Northrop Overruns Could Erase Carrier Profit, Navy Says

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Navy officials said Northrop Grumman Corp. may not make a profit on the latest U.S. nuclear aircraft carrier, which will be named the USS George H. W. Bush, due to cost overruns, Bloomberg News reported.


Northrop is required to pay all costs for the carrier, now known as CVN-77, above $3.8 billion. John Young, the Navy’s acquisition assistant secretary, said in an interview with Bloomberg that the project cost was already about $120 million below the $3.8 billion level and Northrop is still three years away from its promised March 2008 delivery. That date is already eight months behind the original schedule.


The contract terms for the CVN-77 specify a target cost of $3.25 billion and allow for a profit of $492 million, or a margin of 15 percent. Northrop pays 30 percent of costs above $3.25 billion and all costs above $3.8 billion, Bloomberg said.


Northrop doesn’t accept the Navy’s figures on the CVN-77, said Mike Petters, president of Northrop Grumman Newport News. “The Navy believes that we’re at the point” where the company might not make money, “but we don’t,” Petters told Bloomberg.

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