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Army Moves Ahead on Development Deals; Interim Work Dwindling

Oct. 18, 2013 - 05:15PM   |  
By PAUL MCLEARY   |   Comments
A convoy of Humvees and Bradley fighting vehicles maneuver into the training area at Fort Irwin, Calif.
A convoy of Humvees and Bradley fighting vehicles maneuver into the training area at Fort Irwin, Calif. (US Army)
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WASHINGTON — BAE Systems’ decision to shutter its Sealy, Texas, production facility and lay off 325 workers surprised industry officials, but BAE said dwindling Army vehicle orders and the end of some wartime-related work forced its hand.

The Oct. 10 announcement also made observers wonder if the Sealy move is a peek into the future of the Army’s vehicle industrial base, which will see work fall off drastically over the next two years before several vehicle decisions are scheduled to be made.

Still, fault for the closure isn’t totally with the Army. The line at Sealy focuses on wheeled ground vehicles, and with the end of mine-resistant, ambush-protected (MRAP) work and because BAE lost to Oshkosh Defense in 2009 on a $3 billion contract to build the Family of Medium Tactical Vehicles — which the Sealy facility had produced for 17 years — the work just wasn’t there.

That 2009 deal didn’t work out so well for Oshkosh, however. The truck maker underbid BAE by about 10 percent to win the work, but the low cost also meant the company made little profit off the contract, which the Army then canceled in 2012.

The announcement doesn’t take BAE out of the ground vehicle game, but its role as partner to Lockheed Martin in the Joint Light Tactical Vehicle (JLTV) competition will change.

Production was slated to be done in Sealy if the team wins the JLTV work in 2015, but with the plant’s closure the work would be moved to Lockheed’s Camden, Ark., manufacturing facility.

Kathryn Hasse, director of JLTV at Lockheed Martin Missiles and Fire Control, said “BAE remains a key partner with us on our JLTV team,” but with the shift in production locations, “the terms and conditions of the agreement will be modified” between the two companies.

Hasse wouldn’t elaborate on those new conditions, but said it is almost certain that some engineers who had worked for BAE at Sealy would come aboard at Lockheed and move to the Arkansas plant.

The company also will have to invest in modifications to the new plant to accommodate JLTV production, she said, but given that the next program milestone won’t come until 2015, the work would be done well before then.

So, defense industry executives ask: Is Sealy an outlier or the start of a trend?

“Slowly but surely the entire Army industrial base is running down,” said Loren Thompson, with the Lexington Institute. With MRAP work all but done, and Bradley and Abrams tank work ending by mid-2015 with no resumption until 2018 at the earliest, there remains the very real possibility of more shutdowns and thousands more layoffs.

“The heavy vehicle industrial base is right on the edge,” Thompson continued. General Dynamics’ Abrams tank plant in Lima, Ohio, and BAE’s York, Pa., facility, which does Bradley and M88 recovery vehicle work, are operating below capacity and face the end of production contracts by 2015. Meanwhile, industry waits for the Army to award the Ground Combat Vehicle, Joint Light Tactical Vehicle and Armored Multi-Purpose Vehicle contracts.

“The workforce is already ebbing away,” Thompson said, as second- and third-tier suppliers begin to look for more steady work outside of the defense industry.

“If we don’t maintain some core of ground vehicle and military rotorcraft capability, the Army is going to have a real problem” when it needs to start building next-generation vehicles toward the end of this decade, he added.

The rotorcraft market looks a bit different, with Boeing working on a variety of foreign contracts to sell dozens of variants of its iconic CH-47 Chinook helicopter to Libya, Saudi Arabia and Qatar.

Boeing officials recently said the company is preparing to perform a flight demonstration in Saudi Arabia, which is mulling the purchase of 24 Chinooks. Qatar is also interested in buying eight F models, similar to the twin-rotor helicopters the company produced for Canada, and Egypt is in talks to buy about six more helicopters.

Even though signatures on contracts are years away, the company recently inked a $4 billion, five-year deal with the US Army for 214 more CH-47Fs. The work will be completed in 2019, by which time the company hopes to have some of these foreign sales under contract to keep their base humming.

Further down the road, industry is looking at the potentially massive Joint Multi-Role (JMR) helicopter program, which would replace the Apache and Black Hawk platforms by the mid-2030s.

On Oct. 2, the Army announced that it was investing $217 million in the first phase of its ambitious JMR program, calling this first development stage the Future Vertical Lift (FVL) initiative.

Four teams each won $6.5 million awards to begin work on the initial technology demonstration. Teams led by Sikorsky, Bell Helicopter/Textron and newcomers AVX Aircraft Co. and Karem Aircraft will use government funds to supplement their own in-house investments to develop technology demonstrators.

In late fiscal 2014, the Army will downselect to two competitors who will then build platforms that will be readied for flight tests.

An Army spokesman told Defense News, “Future Vertical Lift is an initiative, not yet a solution,” adding that as the Army explores its options, the service is also “preparing for a potential analysis of alternatives to compare a new-build FVL solution to maintaining the legacy fleet and determine the best solution for each service.” ■

Email: pmcleary@defensenews.com.

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