Dec 09 2006

Austal to build second LCS

Mobile Press Register

By George Talbot

Austal USA, part of a team competing to build a new fleet of next-generation warships for the U.S. Navy, on Friday won approval to build its second prototype of the so-called Littoral Combat Ship in Mobile.

The Navy said Friday it awarded a $208 million contract to the Austal team, which is led by General Dynamics Corp. and its shipbuilding subsidiary, Bath Iron Works Corp. The 417-foot, aluminum-hulled vessel is scheduled to be delivered by August 2009, the Navy said.

The contractors are vying against a rival team led by Lockheed Martin Corp. and Marinette Marine Corp., which has received orders for two of its 379-foot, steel-hulled LCS prototypes. The Navy currently plans to purchase 55 of the shore-hugging combat ships over time, and is working to decide between the two dramatically different designs.

Austal, which recently announced plans for a $3 million expansion of its shipyard on the east bank of the Mobile River, said it would begin construction of the new vessel in June. The shipyard earlier this year held a keel-laying ceremony for its first LCS, the USS Independence, scheduled for delivery late next year.

The second award "demonstrates the Navy's confidence in the Austal design and shows their commitment to building multiple (ships) in Mobile," said Dan Spiegel, Austal USA's chief operating officer.

Austal currently employs about 810 workers, but is looking to hire another 190 as part of its expansion. The new jobs, which pay up to $20 an hour, are being driven primarily by the LCS project, but Austal also builds high-speed passenger ferries in Mobile.

Austal officials have said they expect to seek incentives from the state, county and city to support the company's latest expansion. The shipbuilder last year added a $20 million production shed to house the Independence, receiving $5 million from the state and $2.5 million each from the city and county.

The LCS is designed to be a cutting-edge warship that can chase down enemy vessels, hunt mines and handle a variety of military missions in coastal, or littoral, waters. Navy officials have said they want the ship to serve as a smaller, cheaper complement to its fleet of destroyers and guided-missile frigates.

The ship "gives our naval forces the maneuverability, flexibility, and capability we need to face the threats of the future," said Sen. Richard Shelby, R-Tuscaloosa, adding that Friday's award "is great news for Austal and Mobile."

The $208 million price tag for the Navy's fourth LCS comes in considerably lower than the $223 million contract awarded for the third prototype, awarded to Lockheed in June. The third ship is being constructed by subcontractor Bollinger Shipyards Inc. in Lockport, La.

Concerns over the Navy's rising shipbuilding costs threatened to hold up funding for the LCS program as part of the 2007 defense spending bill. Congress ultimately approved legislation that includes $520 million for a fifth and sixth LCS to be ordered next year.

"I'm convinced it's a good program, and it has continued to maintain bipartisan support in Congress," said Sen. Jeff Sessions, R-Mobile. "As far as the competition goes, Austal and General Dynamics are doing exceedingly well, and I am confident they'll win orders for additional ships in the future."

The first LCS, the USS Freedom, was christened and launched at Marinette's Wisconsin shipyard in September, and will be based by the Navy in San Diego.

The Navy said recently that at least six foreign allies have expressed interest in buying into the LCS program, including two "near-term" candidates. Worldwide, the Navy has identified up to 26 potential buyers for the new ship, according to Rear Adm. Charles Hamilton, the Navy's program executive officer for ships.

Hamilton declined to name specific buyers but said interest was strong for both the General Dynamics and Lockheed versions of the ship. If the sales materialize, it could lower the Navy's costs and boost sales for the shipbuilders, according to Joe Carnevale, senior defense advisor for the Shipbuilders Council of America, a Washington, D.C.-based trade group that includes Austal, Bollinger and Marinette among its members.

"There's enormous foreign military sales potential with the LCS," Carnevale told Dow Jones newswires.