Pentagon rolls forward with Humvee successor
By RICK BARRETT | Milwaukee Journal Sentinel | Published: August 24, 2012
A competition to replace thousands of U.S. military vehicles, potentially worth billions of dollars, has heated up with the naming of Oshkosh Corp. as one of three firms awarded vehicle engineering and manufacturing development contracts.
The Humvee replacement program is important because there are few opportunities like it as the Pentagon prepares for up to $1 trillion in spending cuts over the next decade.
A workhorse vehicle that's served the military well for decades, the Humvee is due for a makeover.
At one point the Department of Defense planned to rebuild thousands of the trucks, which are used to haul troops and light supplies. But that plan was scrapped.
Now the focus is on Humvee replacements called Joint Light Tactical Vehicles, which are expected to have such features as advanced weapons systems, night-vision capabilities and diesel-hybrid engines that can run almost silent when necessary.
Thursday, Oshkosh said it was one of three vehicle makers awarded contracts, which are valued at $56 million to $66 million, to further develop Humvee replacements for the Army and Marines.
The company is competing with defense contractors Lockheed Martin Corp. and AM General Corp. for the Joint Light Tactical Vehicle program, which could result in years worth of work for the winning bidder.
"The potential for Oshkosh's defense business has certainly improved from yesterday," analyst Charles Brady with BMO Capital Markets said Thursday.
The Army and Marines have said they want to purchase 55,000 of the vehicles, which cost up to $250,000 each. Selection of the prime contractor for the initial seven-year contract, worth about $6 billion, is likely to take place during the summer of 2014, according to Brady, although the date and contract value could easily be changed.
The military wants the vehicles, but how many it can afford depends on the budget, he said.
With military spending on the decline, the competition for the business will be intense, with thousands of jobs at stake.
"This is the most visible, large (military vehicle) contract on the horizon. It's the one everyone has focused pretty hard on," Brady said.
Oshkosh already has a Joint Light Tactical Vehicle prototype that has undergone six years of development. Under the new 27-month engineering and development contract, the company will build 22 vehicles for the Army and Marines to evaluate.
If Oshkosh wins the contract to build thousands of Humvee replacements, initial production could begin in late 2015, said David Diersen, director of the company's JLTV program. Full production would begin in 2018.
Oshkosh and its suppliers employ thousands of people in the Fox Valley.
It's too early to say what impact the Joint Light Tactical Vehicle work would have on the company's employment, company spokesman John Daggett said.
Navistar left out
Navistar Corp., an Oshkosh competitor, was not chosen for the next round of vehicle prototypes. Navistar could remain in the competition for the final work, but analysts say its chances of success have been diminished from not winning one of the engineering, manufacturing and development contracts.
Oshkosh is a strong contender, said James Hasik, a defense industry consultant from Austin, Texas.
The other two bidders have production facilities that, without the JLTV work, have a dim future after about 2015, Hasik said.
Unless Congress and the White House can agree on a plan to reduce the federal deficit, Wisconsin stands to lose more than 11,000 jobs from military spending cuts scheduled to begin in January.
That's according to a study by a national manufacturing trade group, which says many of the job reductions could occur at big defense contractors, compounded by losses at hundreds of smaller companies that supply products and services to the defense industry.
Oshkosh has already said it expects to build fewer military trucks as the U.S. comes out of wars in Iraq and Afghanistan.
After Thursday's announcement, the company's shares closed at $25.30, up 54 cents.