Northrop Grumman and American Classic Voyages (AMCV) announced they have reached an agreement, endorsed by the U.S. Maritime Administration that enables the continued and uninterrupted construction of two 1,900-passenger cruise ships. The program to build the first cruise ships in the United States in 40 years, named Project America, is a pilot project to reinvigorate U.S.-flag cruise ship construction and operation. This agreement enables Project America to continue unabated and resolves business issues relating to a delay in the delivery and an increase in the price of the cruise ships currently under construction.

Following are some of the major provisions of the agreement:

• Ship delivery dates will be extended by approximately 12 months, to February 2004, for Project America Ship I and February 2005, for Ship II.
• The price per ship will be increased by $19 million from the original contract price of $440 million to cover the increased costs of the interior finishing (joiner) package.
• AMCV has committed $42 million and Northrop Grumman has committed $44 million to acquire through 2005 a new issue of stock in AMCV's subsidiary, Project America. This additional equity in Project America will help offset the price increase and associated costs for the delivery extensions, and will provide additional funding for Ships I and II. In addition to the equity committed as part of this agreement, AMCV has already committed $100 million to fund the construction of Ships I and II.

More than 1,600 personnel at Northrop Grumman's Ingalls Operations are currently engaged full-time in the cruise ship program. The design of the ships is virtually complete, and the first ship is one-third finished. A total of 142 assemblies have begun fabrication, with more than 48 percent of the assembly blocks erected on the ship.