LCS shipbuilder president resigns amid U.S. and Australian investigations

The head of Alabama-based shipbuilder Austal USA has stepped down amid continuing investigations by U.S. and Australian regulatory agencies linked to the Navy’s troubled Littoral Combat Systems (LCS) program. 

Following the resignation of company president Craig Perciavalle, the board of directors appointed current chief financial officer Rusty Murdough. He will be interim president while the search continues for a permanent candidate, company officials said.

Austal USA is a wholly-owned subsidiary of the Australian shipbuilder Austal, which says it is cooperating with all regulatory authorities in relation to the investigations.

“Austal and Austal USA have also engaged external lawyers in the U.S. to conduct their own detailed investigation into what they understand to be the focus of the U.S. regulatory investigations,” company officials said.

The Independence and Freedom-class LCS vessels were billed as fast and maneuverable, and not particularly expensive ships that could be swiftly modified for different missions, such as anti-submarine operations or clearing minefields. But that ability never panned out.

The ships also have been struck with other mechanical issues and cost overruns over the years.

The company determined that LCS vessels have cost more to construct than was initially anticipated in large part because of added costs to meet Navy safety requirements. The company has identified “isolated” instances where labor hours between vessels in the early stages of the LCS program weren’t properly allocated. According to reports, in 2016, the company announced losses of about $120 million to reflect those changes. 

“The company is also satisfied that Austal USA materially complied with its reporting requirements with the U.S. Navy,” company officials said. “It is not possible at this stage to predict what action, if any, they may take in relation to these matters.”

Austal said it is continuing to work with the Department of Defense and recently delivered its 13th Independence-class LCS to the fleet from its shipyard in Mobile, Ala. The company says it also is working with the Pentagon on a $100 million joint investment to add steel shipbuilding capability to complement the aluminum shipbuilding facilities at the yard.

“The company is confident that the proactive steps it has already implemented to strengthen its internal reporting and compliance practices will be taken into account in determining whether there are any potential consequences arising from matters identified by the investigation,” Austal officials said.

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