The CEO of Australia’s Austal Limited said in an earnings call that the resignation of the Austal USA subsidiary is meant to shift them from a focus on winning new work to executing that work.
“Rusty’s done a tremendous job of selling the order book and winning new work and turning the business around strategically to resolve that issue we had a couple of years ago. And now’s the time that we absolutely need that operational focus in the business. And that’s the conclusion we’ve come to, that’s what we’re doing. And we’re really knuckling down, and we’re going to get into operational delivery,” Austal Limited Chief Executive Officer Patrick Gregg said during a company earnings call on Aug. 31 from the U.S. subsidiary’s facility in Mobile, Ala.
Rusty Murdaugh abruptly resigned as Austal USA president on Wednesday after serving in the role for more than two years (Defense Daily, Aug. 30).
Murdaugh was first made president on an interim basis after his predecessor Craig Perciavalle resigned due to an investigation into fraud.
In March, the Securities and Exchange Commission charged Perciavalle and two other Austal USA executives with orchestrating an accounting fraud scheme related to work on the Littoral Combat Ship (LCS) program (Defense Daily, March 31).
Gregg elaborated that the Austal USA business has “gone through a couple of radical transformations’ and when Murdaugh took over he helped them diversify from building the LCS and Expeditionary Fast Transport (EPF) ship to strategically grow the business.
He argued Murdaugh did a “fantastic job” of diversifying and winning new work, setting them up for “a great 10 years” of ordered shipbuilding work.
However, Gregg said it was time to find a different person to deliver on all that work.
“Strategy and business winning are different from execution. And we’re just trying to do the best thing we possibly can to make sure that the workforce here are delivering ships for our customers.”
Gregg gave no indication Murdaugh’s departure is related to a company update last month that announced a “substantial revision in earnings guidance” this fiscal year because a new steel production line will be causing financial losses in the short run. The company’s fiscal year 2023 earnings for the steel line are being reduced from about $88 million in profit to upward of $6.5 million in losses.
Specifically, after the Navy ordered five Navajo-class towing, rescue and salvage ships (T-ATS) the company realized the efficiency assumptions for the steel line, labor hours and recovery of overheads will cost more than planned, resulting in slower than planned production on the first new steel T-ATS ship.
At the time, Gregg called the result disappointing and “we need to make changes to some reporting structures and processes so that Austal USA can identify and rectify these sorts of issues in a more timely manner.”
Austal had named Michelle Kruger, Austal USA Vice President of Global Services and Support, as the newest acting president until a permanent successor is named.
Gregg said there is no particular timeline on finding the permanent president, but he said they are “very happy” with Kruger in the acting role and she is also under consideration for the permanent position.
He said Austal will seek the best person possible and they have started a “global search as well.”