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Workforce Reductions Northrop Grumman Rejected Bids for Facility Slated to Close, Metal Trades President Says
Posted On: Aug 09, 2010

By Michael Rose--Reprinted from the Daily Labor Report

The president of the AFL-CIO Metal Trades Department, which includes unions representing thousands of workers at Northrop Grumman Corp.'s shipyards in Avondale, La.; Pascagoula, Miss.; and Newport News, Va., said Aug. 5 that the company had rejected bids from other companies to buy the Avondale facility, which is slated to close by 2013, eliminating 4,900 jobs.

In an interview conducted during a meeting of the AFL-CIO Executive Council, Ronald Ault told BNA that he had learned through various unspecified sources that Northrop Grumman, which in July announced the phasing out of operations at its Avondale, La., shipyard (136 DLR A-12, 7/16/10), only was interested in selling its entire shipbuilding division, and not solely the Avondale facility.

The shipbuilding division of Northrop Grumman manufactures ships for the U.S. Navy, which has cut its budget for marine vessels in recent years, Ault said.

Union Says Company Seeking Tax Deal

Ault charged that the reason Northrop Grumman only would entertain bids on the whole division was that the company wanted to take advantage of a tax deal known as a Reverse Morris Trust, which would allow the company to spin off its shipbuilding division without incurring tax on the transaction. At the time of its announcement of the closing of the Avondale facility, the company said it intended to “explore strategic alternatives for its shipbuilding business,” including spinning off the shipbuilding operation.

When the company announced that it would end operations at the Avondale facility, which at the time of the announcement employed some 4,900 workers, including 4,200 in the bargaining unit, Ault said the unions representing those workers began looking for potential buyers for the facility. Two made bids, but those bids were rejected, Ault said.

Meanwhile, Northrop Grumman Aug. 3 announced it had issued notices under the Worker Adjustment and Retraining Notification (WARN) Act to 205 workers in Avondale and at its smaller facility in Tallulah, La., which is also slated to close. Ault said this represented the first round of layoffs, with more to come as work is completed on the last two Navy ships being built at Avondale.

Company ‘Making Money at the Expense of Workers.'

“The corporation is making money at the expense of the workers in Louisiana,” Ault said. “It's immoral. If they would sell just Avondale, the jobs would be there.” In addition, Ault said, when the Avondale facility is vacated, it will be considered a toxic waste site that would need to be cleaned up.

Ault said the Avondale shipyard supported some 12,000 jobs in Louisiana, including some 7,000 indirect jobs and the nearly 5,000 workers employed at the facility. The closing of the shipyard would have a dramatic impact on the economy of the region, including lost economic development, wages, and taxes, he said, while the region is still suffering the economic effects of Hurricane Katrina and the more recent BP oil spill.

“We've been beating down the doors of politicians” to make them aware of the situation, Ault said, but there's only so much they can do. He said that Sen. Mary Landrieu (D-La.) “understands the economic impact” of the closing of the Avondale shipyard, and that Secretary of the Navy Ray Mabus was sympathetic to the situation, but “he can't tell a [private] corporation where to place their work.”

Going forward, Ault said he held out hope that a solution could be found to keep the Avondale facility open and preserve jobs for union-represented workers. One option, he said, was for the state of Louisiana to “float industrial bonds” to purchase the shipbuilding division, including Avondale and Pascagoula, from Northrop Grumman. Such an arrangement, Ault said, would benefit both the workers and the state, which he said would make money on the transaction.

Ault also said he planned to “marshal employees to help us save their shipyard,” and remained an “eternal optimist” about the possibility that those jobs would be preserved. “If we get all the employees behind us, we can move mountains,” he said.

Union officials plan to meet with representatives of Northop Grumman Aug. 12 to discuss severance packages for workers affected by the closing, Ault said.

A Northrop Grumman spokesman told BNA Aug. 6 that “it is our company's policy not to comment on questions or speculation regarding mergers, acquisitions, or divestitures.”

Metal Trades Department, AFL-CIO
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