NAVY PICKS NORTHROP FIRM TO BUILD MINE-CLEARING SYSTEM FOR FLEET.

Byline: Evan Pondel Staff Writer

CENTURY CITY - Defense contractor Northrop Grumman said Tuesday it has received a three-year, $36.9 million contract to develop a mine-destruction system for the U.S. Navy.

The contract calls for Century City-based Northrop to produce a Rapid Airborne Mine Clearance System that protects the Navy's fleet from near-surface and floating mines. Aside from a revenue boost, the contract establishes Northrop's expertise in this area, said company spokesman Jim Stratford.

``This is also a big deal for the Navy,'' Stratford said. ``Mines are a very cheap weapon and a hazard to the shipping and travel industry.''

The contract's announcement arrives on the heels of several reports that TRW Inc. - a company Northrop's in the process of acquiring - is likely to sell its automotive business. Analyst say the sale of TRW's automotive unit was certainly drawing more response from Wall Street on Tuesday than the defense contract.

Northrop shares rose $3.64, or 3.05 percent, to close at $122.36, while TRW shares rose $1.18, or 2.1 percent, to close at $57.68 on the New York Stock Exchange.

``It's not the contract that's moving the needle,'' said David Gremmels, analyst with Thomas Weisel Partners LLC in Massachusetts. ``One of the sources of uncertainty about Northrop's acquisition was TRW's automotive unit.''

Now, with investors' fears somewhat allayed about TRW's automotive unit, Gremmels said Northrop's acquisition can proceed with fewer obstacles.

TRW is in advanced discussions with the Blackstone Group and Carlyle Group to sell its automotive unit for about $5 billion, reports said. The sale would be a bonus for Northrop because the company already planned to divest itself of the auto business upon completing the TRW acquisition by the fourth quarter.

``Northrop has always had the divestiture of TRW's automotive unit in mind,'' Stratford said.

As to whether Stratford believes the sale of TRW's automotive unit would help bring Northrop's acquisition to a close: ``Absolutely,'' he said.

In July, Northrop agreed to acquire TRW for $7.8 billion, creating the second-largest contractor in the nation. Bolstering Northrop's position as a strong contender in satellite communications and missile defense, the deal also ends TRW's 101-year reign as a pioneer in the automotive and aerospace industry.

Paul Nisbet, an analyst with JSA Research Inc. in Newport, R.I., said initially it was difficult to gauge whether Northrop's purchase of TRW was out of scope. With Northrop primarily interested in defense, TRW's automotive and aeronautical segments were viewed as extraneous.

``But it's certainly good news to hear about the possible sale of TRW's automotive unit,'' Nisbet said. ``They (Northrop) are undoubtedly looking for the best properties, hoping that overtime to realize a significant appreciation.''

The TRW transaction is a bold move for Northrop, which has acquired Woodland Hills-based Litton Industries and Newport News Shipbuilding in little more than 18 months. The deal's closure is contingent upon Northrop assuming more than $5 billion of TRW debt.