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Oshkosh Looks North for More Military Vehicle Work

by: Matthew Potter
February 24, 2011

Category: Business Line, Canada, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, Events, logistics, Oshkosh Truck Corp, production program, Services, States, U.S. Army, Wisconsin | RSS 2.0

The market for new military support vehicles has been doing well lately. Nations like the U.S., the United Kingdom and other Allies who have sent troops to Iraq and Afghanistan have needed to invest in improving their fleets as well as restoring and upgrading existing systems. There has also been the growth of the Mine Resistant Ambush Protected (MRAP) market to protect troops against IED and mines.

One company that has been able to take advantage of this market has been Oshkosh (OSK) of Wisconsin. They have made heavy transport trucks for the U.S. military for several years but since 2008 they have won two major new contracts. First they were the victors in the contest to build new, lighter MRAP for use in Afghanistan with their MRAP-AT vehicle. The U.S. has purchased several billion worth of the vehicles and support. They also won the right to make the U.S. Army’s Family of Medium Tactical Vehicles (FMTV) which had been produced by BAE Systems (BAE:LSE) in Texas. The U.S. needs to build thousands of those to replace ones lost in combat or through hard use.

Oshkosh has been able to offset declines in their commercial business due to the overall world economic picture with these military sales. Unfortunately the MRAP business is winding down and the FMTV is not as profitable for the company as the Army chose them due to their very competitive price. This has led to reduction in profit as the commercial business has not yet fully picked up. So like many defense contractors Oshkosh is looking at overseas customers for more business.

One contract they are aggressively going after is a requirement for Canada’s new light tactical vehicles and trucks. Oshkosh owns a production facility in Canada and this will aid them if they do win the almost two billion dollar contract. One end result is that factory will be expanded and upgraded so that at the end of the military contract it will be better prepared to support production of other commercial and military vehicles.

As the U.S. and its Allies reduce or cap their defense spending Oshkosh if it wants to remain a major defense contractor for these types of systems will have to find other customers. If not once production goals have been met for the FMTV and MRAP-AT then they will be reduced to just supporting the vehicles with parts and modifications which will require a much smaller work force and generate less revenue.

Photo from abdallahh’s flickr photostream.

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