Lockheed, Austal Share $1.38 Billion for Littoral Ships

Lockheed Martin Corp. (LMT) and Austal Ltd. (ASB) today received a combined $1.38 billion in orders for continued purchases of the Littoral Combat Ship, according to the Pentagon.

The Navy’s orders, made under existing contracts, will pay for the 13th through 16th vessels in the program’s initial purchase of 20 ships divided between Bethesda, Maryland-based Lockheed and Austal based in Henderson, Australia, the Defense Department said today in a summary of contracts.

Lockheed is getting $697 million and Austal’s U.S. unit is receiving $682 million to complete work on their new vessels by mid-2018.

The Navy action underscores the service’s commitment to the $37 billion program in the face of automatic budget cuts known as sequestration that started to take effect on March 1. The ship is designed to operate in littoral waters, those close to shore, for missions from clearing mines to delivering humanitarian aid.

Critics have questioned the Navy’s decision to go with two versions of the ship, increasing long-term maintenance costs. The estimated price to build each Littoral Combat Ship has doubled to $440 million. Cracks and corrosion plagued the first completed vessels. The Pentagon’s chief weapons tester has cited flaws with the ship’s guns, said its helicopter isn’t powerful enough to tow mine-hunting equipment and questioned whether it could carry on its mission after being hit in combat.

First Deployment

The first vessel of a planned 52, Lockheed Martin’s USS Freedom, is sailing to Singapore in a deployment intended to test the vessel’s crew and maintenance operations. It’s also the first visible step in the Pentagon’s new strategy that places a greater emphasis on Asia.

Lockheed makes one version in partnership with Marinette Marine Corp., a subsidiary of Fincantieri SpA, based in Trieste, Italy. Their steel-bodied ships, which includes the Freedom, are built at Marinette’s yard in Marinette, Wisconsin. Under the new order, 56 percent of the work on the new order will be performed in Marinette, the Pentagon said.

The other is made by Austal in partnership with Falls Church, Virginia-based General Dynamics Corp. (GD) Their ships are built at Austal’s yard in Mobile, Alabama. The Pentagon said 51 percent of the work will be performed at that location.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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