Post by ferryfast admin on Nov 2, 2007 13:09:03 GMT -5
Austal shares fall after order axed
November 2, 2007 - 1:20PM
Shipbuilder Austal Ltd expects its earnings to take a hit this financial year after the United States Navy cancelled an order for one of its shore-hugging warships.
The cancellation could result in Austal's US staff, which were to build the vessel, being underused in coming months.
Austal executive chairman John Rothwell said the effect on earnings, which it did not specify, would depend on the work secured to replace the order.
The company's shares were hit hard in intraday trade, dipping 42 cents or 13.25 per cent to $2.75 by 1442 AEDT on Friday.
The order was for a second Littoral Combat Ship (LCS) prototype, which operates near shore and carries out mine countermeasures and anti-submarine warfare
However, Austal's first, identical prototype LCS is still in the running to be chosen by the US Navy as the basis for a 55-vessel LCS fleet to be built over the next decade.
Austal is General Dynamics' sub-contractor and is competing with another consortium led by Lockheed Martin to design and build the fleet.
The deal for the second prototype fell over when the General Dynamics' team was asked to change from a cost-price contract to a fixed-price incentive contract.
Mr Rothwell said the 55-vessel program was "very much alive and well".
Mr Rothwell said he believed Austal's first LCS, which was about 70 per cent complete and scheduled for launch in early 2008, would prove successful during the testing of the two competing prototypes.
He said the US Navy was likely to select a single design but may go with both.
The selection of the successful builder and design would be made in about 12 months, he said.
"We have lots of confidence we will win a good share of the vessels."
"We put our price in to General Dynamics ... and the navy and General Dynamics just couldn't agree," he said.
Mr Rothwell said the company had no control over General Dynamics, which, as the prime contractor, ultimately controlled negotiations on price with the US Navy.
"General Dynamics' profit expectation on this might have been beyond what is certainly good for us and we felt that it was unfortunate, but there was nothing we could do about it.
"The navy needs the ships ... but they confirmed they needed to be robust in their processes for acquiring them."
The US Navy is assisting Austal USA in identifying short-term contracts to help it fully use its workforce.
Mr Rothwell said the 1200-strong US workforce was secure for the moment.
"The US navy has flagged four or five different programs that they may be able to utilise the workforce for," he said.
Without it, Austal may be forced to cut some staff.
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Navy cancels Austal ship
Posted by Sean Reilly, Washington Bureau
Mobile Press-Register
blog.al.com/live/2007/11/navy_cancels_austal_ship.html
November 01, 2007 11:41 AM
WASHINGTON -- The Navy has opted to cancel construction of a second littoral combat ship that was to be built at Austal USA's shipyard in Mobile, officials announced this morning. The decision came after the Navy and the lead contractor, Virginia-based General Dynamics Corp., could not reach a deal on restructuring the contract to contain costs, according to a press release.
Today's announcement represents the latest setback for a program buffeted by cost overruns and production delays. Nonetheless, the Navy remains committed to steaming ahead, top managers stressed.
"While this is a difficult decision, we recognize that active oversight and strict cost controls in the early years are necessary to ensuring we can deliver these ships to the fleet over the long term," Navy Secretary Donald Winter said in the release. Over time, the Navy hopes to build 55 of the shore-hugging ships, which are designed for submarine hunting and other operations in shallow coastal waters.
At Austal, whose Mobile County workforce numbers about 1,100, "there won't be any impact near-term" on employment, said Bill Pfister, vice president of government programs. Pfister defined "near-term" as approximately six months to a year.