” shipbuilding efforts at Ingalls’s Gulf Coast shipyards.

Huntington Ingalls is “at a forward loss” on two amphibious assault ships, and “not performing as well as we should be on” a large-deck amphibious vessel program, Petters said.

But in 2013, ships in those “underperforming” programs are slated to be delivered to the Navy, which Huntington Ingalls executives say will give the new firm a boost.

Also in 2013, the company plans to shutter its Avondale, La., shipyard because officials have determined the Navy’s 30-year shipbuilding plan lacks enough ships to justify keeping it open.

That area’s congressional delegation, as well as state officials, are expected to seek to keep the Avondale yard open. To that end, Petters told reporters, Huntington Ingalls officials will “remain open-minded” about “other alternatives” to simply “locking it up” when operations cease in 2013.

That includes working with Louisiana officials and other firms about another company operating that facility.

Pro-defense lawmakers and members from the Avondale area have raised concerned for months about the plan, first hatched by Northrop Grumman, to close Avondale in 2013, saying it would weaken an American defense industrial base some say is declining. Sen. Mary Landrieu (D-La.) has floated options for keeping open the Avondale yard, saying doing so would stave off an “economic catastrophe for thousands of workers in Louisiana.” 

One plan Landrieu has discussed publicly is for the Navy to accelerate construction of several double-hulled tanker ships and do that work at the Louisiana shipyard.

The move by Northrop to spin off the shipbuilding entity should be a winning decision for both firms, said Loren Thompson of the Lexington Institute.

“Some observers may view Northrop Grumman’s retreat from shipbuilding as a defeat, but it is really the triumph of common sense for a company that backed into naval shipbuilding while trying to construct a very different kind of enterprise,” Thompson wrote in a recent blog entry.

“The Huntington Ingalls yards should be the most successful naval shipbuilders in the nation,” Thompson wrote, “because they have greater capacity, better locations and more favorable regulatory environments than their General Dynamics counterparts in California and New England.”