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GD, Israel Renegotiate Troop Carrier Deal To Cut US Production

Jan. 11, 2014 - 03:45AM   |  
By PAUL McLEARY   |   Comments
An Israeli Namer is part of a Maneuver Battle Lab ground combat vehicle assessment at Fort Bliss, Texas.
An Israeli Namer is part of a Maneuver Battle Lab ground combat vehicle assessment at Fort Bliss, Texas. (US Army)
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WASHINGTON — General Dynamics Land Systems (GDLS) is renegotiating a 2011 contract with Israel that will likely include penalties due to budget-driven cuts in the number of heavy troop carrier kits Israel agreed to buy from the firm.

The Sterling, Mich.-based firm beat out BAE Systems and Textron Marine and Land Systems in October 2010 for rights to build chassis and main components for several hundred Namers, a heavy troop carrier based on Israel’s indigenous Merkava Mk4 main battle tank.

Under the eight-year deal, GDLS committed to delivering kits for some 386 vehicles through 2019 at a per-unit cost of approximately $730,000 based on full-rate production of 60 vehicles per year.

The two-part contract stated GDLS would invest in tooling and perform work at the US government-owned, General Dynamics-operated Joint Systems Manufacturing Center (JSMC) in Lima, Ohio, for an initial 110 vehicles, with firm price options for 276 more.

The Lima facility has been in the middle of a heated debate in the United States over military spending and sequestration, since it is the country’s main hub for the manufacture and refurbishment of the Abrams tank for both the Pentagon and foreign customers like Egypt, Saudi Arabia and Iraq.

At the time that the contract with Israel was signed, Israeli officials characterized the planned multiyear, US-based Namer production as a program that could surpass $800 million and trigger potential global sales for the Israeli MoD and GDLS, its selected strategic partner.

But US and Israeli sources said Israel’s latest five-year spending plan cuts US-based Namer production by more than half, with revised funding allowing for no more than 170 produced vehicles through 2017.

In preliminary talks with Israeli Defense Ministry officials, GDLS warned that restructuring the existing agreement would result in penalties of some $17 million, with unit costs estimated at just under $900,000 due to lost economies of scale. GDLS officials declined to comment on potential job losses at the Lima facility, referring all questions to the Israeli Ministry of Defense.

In a Jan. 31, 2011, interview, Yaron Livnat, then-director of Israel’s Tank Production Office managing the program, said the MoD contract — to be funded with annual US military aid — marked “the first joint mass production major platform program in our history.

“Right now, we’re focusing on the main body and major components, ... but even now, in the initial phases, we’re looking at a huge program ... with many options to expand our strategic partnership with GDLS,” Livnat said at the time.

Industry sources expect Israel’s MoD to release its revised request for proposals by early February.

At the end of 2013, GDLS had delivered seven Namer hulls, one of which has been fielded with Israel’s Golani infantry brigade, sources in Israel said.

An Israeli Defense Ministry spokeswoman said final approval of the IDF’s five-year plan is still pending, and therefore MoD could not comment on the prospective impact on the Namer program or its contract with GDLS.

At the height of its wartime production, the joint GD/government plant at Lima employed some 1,200 workers, churning out Abrams tanks for US and foreign customers, but with budget cutbacks and the end of most war-related work, the JSMC currently employs about 700 people.

The US Army has said it wants to stop Abrams production in 2016 and resume work in 2019 when it will start building its next-generation Abrams tank, which it is developing with General Dynamics.

Despite assurances to the company that Foreign Military Sales would be enough to keep the line warm during that break in tank production, company officials and the congressional Ohio delegation have said that foreign orders alone would not suffice. ■

Barbara Opall-Rome contributed to this report from Tel Aviv.

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