Northrop May Spur Interest in Shipyard on Navy Plan to Speed Up New Oilers

Northrop Grumman Corp. may be able to find a buyer for a Louisiana shipyard targeted for closing after the U.S. Navy said it plans to accelerate production of a new class of refueling vessels.

The Navy’s 2012 budget will propose starting work on a fleet of double-hulled oilers in 2014 instead of 2017, the service said today. The Navy also would spend about $16 million for training shipbuilders in Louisiana, home to Los Angeles- based Northrop’s Avondale yard.

Adding the ships sooner than planned may help keep the yard open after Northrop said in July it would shut the facility by 2013, move work to Mississippi and eventually spin off or sell its shipbuilding unit. Under the Navy’s previous fleet plan, there would have been no work available for Avondale after 2013.

The move “to identify early on what our intentions are with respect to the oilers would be beneficial to a future potential owner of Avondale,” Sean Stackley, the Navy’s head of acquisitions, said at a news conference at the Pentagon.

Randy Belote, a Northrop spokesman, declined to say whether the company has received interest from possible buyers for the Avondale yard or the shipbuilding unit. The division includes yards in Pascagoula, Mississippi, and Newport News, Virginia. The Avondale yard has about 5,000 employees.

Transport Vessels

Northrop, which now makes the LPD 23 and LPD 25 Navy transport ships in Avondale, will complete their production as planned, Belote said. “It’s premature for us to speculate on possible future business at the yard,” he said.

General Dynamics Corp.’s Nassco shipyard in San Diego also would be able to compete for the new oilers, Stackley said.

Northrop rose $1.14, or 2 percent, to $58.91 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have gained 5.5 percent this year. Falls Church, Virginia-based General Dynamics climbed $1.38, or 2.3 percent, to $62.69.

Oilers transfer fuel to other vessels at sea, extending their range. Double hulls provide an additional safety margin against a fuel spill.

The Navy now operates 19 oilers, and the plan to start speeding up their replacement would go to Congress in February as part of the service’s next budget proposal.

Accelerating the timetable for the new vessels would give a future owner of the Avondale yard the chance to compete for those contracts, “making the facility more attractive to prospective new shipbuilding buyers,” Senator Mary Landrieu, a Louisiana Democrat, said in a statement.

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; Juliann Neher in Washington at jneher1@bloomberg.net.

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