The facilities of Gulfport's composite construction shipyard survived Hurricane Katrina, but couldn't weather the loss of future construction orders. The yard is seen a month after Katrina struck in late August 2005. (Christopher P. Cavas / Staff)
WASHINGTON — Having lost one more construction contract, and with no prospects for future composite work, Huntington Ingalls Industries (HII) announced Wednesday it is giving up on its effort to make a go of composite ship construction, and will close its shipyard in Gulfport, Miss.
“This is a difficult but necessary decision,” HII president and chief executive officer Mike Petters said in a press release. “Due to the reduction in the Zumwalt-class (DDG 1000) ship construction and the recent US 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.”
Work now being done in Gulfport is expected to be completed by the end of March, with closure expected by May 2014, the company said in its press release.
“Ingalls Shipbuilding continues to perform well in building the composite products for the Zumwalt-class program and has demonstrated considerable learning curve improvements,” Irwin F. Edenzon, HII corporate vice president and president of Ingalls Shipbuilding, said in the release. “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.”
Both of those jobs represent the last ships of their respective classes needing composite structures.
Of about 700 employees currently working at Gulfport, the company expects 427 to be affected by the closure, with about 315 workers to be laid off, according to Beci Brenton, a company spokeswoman in Washington.
Some of the 700 are Ingalls employees, on loan to the composite facility.
“HII expects to impact 427 employees either through headcount reductions or transfers and to incur total costs of approximately $59 million,” the company said in its press release.
“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. Additional details are contained in HII's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2013,” the company said.
A Decade-long Struggle
The 120-acre site in Gulfport is dedicated solely to carbon fiber composite construction. It produces the tower masts for the San Antonio (LPD-17)-class amphibious ships, new masts for Nimitz-class aircraft carriers, and the large superstructures and hangars for the Zumwalt class.
The facility’s death knell was sounded Aug. 2 when the Navy awarded a $212 million contract to General Dynamics Bath Iron Works to build the deckhouse for the third — and last — Zumwalt-class ship from steel.
Negotiations for the deckhouse had been stalled for over a year. The Navy wanted to see more savings from lessons learned with construction of the first two deckhouses, and HII was unable to meet those expectations. Perhaps as a trial horse, the Navy put out a request for bids on a steel deckhouse, but only Bath responded; HII would essentially have been bidding against itself had they bid it, as steel work would go to the Ingalls yard in Pascagoula, Miss., and not to Gulfport.
Under previous corporate owner Northrop Grumman, the Gulfport yard was really aimed at securing the Fast Response Cutter (FRC) contract from the Coast Guard, an essential element of the Deepwater modernization program. Prospects brightened when the FRCs, initially planned for acquisition in 2018, where moved up to the mid-2000s because of problems with older boats. The service wanted 58 of the small cutters.
But the Coast Guard suspended FRC design work in late February 2006 because of design risks, including the hull shape, excessive weight and horsepower requirements. Shortly after, the service ended all plans to proceed with composite construction for the ships, which were subsequently built using standard, steel construction methods.
Gulfport, like the rest of the Gulf coast between New Orleans and Mobile, was heavily damaged by Hurricane Katrina on Aug. 29, 2005. But amazingly, most of the shipyard’s structures survived, and Northrop was determined to keep the facility going.
Workers returned within days to clean the shipyard and its delicate, specialized equipment, and temporary structures were erected to get the yard back on its feet.