Advertisement

You will be redirected to the page you want to view in  seconds.

After Long Wait, a Turnaround For BAE’s Swedish Vehicle Arm

Oct. 25, 2012 - 04:35PM   |  
By ANDREW CHUTER   |   Comments
A Norwegian CV90 armored vehicle patrols in Afghanistan. Norway in June signed a $750 million deal with BAE to upgrade its CV90 fleet and purchase new vehicles.
A Norwegian CV90 armored vehicle patrols in Afghanistan. Norway in June signed a $750 million deal with BAE to upgrade its CV90 fleet and purchase new vehicles. (BAE Systems)
  • Filed Under

LONDON — Travel-hardened commuters here, describing the erratic arrival of public transport, can often be heard moaning that you can wait ages for a bus and then three will turn up at once.

It’s a sentiment that Tommy Gustafsson-Rusk, the president of the Swedish armored vehicles arm of BAE Systems’ Land and Armaments division, will have some sympathy with, although you are unlikely to hear him complain.

Armored vehicle manufacturers often experience famine-to-feast fluctuations in ordering patterns, and BAE’s business, formerly known as Hägglunds, has been no exception.

But, having waited since the French purchase of BvS10 all-terrain vehicles in 2009 for another major order to fill assembly lines at its Örnsköldsvik factory, the company has in 10 months secured three deals for tracked vehicles which, including support, approach $1 billion in value.

“This year has seen a turnaround in the company’s fortunes. The Swedish BvS10, Norwegian CV90 and U.K. Viking regeneration contracts will sustain us for several years,” Gustafsson-Rusk said.

The year opened with a $106 million Swedish order for 48 BvS10 all-terrain vehicles; got better in June, when Norway finally signed a much delayed $750 million deal for upgrading existing CV90 armored combat vehicles as well as buying new vehicles; and concluded this month with a $60 million deal to regenerate the British Royal Marines’ BvS10 Viking fleet after service in Afghanistan.

Executives at Örnsköldsvik said the Norwegian CV90 deal, in particular, was a huge fillip for the company after a difficult time.

A BAE house magazine article recently implied that Örnsköldsvik had built up “sizeable deficits” due to periods of low production at the plant.

The contracts secured since January will be carried out in a factory that has undergone radical restructuring over the past four years to better cope with the vagaries of ordering patterns, as well as cost cuts to compete with cheaper wheeled rivals.

The initiatives included halving the size of its premises at Örnsköldsvik, including the production area, cutting employee numbers from 1,400 to 750, outsourcing operations, becoming more reliant on suppliers, and sharpening production processes.

The new production regime has had the glitches removed in building the French BvS10s. Production speed on the French vehicles was fairly slow, and BAE executives said the CV90 order from Norway, which requires a series production start by early 2014, will be the acid test for the new processes.

The assembly time for a CV90 should be reduced from 620 hours to 246 hours. Company executives reckon they can further reduce that figure to about 200 hours.

Gustafsson-Rusk said the flexibility the company has introduced into the way it operates means “the 750 people we employ equals 1,100 under the old ways of doing things. We have less people, but are able to do more.

“We believe our ability to offer chassis from a new ‘hot’ production line optimized for flexibility and lean operations, plus our proven cost-effective approach to in-country turret integration, will ensure low risk and help us bridge the price gap between less capable but often cheaper wheeled options,” he said.

One armored vehicle analyst who asked not to be named said the Swedish operation’s prospects have markedly improved, thanks to the internal restructuring program and recent orders.

“They are now in a much better position, thanks to securing the Swedish and Norwegian orders, and the investments they have made in making the company leaner and meaner,” he said.

“Their business has always been dominated by exports, with the recent BvS10 order being their first deal with the local customer for over a decade,” he said. “On the plus side for them is the export market is showing signs of a trend back toward tracks, due to the greater mobility it gives. The downside, though, is they don’t appear to have much going on in the Middle East and Asian markets, where defense spending is rapidly growing.”

Just how successful the Swedish operation has been in closing that gap with increasingly capable wheeled vehicles may become apparent next year. Canada and Denmark are slated to decide between tracked vehicles such as the CV90 and wheeled contenders from General Dynamics and Nexter for sizeable programs.

The CV90’s other big upcoming opportunity is in Poland, where the military is looking to initially replace about 200 Soviet-era BMPs in an infantry fighting vehicle role starting in 2017.

Briefing reporters at the Örnsköldsvik plant, Gustafsson-Rusk said company plans include winning one of the three big contests to add to an order book totaling 7 billion Swedish krona ($1.05 billion).

Like other defense contractors, BAE’s Swedish vehicle arm is trying to better balance its work between new orders and support and services revenues. Gustafsson-Rusk said this year, support and services will account for about 50 percent of planned revenues, but as vehicle assembly work grows, the “more sustainable figure is around 30 percent and growing.”

The order revival in Sweden comes against declining fortunes for BAE’s wider armored vehicle business. The capability to build armored vehicles in Britain will virtually cease when a contract to supply Terrier combat engineering vehicles for the Army is completed. The U.S. military’s withdrawal from Afghanistan and increasing budget pressures have put BAE’s business in the sector into rapid retreat.

Before the flurry of new work, Hägglunds workers were looking at the tail end of a deal with the French military to supply BvS10s, and a build-to-print contract for parts of the armored cab for the Archer self-propelled artillery system, developed and purchased jointly by Sweden and Norway.

The last of the 53 all-terrain vehicles ordered by France recently departed Örnsköldsvik en route to a Panhard factory, where they will be completed.

There are options for further French purchases. But in the face of budget problems in Paris, nobody in Hägglunds appears to be counting on an order for more BvS10s.

More In Early Bird Brief Newsletter

Start your day with a roundup of top defense news.

Subscribe!

Subscribe!

Login to This Week's Digital Edition

Subscribe for Print or Digital delivery today!

Exclusive Events Coverage

In-depth news and multimedia coverage of industry trade shows and conferences.

TRADE SHOWS:

CONFERENCES:

Defensenews TV

  • Sign-up to receive weekly email updates about Vago's guests and the topics they will discuss.