Leadership change at Austal USA: Presidentâs resignation announced
Austal USA has announced the exit of its president, a fresh twist for a company that is promising major expansion and hiring but which also has suffered some losses that affected the earnings outlook for its parent company.
On Wednesday, the Mobile-based shipbuilder announced that Rusty Murdaugh had resigned effective the same day.
Murdaugh, who had been Chief Financial Officer at Austal USA, was named interim president in February 2021 following the abrupt resignation of Craig Perciavalle. Murdaugh was confirmed in the position in September 2021, and led Austal through a period when it added the capability to build steel ships and landed the first contracts to do so.
For a shipyard that had specialized in aluminum construction, and which was facing the end of its biggest Navy program, the transformation has appeared to open the way to a promising future. Austal USA leaders said in June that they anticipated adding 2,000 jobs over the next two years, likely bringing their workforce to a record high of around 5,000. They also said they planned new facilities, including a third huge assembly bay on the riverfront across from downtown Mobile.
The brief statement issued Wednesday by Austal USA praised Murdaugh for leading the company through “significant changes that ushered in a period of unprecedented growth.”
“Under his leadership, Austal USA completed the addition of steel shipbuilding capability to the Mobile shipyard, opening the most modern steel shipbuilding facility in the industry,” it said. “This change led to major competitive awards in the U.S. Coast Guard Heritage-class Offshore Patrol Cutter (OPC) program and U.S. Navy ocean surveillance ship (TAGOS-25) program creating over $6 billion in new construction backlog. During his tenure, Austal USA also opened a waterfront ship repair facility in San Diego, greatly expanding the company’s repair business, and acquired property in Mobile that will facilitate the continued expansion of the Mobile ship yard.”
“Rusty made a lasting impact on the company,” said Paddy Gregg, CEO of Australian parent company Austal Ltd. “The transformation and growth of Austal USA under his leadership has postured the company for the future with a diversified and balanced portfolio. Rusty is leaving Austal USA with unlimited growth potential and we thank him for all his hard work and dedication over the last two years.”
Though Wednesday’s statement and Gregg’s comments are bullish, the news hasn’t all been good for Austal USA this summer. In July, Austal Ltd. revealed that Austal USA’s first contract to build steel ships for the U.S. Navy had become “onerous” as inflation and other issues jacked up the cost of building those ships.
The problem was serious enough to hammer Austal Ltd.’s financial projections for the 2023 fiscal year. The company had said it expected to make a profit of 58 million Australian dollars [$39.7 million U.S. dollars]. Instead, the company said it expected to see “an expected range between zero profit to a potential loss of AU$10million.”
In some ways, the episode appears to echo early problems with Austal USA’s Littoral Combat Ship (LCS) program: From 2013 onward, Austal USA underestimated costs on the first few ships and Austal Ltd. only belatedly became aware of the problem. When it did, in 2016, it had to absorb an unexpected loss. In that case, there was investigation into whether the handling of the news violated regulations of the Australian stock exchange. That was found not to be the case, but in March 2021 Perciavalle and two other Austal USA executives were indicted on charges of conspiracy to commit wire fraud, wire fraud and wire fraud affecting a financial institution.
Perciavalle has entered a plea of not guilty, as have former financial analysis director Joseph Runkel and former LCS program director William O. Adams. While a trial date is not currently set, prosecutors have suggested the trial be scheduled for fall 2024.
In this case, AUSTAL Ltd. appeared to be at pains to avoid such issues. The company called a halt to trading of its shares before making the announcement. Gregg also attributed the cost overruns to “a period of unprecedented hyperinflation” as well as “inaccurate assumptions” about how efficient Austal USA’s steel line would be on its first run.
According to Austal USA’s statement, Michelle Kruger, Austal USA Vice President of Global Services and Support, has been named acting president until a successor is named.
Related:
Austal USA braces for boom: 2,000 new jobs, new facilities to come
Austal USA taking a beating on first steel ships, parent company says