Huntington Ingalls Industries [HII] said Wednesday it plans to shutter a facility in Gulfport, Miss. following the Navy’s decision to abandon a composite deckhouse for the third and final ship of the new class of Zumwalt (DDG-1000) destroyers.

The Navy announced Aug. 5 that it had awarded General Dynamics [GD] a $212-million contract for the construction of a steel deckhouse for the future USS Lyndon B. Johnson (DDG-1002).

The first DDG-1000 under construction at General Dynamics Bath Iron Works. Photo by General Dynamics

The award came after negotiations between the Navy and HII to bring down the costs of the composite deckhouse failed. HII was contracted to build the composite deckhouses for the first two Zumwalt ships. General Dynamics Bath Iron Works builds the hulls.

There had been cost increases on the composite versions, but the Navy also said it was shifting to steel to save money, and concluded that using steel would not negatively impact weight requirements.

HII said it will close the Gulfport Composite Center of Excellence by May, as current work at the facility is expected to be completed early next year.

"This is a difficult but necessary decision," HII President and CEO Mike Petters said in a statement. "Due to the reduction in the Zumwalt-class (DDG 1000) ship construction and the recent U.S. Navy decision to use steel products on Lyndon B. Johnson (DDG 1002), there is both limited and declining Navy use for composite products from the Gulfport Facility."

HII said the closure will impact 427 employees through layoffs or transfers to incur total costs of approximately $59 million. The company said it estimates the costs will lower operating income in the third quarter of 2013 by $15 to $20 million but expects no significant impacts in subsequent quarters.

The Johnson is scheduled to be delivered to the Navy in fiscal 2018.