Louisiana to provide $214 million in incentives to preserve Avondale jobs

Louisiana Gov. Bobby Jindal and Huntington Ingalls Industries (NYSE: HII) President and CEO Mike Petters have announced that the State and Huntington Ingalls Industries (HII) have entered into a Memorandum of Understanding (MOU) under which an Avondale joint venture would receive incentives for retooling and training at Avondale if this new joint venture preserves Avondale as one of Louisiana’s top employers with approximately 3,850 jobs.

Governor Jindal said, “Northrop Grumman’s decision to end shipbuilding at Avondale by 2013 – as a result of the Navy’s procurement changes – was a blow to the thousands of people who work at Avondale and to the communities that support the shipyard.  We knew there were multiple communities and thousands of jobs at risk – and that’s why we committed last year to do everything we could to secure the future of Avondale and its workforce. We refused to accept a future in Louisiana without an Avondale. We refused to think of a future in the New Orleans area that does not include Avondale and all the shipbuilding tradition and economic activity it has spurred in this region for more than seven decades now. We refused to give up on Avondale.

“We made a commitment that we would exhaust every possible avenue before us to save the jobs in this area. We immediately began reaching out to other potential shipbuilders for the site, and worked with Northrop Grumman and later Huntington Ingalls to discuss options for keeping Avondale open. This agreement with HII means we are one step closer to securing the future of Avondale and its incredible workforce. We still have work to do, but we’re moving in the right direction. For generations, folks at Avondale have worked to build the ships that protect our country and keep our soldiers safe – and we will not rest until every option is exhausted to keep jobs in Louisiana.”

The MOU between Louisiana Economic Development and HII details a commitment of performance-based incentives totaling approximately $214 million over 10 years, including job-creation credits, funding toward retooling and modernization of Avondale and a comprehensive, customized workforce training solution to be delivered by Louisiana FastStart. The incentives commitment is based on an assumption of approximately 3,850 full-time joint venture employees. Employment and incentive levels could change proportionately based on the final structure and focus of the potential joint venture.

HII and LED have been working together for several months to identify and cultivate potential customers and partners, with a significant focus on major growth markets, such as oil and gas, offshore wind, commercial nuclear energy and commercial shipbuilding. HII is actively engaged in preliminary discussions with multiple leading companies; however, there is no guarantee that a joint venture agreement will be reached.

“Although we do not yet have a complete solution, this agreement with the State of Louisiana affords us the opportunity to leave no stone unturned in our search for a viable and sustainable alternative for the very talented and capable workforce at the Avondale Shipyard,” said HII President and CEO Mike Petters. “Our goal is to find a strategic alternative with a credible partner that will result in a joint venture beneficial to all parties.”

In July 2010, Northrop Grumman Corporation announced that, due to a major reduction in the Navy’s shipbuilding procurement plan, it would have to consolidate its shipbuilding on the Gulf Coast, resulting in the wind-down of Navy ship construction at its Avondale facility in 2013. Subsequently, Northrop Grumman elected to spin off its shipbuilding business into a new, independent and publicly traded company, HII, which was finalized earlier this year. Immediately after Northrop Grumman announced the anticipated shutdown of its Navy shipbuilding work at Avondale, LED and shipbuilding representatives from what is now known as HII began pursuing short-term and long-term options to maximize employment at the Avondale site and cultivate alternative employment opportunities for those workers who ultimately will be displaced.

In May of this year, the U.S. Department of Defense’s Office of Economic Adjustment (OEA) awarded LED a $1.49 million grant for a major project focused on securing the future of Avondale and its workforce. Recognizing the size of the Avondale workforce and the complexity of the project, the OEA grant was the largest of its kind ever awarded. LED funded the remaining 10 percent of the project cost, or $165,000.

The grant has funded LED’s efforts to evaluate best practices from prior shipyard reuse projects; assess Avondale’s current facilities and workforce, as well as evaluate them against current and future trends in shipbuilding and other manufacturing sectors; establish a prioritized array of the best options for Avondale and its workforce; and develop a detailed plan of action to pursue them. This planning work has been conducted in close collaboration with local stakeholders, including representatives of the Jefferson Parish Economic Development Commission (JEDCO), City of New Orleans, Greater New Orleans Inc., and HII. The preliminary results from this work have been incorporated into HII’s joint venture development efforts, and LED is engaging in discussions with HII and its potential partners.

The MOU between LED and HII was executed in July.

LED Secretary Stephen Moret said, “Today is a significant milestone for Avondale and its workforce. We also are continuing to cultivate new employment opportunities in the Jefferson Parish and New Orleans metropolitan areas for those current and former employees who may be unable to continue working at Avondale. This project remains one of our top economic development priorities statewide.”

October 18, 2011