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Problems Surface in Building Latest Subs

September 16, 2004|From Bloomberg News

Northrop Grumman Corp., the world's largest builder of warships, has had "significant cost growth" and schedule delays in building its share of the Navy's newest class of nuclear submarines, the service's top acquisition official said.

There has been "rapid deterioration" in the company's performance since January, Assistant Secretary for Acquisition John J. Young wrote Northrop Chief Executive Ronald D. Sugar in an Aug. 6 letter. The cost of the first four subs has risen by $419.4 million, the Navy said.

The Navy attributed the program's cost growth largely to "poorer than expected" contractor performance.

Century City-based Northrop and General Dynamics Corp., based in Falls Church, Va., share production of the vessel body and systems and alternate final assembly at their shipyards in Newport News, Va., and Groton, Conn., respectively.

"The data suggests that the majority of the new cost increase is a result of performance issues at Newport News," Young wrote.

Northrop shares rose 10 cents Wednesday to $51.80 on the New York Stock Exchange.

Northrop is working to get growing costs for building the submarines under control, Sugar said Wednesday at an investor conference in Phoenix.

Young's letter was sent a week after First Lady Laura Bush traveled to the Newport News shipyard to christen the Texas, the second of the Virginia-class submarines.

Of the first four submarines, the Texas has the greatest cost growth, $207 million, Young said.

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