On Tuesday, April 24, 2007, Philip Teel, Corporate Vice President and President, Northrop Grumman Ship Systems sector, addressed the Jackson County Chamber of Commerce at their annual meeting in Moss Point, Mississippi. Below are his remarks.

“Workers and Neighbors: Progress in the Region We Call Home”

It’s great to have this opportunity to speak with Chamber and community leaders. Before I begin my remarks, let me just say how proud I am of the people in this room, and of entire Gulf Coast’s business leaders. The nation has noticed how hard this region has worked to come back from Katrina. And more important than that, the nation has noticed how much progress you have made. I am very pleased to be part of this community and Kelly and I are proud to call it home.

Like the region we love, Northrop Grumman, and the Ingalls Shipyard in particular, has made great progress in these past nineteen months since the storm. I thought today that I would talk a bit about that progress, and about the progress that we still need to make. Like you, I speak from the perspective of both a businessman and a devoted resident of this region.

Let me start with a short overview of the operation I lead. I am very proud of the people that make it up, the products we build, and the customers we build them for.

Northrop Grumman-built ships make up nearly 1/4 of the U.S. Navy Fleet, including nearly 1/2 of all surface combatants and 1/3 of all amphibious ships. We build the Arleigh Burke-class of Aegis guided missile destroyers and the large-deck amphibious assault ships and the large, complex amphib transport ships. We are designing and building the naval fleet of tomorrow.

In partnership with Bath Iron Works, we are designing the Navy’s transformational Zumwalt-class destroyer — an awesome fighting machine and the ship system that will serve as the technology basis for all future naval platforms. In addition, we have a major role in recapitalizing the Coast Guard fleet with the next-generation National Security Cutter.

Our backlog is good — over $9B — so the work we do will be secure as long as we can find the people we need to do the work.

The chief source of our strength is our workforce — more than 11,000 employees here in Pascagoula and over 16,000 sector wide … program managers, supply chain specialists, planners, administrators, engineers of all types, craftsmen and women in multiple specialties, shipfitters, boilermakers, pipe fitters and welders, painters, sheet metal workers, riggers, electricians, carpenters, joiners, and machinists — a skillful team that accomplishes amazing things — they build the most advanced and capable ships in the world and they build more different types of ships simultaneously than anyone else in the world.

I’m pleased to say that most of our workforce is back at work after the recent strike and I see renewed commitment and energy in everyone. We have good, well paying jobs at the shipyards — jobs that are good for the people who hold them, and good for Jackson County, the state of Mississippi, and the region.

On average, the craftsperson jobs pay a salary of nearly $45,000 per year. A person could earn up to ~$52,000 with bonuses and premiums. The vacation, holiday, health and retirement are valued at about $16,000 per year. So the total annual compensation for a craftsperson is between $61,000 and $68,000. The average for salaried employees is between $75,000 and $80,000—very good jobs indeed.

In total we pay nearly $450M per year in salaries at the Ingalls facility—that is about $8.7M per week. And each of these 11,000 jobs generate an additional 1.8 indirect jobs in our local communities. Each dollar paid in wages generates an additional $1.40 in indirect wages.

A pretty healthy engine for our local economy.

During the 2 years before Katrina, we had invested nearly $200M in Ingalls facilities and equipment. We are spending another $500M in the 3 years following the storm. The state of Mississippi is investing $153M as well. We have repaired or replaced ~ 1.3 million sq. ft. of covered space, 2 million sq. ft. of roof, 30 miles of 13.8 K volt cable, the main, the substations, and the distribution panels, replaced 90% of our rolling stock, 90% of our shop equipment and machinery... We are committed to making this the best shipyard in the country.

For nearly 70 years, the Ingalls, Litton, Northrop Grumman companies have been a major part of this community, region and the state of Mississippi and it is our commitment to continue that legacy for at least another 70 years.

So what are our issues and challenges?

The major challenges to our future success are hiring and retaining adequate numbers of skilled people. We are on a very aggressive recruiting and hiring campaign. We have ~ 400 openings for skilled craftsmen and women — primarily in electrical and pipefitting and welding. We have ~ 250 openings for salaried personnel in skill categories like engineering, supply chain, administration, and production planning and scheduling. One of the major objectives of our recent union contract was to improve our success in recruiting and retention. I think we achieved that objective to the extent we could in a labor agreement.

So we are aggressively addressing those areas within our control to overcome these challenges. As to those challenges that are outside our direct control, available, affordable housing is one of the most important and most challenging. Before I discuss this issue further, I want to discuss our workforce trends since the storm.

Jackson County is our home — at least for most of us in this room and for Ingalls shipyard. However since Katrina, only 59 percent our employees still live in the county. That is a lower figure than at any time in our history. Though the percentage of employees in Jackson County has shrunk, the percentage in Harrison, George and Mobile Counties has increased. Furthermore, the Jackson County census tells us that we now have fewer employees living in every municipality than we did before the storm.

Clearly, there are many issues that have influenced people’s decision to leave Jackson County. One big one was certainly Katrina, but we must ask ourselves, why haven’t they returned. Is it a shortage of housing, a shortage of shopping centers, grocery stores, other retail services, restaurants, recreational opportunities, etc? I certainly don’t know all the reasons.

However, we know there is a housing shortage here in Jackson County and across the entire Gulf Coast region. This shortage is serious because it represents a competitive disadvantage for organizations, like Northrop Grumman, seeking to bring good talent into our area. It will also affect our area’s ability to attract new businesses into the area.

As we see industrial growth in adjacent areas, like Mobile County, I am concerned that the great people who commute from that area to work in Jackson County, at our shipyard in particular, will seek employment closer to home — shorter commuting time and lower transportation costs. Today approximately 1/3 of the Ingalls workforce lives in Mobile County. I would guess that some of you here today live there. One of my uncles lives there, it is a great place to live. That is not my point. My point is that we must be concerned about the loss of people from our Jackson County communities and must act to create the environment in which employees, present and future, want to live and raise their families.

I know that this organization and others are seeking solutions to these issues. For example, I am encouraged by the proactive efforts of the Gulf Coast Business Council. That council was formed last year to unite the post-Katrina recovery efforts of businesses in the three coastal counties. Many in the audience are members. This Council has taken very aggressive actions to address several critical issues that negatively impact housing availability. The Council has brought into existence the Renaissance Corporation to develop strategies and financing to build more homes that are affordable, attractive, and close to centers of employment.

Related to that is the need for lower and more stable insurance rates. The Business Council has worked with elected officials to create new legislation designed to address this critical problem as well. I applaud the leadership of Anthony Topazzi, Jerry St. Pe' and others on the Business Council for their proactive and successful efforts on these and other critical issues.

We have all gone through a lot and accomplished a lot since Katrina. We still have much work to do to overcome the challenges associated with available and affordable housing and insurance and other quality of life issues. These are some of the biggest challenges we face as we work together to revitalize this region that we all love so much. I encourage every organization to find a role to play in assisting our local, county, and state leadership to solve these critical issues.

Success against these challenges will bring economic and social benefits to all of us. In the case of Northrop Grumman, this success will enable us to meet our commitments to our customers, our shareholders, and our community.