Filed under: Business Line, California, Companies, Department of Defense, Earnings, Esterling Defense Technologies, Events, logistics, production program, Services, States, U.S. Army, U.S. Marine Corps
Because of demand for certain items it can sometimes be easy for one company to dominate the production of it and control a large portion of the defense market for their product. With the contraction of the U.S. industrial base this has been happening more often with the U.S. military. Esterline Defense Technologies (ESL) is a good example of that with their combustible cartridge case and other products for artillery ordnance.
The U.S. military has used a lot of shells, bombs and rockets over the last nine years. Many of these use an advance case that consumes itself by burning up when it is fired. Esterline is the major supplier of this technology to ammunition manufacturers for the U.S. military. In the last several years it has earned over $300 million from these contracts. Manufactured at their facility east of Los Angeles the company also manufactures other specialty items for a broad variety of commercial and government applications.
Because their are certain things that only a military or government buys — such as large caliber artillery rounds — it allows one company to be able to dominate the market. The government is also willing to keep one supplier as long as the product meets requirements and is at a fair price. There are times when another contractor may be able to come in and seize part or all of the market if the original supplier gets too expensive. If the government buys the data rights to the product which is not always a given they do also have the ability to transfer the production to another contractor. The movement of the FMTV truck contract from Armor Holdings in Texas to Oshkosh (OSK) in Wisconsin last year is a good example of that.
With the fighting in Afghanistan to continue for the foreseeable future and the need of the U.S. to replenish and maintain their stocks of ammunition Esterling is well positioned to keep producing their combustible materials and finding a ready market.
Photo from The U.S. Army flickr photostream.