Northrop Says U.S. Cuts Could Cost 2,500 Jobs

Northrop Grumman Corp., the world’s largest builder of warships, said proposed Pentagon spending cuts would force the company to eliminate 2,500 jobs at shipyards in Louisiana and Mississippi in the next three years.

“We hire to handle the load we have at the moment,” said Philip Dur, Northrop’s president of ship systems. “We try to project our requirements going forward, but they are always very sensitive to what is effectively in the Navy’s shipbuilding plan.”

The widening federal budget deficit and rising costs for the Iraq war are forcing the Pentagon to cut Air Force and Navy programs that are among its most expensive. Deputy Defense Secretary Paul D. Wolfowitz on Dec. 23 approved a plan that would cut $8 billion from Northrop’s shipbuilding programs over six years.

The plan must still be approved by Congress, where it could face opposition, Dur said.

“Until that budget is passed on the Hill, the opera isn’t over,” Dur said.

Northrop has 125,000 employees in total, including about 20,000 at the Avondale shipyard in New Orleans, the Ingalls shipyard in Mississippi and smaller plants in Gulfport, Miss.

Shares of Century City-based Northrop fell 14 cents to $53.16 on the New York Stock Exchange. They have risen 11% in the last year.

Ships accounted for $5.5 billion, or 21%, of Northrop’s $26.2 billion of sales in 2003. Excluding the aircraft-carrier work the company does in Newport News, Va., sales from the shipyards in Mississippi and Louisiana accounted for more than $2.6 billion.

Almost annual changes to the Navy’s five-year shipbuilding plan are making it difficult for shipbuilders to properly prepare, Dur said. Even before the Pentagon’s proposal was made public this week, Northrop was headed into a “valley” between shipbuilding contracts that could have led to some workforce cuts, he said.

The proposed budget cuts “haven’t helped,” Dur said. He didn’t specify how many jobs would have been eliminated under the original shipbuilding plan.

Northrop would attempt to achieve the job cuts first by not filling positions as they open, Dur said. The number of jobs that would be lost is almost equal to the positions added in the last three years, he said.