Shore-hugging ships still high priority

WASHINGTON (Reuters) - A plan to build a new class of 55 shore-hugging ships remains a high priority, U.S. Navy Secretary Donald Winter said on Wednesday, despite cost overruns that prompted him to cancel two ships this year.

The small, fast Littoral Combat Ship (LCS) is "still a high priority of the Navy," Winter told the Reuters Aerospace and Defense Summit. "We need to make sure exactly what it is that we want to buy first."

He said the first two LCS ships being built by Lockheed Martin Corp (LMT.N) and General Dynamics Corp (GD.N) were nearing sea trials that would let the Navy evaluate the performance of the two separate designs.

By early 2009, the Navy would decide whether to stick with two LCS designs or pick one to build out the fleet designed to counter coastal threats, including floating mines, diesel submarines and speedboats driven by guerrillas.

Asked if several firms could ultimately build the ships even if the Navy moves to one design, Winter said that approach had been successful with the Navy's DDG-51 destroyer, which is built by General Dynamics and Northrop Grumman Corp (NOC.N) and he would not rule out that approach with LCS.

But he said it was too soon to make a decision, adding, "I wouldn't want to constrain my options."

Winter last month canceled a second ship to be built by General Dynamics after the two sides failed to reach agreement on a fixed-price agreement that would give the Navy more control over cost growth. In April, he had canceled Lockheed's second ship for the same reason.

Each of the two companies was originally tapped to build two of the new class's first four vessels.

The cancellations prompted Congress to slash the Navy's request for $910 million to fund the LCS program in fiscal year 2008, and raised questions about the Navy's ability to reach its goal of a 313-ship fleet any time in the near future.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Andrea Shalal-Esa; editing by Tim Dobbyn)