SEPTEMBER 4, 2013 – The Navy's decision to switch from composites to steel for the superstructure of DDG 1002, the third Zumalt class destroyer (see earlier story), has rung the death knell for Huntington Ingalls Industries (NYSE:HII) Gulfport Composite Center of Excellence in Gulfport, Miss.
DDG 1001 composites hangar
Announcing the closure of the facility, HII President and CEO Mike Petters called it "a difficult but necessary decision."
"Due to the reduction in the Zumwalt-class (DDG 1000) ship construction and the recent U.S. Navy decision to use steel products on Lyndon B. Johnson (DDG 1002), there is both limited and declining Navy use for composite products from the Gulfport Facility," said Mr. Petters.
Current work being performed at Gulfport is expected to be completed by the end of the first quarter of 2014, with closure expected by May 2014.
"Ingalls Shipbuilding continues to perform well in building the composite products for the Zumwalt-class (DDG 1000) program and has demonstrated considerable learning curve improvements," said Irwin F. Edenzon, HII corporate vice president and president of Ingalls Shipbuilding. "We are working closely with our Navy customer to efficiently complete our composite work on Michael Monsoor (DDG 1001) and the mast of Portland (LPD 27) by the end of the first quarter 2014."
HII expects the closure to impact 427 employees either through headcount reductions or transfers and to incur total costs of approximately $59 million.
All but approximately $7 million of the total costs are non-cash, and approximately $14 million of the total costs will be recorded in the third quarter of 2013, with the remainder expected to be recognized over the following six quarters. HII estimates that these costs will reduce operating income in the third quarter of 2013 by $15 to $20 million with no material impact in subsequent periods.