?>

Alliant Techsystems Faces Double Dose of Bad News

24 January – Updated to reflect the loss of the Lake City contract would be a blow to the company instead of “will be”.

Over the last ten years the U.S. military has consumed large amounts of ammunition. This includes not only small arms and support weapons like machine guns and mortars but also larger and more sophisticated weapons such as tank rounds, artillery shells, aerial bombs and guided missiles. Alliant Techsystems (ATK) has become one of the largest suppliers of ammunition and other pyrotechnics to the U.S. military during this time.

Up to last year they had contracts to run two of the largest government owned plants involved in this process — the one in Radford, VA that manufactures nitrocellulose used as the basis for ammunition as well as the one in Lake City, MO which makes small arms ammunition.

Last year the Army awarded the contract for Radford to BAE Systems (BAE:LSE) in the spring. Alliant protested that decision and the Army agreed to revise the competition and conduct another source selection. In October the new contract bids were received and again BAE won. Alliant protested that decision too.

Unfortunately the Government Accountability Office (GAO) announced today that it had denied that protest upholding the award to BAE. Alliant will lose a key contract that it had had since 1995. BAE’s 10 year initial contract also has multiple five year options that could make the contract last until 2036. The value could be well over a billion dollars if all options are exercised and production at Radford remains fairly steady.

Alliant will also face a challenge this year for the Lake City contract as BAE announced it will team with ammunition manufacturer Olin (OLN) to form a team to bid on that one. The Lake City contract could be worth up to $200 million a year to the winner. With the knowledge used for their successful Radford contract proposal BAE and Olin should have a good chance of winning the Lake City one as well.

The loss of these two contracts would be a hard blow to Alliant as they form a decent portion of their revenue each year. They have already seen declines in revenues the last few quarters and this would continue that negative trend. In 2011 their total sales to the U.S. Government, primarily ammunition and explosives, was about $3.3 billion. In their annual report the company stated that they “derived approximately 15% of our total fiscal
sales from the military small-caliber ammunition contract at Lake City”. The loss could be made up if their were other contracts to win or demand for their other products would increase. Unfortunately with the fighting winding down in Afghanistan and budget cuts predicted this might be hard.

Alliant may have recognized that the future might get tough as they moved their headquarters from Minnesota to the Washington D.C. area. In this they followed Northrop Grumman (NOC) which left California. It places them nearer Congress and the Pentagon and will facilitate engagement. This should aid them in keeping work and perhaps gaining new efforts.

All defense contractors no matter what the size are facing the same problems that Alliant is. Cost pressure on the Defense Department will make them look at new providers who may offer the best price meaning contracts will be harder to keep. There will also be less contracts due to the retrenchment from the recent fighting and budget cuts. If the 1990’s when a similar decline in defense spending is a guide then some contractors will have to adjust or face converting to new markets or just merging with other companies.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

More Guided Weapons From Lockheed

The U.S. military has invested in and used a great deal of advanced guided weaponry since 9/11. This includes systems such as Hellfire anti-tank missiles, Excalibur laser and GPS guided artillery shells as well as a great deal of ordnance delivered from aircraft and Unmanned Aerial Vehicles (UAV). Aerial weapons included GPS systems like the Joint Direct Attack Munition (JDAM) which is a bomb with a guidance kit as well as the more traditional laser guided systems.

Lockheed Martin (LMT) a few months ago was awarded a contract by the U.S. Air Force for the production of Paveway Laser Guided Bomb (LGB) kits. This was a five year contact worth almost $500 million if all options were exercised.

Now the Air Force has exercised the first production option with a $134 million award for the production of the Paveway kits. The kit consists of a seeker and guidance unit as well as an air foil component that actually flies the bomb. The bombs rely on gravity and are not powered. They basically glide into the target homing in on a laser from either an aircraft or ground unit.

Since these attacks are carried out on individual houses or vehicles and the U.S. wants to minimize collateral damage as much as possible guided weapons are the primary attack option. The Paveway kit may be fitted to bombs of different sizes as well so as to allow better weaponeering and targeting options.

As the fighting in Afghanistan and Iraq winds down the demand for these types of weapons will also be reduced as they will not be used as much. The production of ordnance and ammunition has increased greatly over the last ten years and it can be expected to drop just as dramatically as the U.S. will need less of it.

For a company like Lockheed cut backs in one product line may be balanced out with other programs but there will be some companies that primarily produce ordnance that may be seriously affected.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Army to Pay General Dynamics to Recycle Ammunition

In the past armed forces would stockpile ammunition and munitions often using newer, more effective weapons first and allowing older designs to sit in bunkers until a time came to use them. The United States for example used up a great deal of their Vietnam era stocks during Desert Storm in 1991 especially aerial munitions such as smaller bombs and early cluster type weapons. The fighting in Iraq and Afghanistan has seen heavy use of newer, more precise weapons such as JDAM’s, advanced Hellfire missiles and others rather then more traditional unguided bombs and artillery shells. The U.S. has even gone so far as to introduce new “greener” small arms ammunition.

This means that older munitions need to be disposed off. The U.S. has had an aggressive program to do this over the last twenty years including heavy investment into chemical demilitarization of older Weapons of Mass Destruction (WMD). This also includes dismantling of rockets, missiles and shells and reuse if possible of their propellant and explosive charges.

In support of this effort General Dynamics (GD) was awarded the first option on a potential five year contract to support disarming munitions and ammunition ranging from 25 mm cannon shells to 106 mm recoilless rifle rounds. The initial option is worth almost $40 million and if all options are exercised it may reach a total value of $163 million.

The U.S. does this as part of their overall abatement program that includes cleaning up bases that store munitions, manufacturing facilities as well as disposing of excess stocks. During the Cold War both the Soviet Union and the U.S. built up large amounts of weapons that have been slowly dismantled and destroyed due to various treaties and the end of the tension in 1991. It is difficult work as modern propellants and explosives are highly reactive and dangerous. Last year two contractors died at Redstone Arsenal in Alabama when trying to test methods to defuel solid rocket motors from missiles and launch vehicles.

It is also work that companies like GD can benefit from for several more years as different weapons are withdrawn from service.

Photo from DVIDSHUB flickr photostream.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Northrop Grumman Delivers 150th Firefinder Shelter to the U.S. Army

Northrop Grumman Delivers 150th Firefinder Shelter to the U.S. Army
April 27, 2010

ROLLING MEADOWS, Ill. – Northrop Grumman Corporation (NYSE:NOC) has announced the on-schedule delivery of the 150th next-generation Firefinder radar shelter to the U.S. Army.

Firefinder is an integrated radar system that detects and tracks hostile mortar rounds, artillery shells and rockets, instantaneously locating their source. It can handle simultaneous fire at multiple locations, detecting and reporting positions on the first round and is suitable for rapid deployment missions. Firefinder is C-130 transportable, ground mobile on HMMWV vehicles, helicopter transportable and easy to move from one vehicle to another on the battlefield.

Northrop Grumman's Land & Self Protection Division is providing electronics upgrades to the Firefinder radar shelters under a $285 million indefinite delivery/indefinite quantity (ID/IQ) contract with the U.S. Army. A total of 50 Firefinder radar shelters are being upgraded for the Army as part of the ongoing radar system enhancement effort. The U.S. Marine Corps (USMC) is also in the process of upgrading its inventory of Firefinder radar systems with modernized radar shelters from Northrop Grumman.

"Our partnership with Northrop Grumman Corporation has seen the achievement of another significant milestone by the delivery of Firefinder Shelter Number 150," said Ted Hom, product manager Radars. "This system was fielded to the 3d Bn, 29th FA, 4th ID, Ft Carson, Colo. in support of the Army's Modularity Concept. The delivery of these Operation Central systems has enabled the U.S. Army and the USMC to introduce a much needed Electronic Upgrade to their fleets of AN/TPQ-36 and AN/TPQ-46 Radars as part of their sustainment and modernization programs necessary to support the warfighter and the war on terrorism. Northrop Grumman's transformation of the S-788 Lightweight Multipurpose Shelter (LMS) into a Radars Operations Central marked a significant milestone in the U.S. Army and USMC process of modernizing the TPQ-36 and 46 Radars. This new system provided the soldier with more operating space, a modern radar processor and the addition of a lightweight computer system which has greatly enhanced the radar's performance. I'm confident that shelter 150 will serve the Soldiers of the 4th ID and our nation with many years of outstanding service."

"Tobyhanna Army Depot is proud to be a member of the Firefinder team and to support Firefinder ATGs and shelters worldwide," said Col. Charles Gibson, the depot commander. "Tobyhanna personnel are dedicated to providing the finest C4ISR systems and support to our warfighters. Over the last several years, we have substantially increased the rate of production on these critical weapons-detecting radars by applying Lean Six Sigma techniques to our repair and overhaul processes."

"The delivery of our 150th Firefinder shelter represents a key milestone in the Army's effort to improve the operational performance, reliability and long-term supportability of the AN/TPQ-36 Firefinder system," said Pat Newby, vice president of Weapons and Sensors for Northrop Grumman's Land & Self Protection Division. "Thanks to these shelter electronics enhancements, Firefinder will continue to provide essential ground-based surveillance and weapons tracking capabilities for our nation's warfighters and international customers for many years to come."


###

Technorati Tags:
, ,



>