Following reports Thursday afternoon that Austal would suspend their stock trading, the company announced today a reported $115 million loss due to unforeseen improvements to the Littoral Combat Ship (LCS).
The LCS is produced at the Mobile-based Austal USA. However, the write-down of $115 million will not have a negative impact on the current or future production and operations at the shipyard, according to Austal.
The unforeseen costs were incurred from improvements that were required by the U.S. Navy. The new warship had to meet the military shock trial standard and pass the US Naval Vessel Rules. To meet these standards, it cost significantly more than they previously estimated.
Austal’s CEO David Singleton said the financial impact is disappointing, but the overall outlook for the US-based company remained positive in terms of future profits.
The new design work is already being implemented in the nine LCS currently under construction at Austal’s Mobile shipyard.
The $115 million loss will apply to the 2016 fiscal budget for Austal.
Cost overruns of this nature are not unusual for new military programs and weapons systems. When the LCS was introduced to the Navy’s fleet, it was the only aluminum ship. Not to mention, the design of the ship was completely new and revolutionary.