Filed under: Australia, Business Line, Canada, Companies, Countries, Department of Defense, development program, England, Events, FMS, Holland, Israel, Japan, Lockheed Martin, Military Aviation, production program, Services, U.S. Air Force, U.S. Marine Corps, U.S. Navy, UAE
The F-35 “Lightning II” Joint Strike Fighter (JSF) will be used not only by the U.S. military to replace its aging F-16, A/V-8, F/A-18 and A-10 aircraft but also by many other NATO countries and allies. It is being purchased as a F-16 replacement by many of these and like the successful F-16 program will have manufacturing and parts co-share agreements with different international partners.
The delays and cost increases to the program have been well documented and these have caused some early planned users to question the financial sense of continuing the program. Many of these countries, though, have already contributed through development funds as well as already had their aerospace contractors sign contracts and agreements with Lockheed Martin (LMT) to produce parts for the aircraft which continues in its Low Rate Initial Production (LRIP).
Canada, the Netherlands and Australia have had and continue to have debates about their purchase of the advanced aircraft rather then existing systems like the F/A-18, Eurofighter, Rafael, SAAB Gripens and Russian alternatives. In Canada they are reviewing the whole cost analysis that had led to the decision to continue the purchase which could technically end it and look at other aircraft. That leads to editorials and articles like this one, “The Case for the Super Hornet As The RCAF’s New Fighter” from Canada or analysis in Australia such as this: “Politics first as white paper fails on big issues”.
At the same time the U.S. has been successful in adding Foreign Military Sales (FMS) of the aircraft most notably to Israel and Japan. There has also been interested expressed by other U.S. allies like the U.A.E.
The commitment of the foreign partners is somewhat critical to the whole program as a reduction in buy quantity will have a ripple effect on the whole program. Less purchased in total and annually will cause a cost increase for each aircraft and the whole program. The F-35 PEO, Lt Gen Bogdan, identified this risk in Congressional testimony in April. If somebody drops out the price the others pay will go up putting more pressure on their budgets and perhaps cause them to drop out too. This would then become a spiral causing issues for the U.S. and all of the other nations involved in the program.
Despite the issues with the aircraft over the last decade the U.S. remains committed to the program. Over 100 are on order and there is discussion to award a new 2 year production contract this summer for a further 60-70. Training is underway for both aircrew and maintainers of the U.S.A.F., Navy, Marines and allies. The big questions remain though about completing development, how many will be built, and who ultimately will operate the aircraft.
Filed under: Alliant Techsystems, BAE Systems, Business Line, Companies, Contract Awards, Countries, England, Events, logistics, production program, Services, U.S. Army
Two years ago the British based BAE Systems (BAE:LSE) was able to win away from ATK (ATK) the contract to run the U.S. Army’s Radford facility that manufactures explosives. ATK had had the contract to operate it for several years and due to the demands of the fighting in Afghanistan and Iraq the plant generated a great deal of revenue for the operator. It was a hard fought win due to a protest and there being multiple competitions to evaluate the different proposals.
With the current budgetary situation and the end of Iraq’s fighting along with the winding down of Afghanistan it could be expected that demand for the products at Radford may go down. Luckily for BAE the Army has just announced that they awarded the company a large contract to manufacture explosives primarily for artillery shells at the facility. This could be worth up to $780 million if all options are executed.
As the U.S. military returns from Afghanistan it will need to replenish stocks of munitions as well as continue building newer, more reliable one. Training operations will also need to be supported. While this means that demand may not be as high as before there will still be consumption of artillery and other shells which will require production of new stock at Radford.
Filed under: Business Line, Companies, Countries, development program, England, Events, Holland, Lockheed Martin, Military Aviation, production program, Services
The F-35 Joint Strike Fighter (JSF) program continues to be controversial. It is the largest defense acquisition program in history and will see the manufacture and deployment of 100’s of the advanced aircraft to the U.S. military and several allies across the world. One of the original and major customers is the U.K. which will replace its Harrier jump jet fleet with Lockheed Martin’s (LMT) aircraft.
Because the F-35 must equip the U.S. Navy, Air Force and Marine Corps there are different versions of the aircraft. Their is the F-35A optimized for the Air Force and use of fixed runways, the F-35B which has Vertical Take-Off-and-Landing (VTOL) capabilities and finally the carrier based F-35C. These will replace the F-16, AV-8 and F/A-18 respectively in the U.S. military.
The British utilize Harriers from ground bases as well as off of their aircraft carriers. They need to replace both missions. The Royal Navy is currently building 2 new aircraft carriers and originally the F-35B was the choice to use from these aircraft. That is also the current choice.
Unfortunately in the 2010 Defence Review the current Conservative government reviewed that decision and changed it to the F-35C carrier based version. It was related to the struggles the program has faced with schedule slips and cost increases. Now, though, that has been reversed again to the F-35B model. The estimated cost of these changes is around $160 million and further delays to receiving the aircraft.
The F-35 has faced problems with development and testing which has led to delays and slower then planned production. This has led some foriegn partners and customers to reevaluate their needs. Canada, for example, has now put their original production buy contract on hold and there are those in Holland who are questioning the whole plan due to cost growth. The U.S. continues to plug on with the program which is in Low Rate Initial Production (LRIP) while at the same time doing more testing.
The U.K. will continue its purchase for the carrier as options for other aircraft are very limited. It just will have to face further potential cost increases and delays associated with the program.
Filed under: Business Line, Companies, Contract Additions, Contract Awards, Countries, development program, England, Events, logistics, QinetiQ, S&T, Services
Qinetiq is a British company that was formed several years ago when the U.K. privatized parts of their Research, Test, Development & Engineering (RDT&E) support structure. This included labs, ranges and the employees who had formally been civil servants. Over the last 2 decades the British governments have been very aggressive about converting formally government positions and roles to private companies with a goal of cost savings. This was the opposite policy of the U.S. which had tried converting contractor positions to government ones in the past with the same goal.
Qinetiq due to the fact that it provides fairly critical services to the U.K. military through the testing & evaluation (T&E) services it provide signed a 25 year contract in 2003. This had a predicted value of over $8 billion if all parts were fully executed.
Now the U.K. government has announced that the last 5 year option has been executed. This option is worth about $1.6 billion.
These types of arrangements are not unheard of in other countries and the U.S. relies on contractors to provide many of the services Qinetiq does to the U.K. military. It is just they don’t normally transfer title of the facilities and management to the contractors. Often equivalent U.S. test ranges have contractors doing most of the work under oversight of the U.S. government.
In 2010 the company underwent a shake up in management as well as a re-organization. Qinetiq had expanded its business interests beyond the U.K. including work in America. Some problems caused the CEO to resign and the company to refocus on their core, original purpose.
Filed under: Business Line, Companies, Contract Awards, Countries, development program, England, Events, General Dynamics, HII, production program, Services, U.S. Navy
One of the largest contracts to be awarded this Fiscal Year was just given to General Dynamics (GD) submarine building arm, Electric Boat. The 5 year, nearly $2 billion contract is for design and development efforts supporting a new ballistic missile submarine.
This new boat will potentially replace the current U.S. Ohio class submarines and the Royal Navy’s similar Vanguards. Electric Boat is the primary producer of submarines for the U.S. Navy. While the Vanguard replacements will be built in the United Kingdom much of the design work will be done in the U.S. due to the fact they utilize a U.S. missile.
While there has been some reductions in the size of the U.S. nuclear arsenal with some of the Ohio class retired or re-designated there will ultimately still be a need for modernization of the design and new submarines. The U.S. is currently only building the Virginia class of fast attack submarines at Electric Boat and partner Huntington Ingalls Industries (HII).
Even with the potential for large cuts to the defense budget if sequestration takes effect these kind of contracts will continue to be awarded. Reductions in funding will limit how much is executed each year and potentially stretch out the work over more years then currently planned.
Filed under: Business Line, Companies, Contract Additions, Contract Awards, Countries, England, Events, Force Protection, General Dynamics, Oshkosh Truck Corp, production program, Services
Force Protection was one of the first and largest manufacturers of Mine Resistant Ambush Protected (MRAP) vehicles used by the U.S. and its Allies in Afghanistan and Iraq. For a time during the first decade of this century the company won a large number of contracts to build, service and maintain these vehicles as the U.S. quickly ramped up its inventory.
Over the last few years though it was a different story as the company faced struggles due to declining demand and the fact that the new MRAP for Afghanistan, the MRAP-AT, contract was won by Oshkosh (OSK). Eventually the company and its assets were acquired by General Dynamics (GD) who also has made MRAP and armor for these vehicles.
That does not mean that different military forces are not investing in MRAP just that the market has shrunk significantly. The U.K. just awarded GD a contract for 51 more Force Protection Foxhound vehicles for use in Afghanistan. The value is just over $73 million.
The U.K. already operates Foxhounds and in 2010 ordered 376 of them. They are made in the U.K. by the former Force Protection.
The military vehicle market still remains strong as the U.S. needs to replace and upgrade large amounts of vehicles from the 1980’s that have seen heavy use since 2001. They also need to fit the stocks of MRAP’s into their tactical formations and doctrine.
Photo from Think Defence flickr photostream.
Filed under: Business Line, Companies, Countries, Denmark, Department of Defense, development program, England, Events, Lockheed Martin, Military Aviation, northrop grumman, Northrop Grumman Corp., production program, Services, U.S. Air Force
As the Pentagon and Lockheed Martin (LMT) continue to negotiate the latest production buy for the F-35 Joint Strike Fighter (JSF) the program continues its path towards completing development, testing and begin fielding. With the recent, unexpected change in leadership for Lockheed one of the issues that has come up is the focus on the JSF program. On Tuesday the Assistant Secretary of Defense for Acquisition, Technology and Logistics (OSD(AT&L)), Mr. Frank Kendall, made clear that the company needs to concentrate on continued delivery of the aircraft and not worry about its short term business goals.
The program overall continues to make progress in different areas including completion of the Operational Utility Evaluation of pilot training Thursday. This means that the data collected through the process of teaching 4 pilots over the last six weeks will be reviewed by the Air Force Training Command (AFTC) eventually leading to approval of the program allowing formal training to begin.
In related matters a group of Royal Air Force and Royal Navy maintainers continue their training at Eglin AFB now supported by 2 British owned aircraft. The U.K. is one of the major overseas partners in the F-35 program and will also begin instructor pilot training this month.
In other Foreign Military Sales (FMS) related F-35 news both Japan and Denmark agreed to have companies there begin making components for the aircraft. As part of the overall program many of the other nations buying the fighter will contribute components from their domestic suppliers. In Japan up to 40% of their version of the aircraft will be produced domestically. Northrop Grumman (NOC), who produces fuselage and other assemblies for Lockheed, signed an agreement with a Danish composite manufacturer to provide items like doors, panels and skin assemblies. This is a follow on agreement to one signed in 2007.
The F-35 remains the most expensive acquisition program in history and a key part of U.S. modernization plans. Despite its struggles with schedule, testing and cost it continues to see investment in it by the U.S. and its partners. While there may be near term haggling about the price it is expected that the next production batch will be on order by the end of the year. As more aircraft are delivered training will continue to increase in amount and complexity.
Photo from MultiplyLeadership’s flickr photostream.
Filed under: BAE Systems, Business Line, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, development program, England, Events, Federal Budget Process, logistics, production program, Services, U.S. Army
The U.S. Army has not developed a new heavy armored vehicle since the 1980’s. They have continued to rely on the M1 Abrams tank and M2 Bradley Fighting Vehicle family for that mission. They did start a new system, Future Combat System (FCS), that would have used speedy, wheeled vehicles to ultimately replace the two venerable tracked systems but that was cancelled due to cost and schedule issues. The current systems have had to “make do” throughout the fighting in Iraq and Afghanistan.
That does not mean they haven’t spent billions on upgrading and refurbishing the systems. The current versions have received significant changes in armor, mobility and electronics. These has kept them capable of carrying out modern missions.
The Army just announced yet another contract to upgrade M2 Bradley’s assigned to the U.S. National Guard. BAE Systems (BAE:LSE), which through a series of mergers and acquisitions, now owns the rights to the Bradley originally designed and manufactured by FMC. That British company received a contract worth over $300 million to provide “enhanced survivability and interoperability” for vehicles belonging to a variety of states.
The company will see more contracts like this as the fighting winds down in Afghanistan and the Army resets their fleet of Bradleys to a common standard.
There is a new Ground Combat Vehicle (GCV) in development that will ultimately supplement or replace the M2. The Army is waiting to received prototype vehicles from different bidders to begin testing. BAE is one of several companies participating in that contest.
BAE like all of the other large defense contractors is facing challenging times as the U.S. and its Western European allies move to reduce their defense spending. Recent earnings were down compared to last year with a 10 percent drop in sales. Keeping existing programs like the Bradley active will only help it in the near future. If the U.S. does go ahead with the GCV and slowly replace the M2 BAE could lose several hundred million in revenue a year.
Filed under: Alliant Techsystems, Business Line, Companies, Contract Awards, Countries, England, Events, logistics, Military Aviation, production program, Raytheon, Services
The recent NATO led air campaign against Muammaf Gaddafi’s Libya was very successful. Using their advanced aircraft such as Eurofighter Typhoons, Dassault Rafales and others the European nations were able to support ground action by the rebels and support the removal of the North African dictator.
Of course this required the expenditure of quite a bit of air delivered ordnance and now the users are looking at purchasing new equipment to replenish their stocks. One of the contracts awarded to do this was to Raytheon (RTN) by the U.K. Ministry of Defence. This almost $100 million contract is for Paveway IV GPS guided bomb kits.
The Paveway adds a guidance section and fins to a normal bomb usually of around 2,000 lbs. The original Paveway used laser guidance homing in on a reflection of a beam but later ones like the IV utilize GPS guidance where the bomb flies to a coordinate utilizing satellite navigation.
Much of the kit will be made by British companies and Raytheon expects to fulfill the bulk of the order in 7 months.
The U.S. used prodigious amounts of small arms ammunition, 30mm cannon rounds and missiles like the Hellfire in Iraq and Afghanistan. This required substantial contract orders for these which allowed companies like Alliant Techsystems (ATK), who make ammunition and pyrotechnics, a good business. Unfortunately for the industry now that fighting is ending there will be some final orders to replenish stocks as Britain is doing and then there will be much less annual production requirement to support training and the expected minimal use in reduced operations.
Filed under: BAE Systems, Business Line, Companies, Countries, England, Events, production program, Services, U.S. Navy
UK Royal Navy Submarine HMS Astute returned to British shores earlier this month after a period of US Sea Trials – the most successful to date since it was launched in 1997. HMS Astute is the most powerful and advanced submarine that the UK has ever sent to sea and the first in its series of “Next Generation” machines. For almost five months she has been employed in extensive trials in North America which included trialling and firing her main weaponry for the very first time.
Brief History of HMS Astute
Astute was built at BAE’s Submarine facility in Northern England’s most famous shipbuilding town Barrow-In-Furness eleven years ago and finally launched after a delay of almost forty three months in 2007. The delay was caused in part by budgeting difficulties and issues concerning transferring funds to BAE Systems. She left her home of Barrow for good in 2009 and was finally sent to her new home port of Faslane the same year. She was given her HMS prefix in a ceremony that was presided over by HRH The Duchess of Cornwall.
A Unique Submarine
It is a submarine that will never need refuelling because it is powered by a nuclear reactor and its sonar can track ships that are as far away as 3,000 miles (or 4,380km). Similarly, her missiles have a target range of around 1,200 miles (or 1,930km). In a new technological breakthrough Astute has been built in such a way that it can be reprogrammed in mid flight to shoot missiles in another direction. Additional features on Astute are a digital optical mast system – this will replace the conventional and traditional periscope. It will offer low light and infrared capabilities. It is hoped that this will help the submarine to quickly capture and analyse data which can then be shared with other vessels.
The US Sea Trials
In February 2010 she underwent her first series of sea trials and dives, but it wasn’t until late last year that she began her stay with the US Navy’s Atlantic Undersea and Test Evaluation Centre which is situated in the Bahamas. This test situation was used to trial the submarine’s capability of firing Spearfish torpedoes as well as Tomahawk Missiles. Astute’s first Tomahawks were fired on 15th November 2011 into the US Navy’s Gulf Of Mexico range. All in all, four Tomahawks were fired in the direction of the Eglin Air Force Base – mainly to test for accuracy. Six Spearfish Torpedoes were also fired. These were the first salvo firings of a UK Submarine for more than 15 years. Earlier in February 2012, Astute came face to face with the USS Mexico in the Atlantic Undersea and Test Evaluation Centre for a series of staged war games in which the Heads of both the UK and US Navy met, in what was an historic and unprecedented occasion. Over the course of this tenure with the US she sailed some 16,400 miles (or 26,400km). The US Naval base in King’s Bay, Georgia was also visited and UK Naval Officers were impressed with what they saw. Astute is still very much in her trial period but it is hoped that this experiment and the help proffered by the US Navy will have strengthened and fortified its capabilities.
When it is officially commissioned it is hoped that it will undertake missions including anti-submarine and anti-ship missions, intelligence gathering and supporting land forces. Astute has, for now, returned to its base in Faslane for maintenance. It is hoped that later on during 2012 it will undertake more sea trials.
US Navy Official’s Impressed With Capabilities
Altogether she spent 77 days at sea and was inspected by 18 stars worth of US and UK Naval authority including America’s Chief Of Naval Operations ADM Jonathan Greenert, who has been in post since September last year. US Naval Officers were apparently “blown away” by the capabilities and strengths shown by Astute and felt that the Submarine had got tremendous capability and could only improve with time and more testing. The success of this test mission has not only strengthened the UK’s Naval Capabilities, but it has also shown the bond between the US and UK and their ability to work together in the name of defence if needed is stronger than ever.
Photo from U.S. Navy Imagery’s Flickr Photostream.
Filed under: Austal, Business Line, Companies, Contract Awards, Countries, DSME, England, Events, logistics, production program, South Korea
and the value of the contract is close to $1 billion.
Interestingly the ships will be built by Daewoo Shipbuilding and Marine Engineering (DSME) in South Korea rather then in a British yard. It is uncommon for a country like Britain to do this but price is becoming a major factor in such contracts and presumably the Daewoo bid was much lower then any competing ones. British companies will get support contracts such as those for design as well as test support.
DSME is one of the largest shipbuilders in South Korea and was recently awarded a contract for submarines to be delivered to Indonesia. It has great experience building cargo vessels, oil platforms and support ships. The RFA tankers will be similar to many commercial ships and other then unique Royal Navy communications equipment and defensive systems will have little or no military specific hardware.
The U.S. Navy has started buying Littoral Combat Ships (LCS) from Australian shipbuilder Austal but it is through their U.S. subsidiary and the ships are built in Mobile, AL. The Royal Navy could have pursued this course as well but it seems for auxiliaries the desire to make them at home is overshadowed by the need to keep costs down. This may portend more contracts like this for not only Great Britain but other Western countries as they look to spend their shrinking supply of defense dollars.
Photo from Official U.S. Navy Imagery’s flickr Photostream.
Filed under: Business Line, Companies, Congress, Countries, Department of Defense, development program, England, Events, Federal Budget Process, Kansas, logistics, Military Aviation, missile defense, production program, Proposal, Restructuring, Services, States
The Obama Administration announced its new strategy for the U.S. armed forces yesterday that will reflect future budget reality for the Defense Department. While no nation ever wants to state that its military size and missions are backed into a total budget number rather they claim to be buying the necessary capability at a certain price. The Obama defense team stood there yesterday and made that claim.
It really is though a combination of the two. The U.S. is under severe budgetary pressure. The Supercommittee failed which mandates a series of cuts to all spending including defense over the next several years. The DoD and Armed Services will have less money to buy things so our capability will be reduced. Similar to the Nineties with the ending of the Cold War but worse due to the current economic state and the overall size of the military.
The core change enunciated is the ending of the “Two War” plan which supposedly drove U.S. strategy since WW II. The U.S. had to have the ability to deal with a major war in Europe and a regional one. The new plan limits our ability to fighting one war and containing another. Conventional forces especially will be reduced to mean troops, aircraft, ships and heavy equipment.
That does not mean there are not opportunities as the hope is to use new systems such as UAV’s and better intelligence to make up for the lack of firepower. Special Forces will be used for regional conflicts rather then heavy brigades deploying such as they did to Iraq and Afghanistan. They will need equipment and force multipliers from across the spectrum.
The defense industry will also have to contract and adjust. There may not be any new heavy programs for several years. Aircraft will be limited to the F-35, the KC-46A and a new bomber of some sort. Carriers, destroyers and submarines along with amphibious ships will be cut and construction of new ones reduced. The Army and Marines will lose boots on the ground and the need to train, equip and support them. Big contracts will be fewer and competition for them much greater until the industry right sizes.
We will probably see many companies exiting the business. Either through M&A or just testing other markets to just disappearing. This will be hardware and support contractors. The DoD workforce will also shrink. Some communities will be hit hard as Wichita, KS is learning this week.
Congress will fight for some programs with each other and the Administration. The budget may not shrink as fast as planned and individual efforts may be saved.
All-in-all the next ten years will see a major adjustment to what the U.S. invests in its military and to the defense economy as a whole. Long term a path similar to the United Kingdom where conventional forces have shrunk precipitously over the last thirty years may be the best case. No matter what the U.S. defense budget will go down for a few years with a magnifying effect on the U.S. economy.
Filed under: Bell, Boeing, Business Line, Canada, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, England, Events, Federal Budget Process, Holland, India, logistics, Military Aviation, production program, Services, U.S. Air Force, U.S. Army, U.S. Marine Corps
Boeing (BA) along with its industry partner Bell Helicopter, part of United Technologies (UTX), produces two major helicopters for the U.S. military as well as export and the only tiltrotor in use today. These are the AH-64D Apache attack helicopter and the CH-47 Chinook heavy lift cargo helicopter as well as the unique V-22 Osprey used by the U.S. Navy, Marines and Air Force.
Boeing is looking forward to two major contracts involving the helicopters that will continue their production for the next several years.
First there is word that the AH-64 easily won a contest with the Indian Army to serve in limited numbers in attack and reconnaissance missions. The U.S. Army had earlier this year informed Congress of their intent to sell over twenty of the aircraft along with engines, Hellfire and Stinger missiles and other support. The estimated value of that contract was about $1.4 billion.
India, it turns out, conducted a “Fly Off” between the Apache and a similar Russian Mil-28 Havoc helicopter. Based on reports the AH-64 bested the Russian in most major areas including performance, armor, electronics and overall capabilities.
The AH-64 has seen a great deal of use in Iraq and Afghanistan providing fire support to ground troops using its Hellfire missiles and 30mm chain gun. The U.S. Army, Great Britain, and the Netherlands have all had successful deployments of the aircraft to Afghanistan. It has also been sold to countries like Israel, Egypt and Singapore.
Boeing has also submitted its proposal to the U.S. Army for the next multi-year production contract for the CH-47. The CH-47 like many major U.S. aircraft is able to negotiate five year contracts for deliveries rather then just one year as most programs as it is felt this saves money by allowing smoother production lines and the ability to order more parts and components at a time. The CH-47F is the current model in production under a 5 year contract signed in 2008.
The new contract is for a further 155 helicopters and could be worth several billion. The U.S. Army has invested heavily in CH-47 as their heavy lift capabilities are at a premium in Afghanistan’s high and hot conditions. Canada and the U.K. have also invested in the Chinook. Because this is a sole source contract the Army will be negotiation with Boeing on pretty much on price and schedule and not with multiple companies to provide the aircraft.
The U.S. has spent a great deal of money the last decade on Army aviation. With the coming decline in defense spending and the ending of the fighting in Iraq and Afghanistan that level of funding will not continue. Cuts to annual buy quantities will most most likely occur reducing Boeing’s sales to the U.S. military. This will be true for the AH-64 and V-22 as well. Foreign sales like the Indian Apache deal will make up some of the cuts to help Boeing keep its revenue and earnings up.
Filed under: Acquisitions, BAE Systems, Business Line, Companies, Countries, Department of Defense, England, Events, Force Protection, General Dynamics, logistics, Navistar, Oshkosh Truck Corp, production program, Restructuring, Services, U.S. Army, U.S. Marine Corps
In a major shakeup of the U.S. armored vehicle industry General Dynamics (GD) announced late yesterday that it intends to acquire Force Protection (FRPT). GD is one of the largest defense contractors in the United States and makes a diverse product line including the Stryker wheeled combat vehicle, submarines, C4I systems and other defense related systems. Force Protection came to the fore in the middle part of the last decade as a successful provider of Mine Resistant Ambush Protected (MRAP) vehicles used by the U.S. and its Allies in Iraq and Afghanistan.
GD will pay about $5.52 a share for the South Carolina based company for a total cost of around $360 million. The transaction still needs to go through all of the necessary shareholder and Government wickets but GD hopes to close it out by the end of 2011.
Force Protection is a good example of the boom-and-bust aspect of the defense industry. They were early producers of MRAP vehicles selling quite a few to select customers before in 2004-2005 Congress and the DoD decided to invest in thousands of the heavily armored vehicles. MRAP were seen as the best counter to the mine and Improvised Explosive Device (IED) threat in Iraq and Afghanistan that were causing hundreds of casualties among U.S. troops traveling in their support vehicles which tended not to be heavily armored.
MRAP were bought initially to equip engineering units responsible for removing these threats but then became standard tactical vehicles. Hundreds were purchased from a variety of suppliers including Force Protection, Navistar (NAV), BAE Systems (BAE:LSE) and other companies across the globe. Factories sprang up in South Carolina, Mississippi and other states to produce them. The U.S. used rapid acquisition to buy the MRAP, spares and logistical support and by 2007 deaths were much reduced.
Force Protection’s earnings and stock mirrored this boom going up to a high in 2008 in the mid-$20 range. Unfortunately at a certain point the U.S. had purchased all that it needed especially of the first generation MRAP and by the end of 2008 Force Protection was struggling to make a profit and its stock had dropped below $10.
The company did not win contracts for the new MRAP vehicle being purchased for Afghanistan losing out to Oshkosh (OSK) for the MRAP-ATV contract. It had bid on some other work like Australia’s and Canada’s new armored vehicles but those contracts are yet to be awarded. It did in 2010 win a contract to build vehicles for the U.K. worth a substantial amount.
The acquisition by GD reflects the changing market that currently exists. With defense cuts coming it will be hard for the U.S. to support multiple suppliers for this product. GD gains manufacturing capability and staff who will make money supporting their existing vehicles and will help GD with the design and production of new systems.
It can be expected that there will be an uptick in M&A with mid-level companies like this that will see limited markets. The U.S. Government has made clear that it is not in favor of the bigger defense contractors merging as happened in the Nineties but the cut backs will see many smaller corporations disappear either changing markets or being absorbed by their competitors.
Filed under: Business Line, Companies, Countries, England, Events, ISR, IT, logistics, Press Releases
UK MoD’s JAGO Receives `Top 5` ISR Award
Aylesbury: October 31st, 2011 – The DataMan geographic system, developed by the UK MoD’s Joint Aeronautical and Geospatial Organisation (JAGO), has been recognised as one of this year’s Top 5 programmes and innovations in the ISR (Intelligence, Surveillance and Reconnaissance) community. At the C4ISR Journal’s Annual Conference & Awards Ceremony, held on October 28th in Washington, DC, DataMan won the Network Systems Award. The Top 5 are selected from five categories; Platforms, Sensors, Organisations, Innovations and Networks Systems.
DataMan is connected to the UK military’s secure network in Afghanistan and delivers a common geospatial picture, via a secure online browser called a Geoviewer. It brings together a huge range of otherwise disparate data from multiple sources, the common factor being location.
In March 2010 it was successfully deployed in Afghanistan by JAGO, operated by 42 Engineer Regiment (Geographic) and, within nine months, was receiving over two million hits per month from a wide range of users throughout the command chain. For the first time, JAGO is able to ensure that everyone, from geospatial analysts to patrols on the ground just requiring a map, are referring to the same, accurate pool of current information and intelligence. The system is powered by Esri’s ArcGIS, a standards-based COTS (SCOTS) geospatial information system. Esri UK’s role in supporting JAGO in DataMan’s development was also recognised as part of the Award.
Ben Iannotta, Editor of C4ISR Journal, stated the reason for DataMan’s nomination, which was based around its rapid acquisition and simplicity. “The ability for troops to view information from multiple sources in a geospatial context is crucial for their decision making and JAGO and Esri UK figured out how to provide this capability, quickly, by using existing software as much as possible. They innovated, but, with the discipline not to reach too far.”
DataMan currently integrates over than 300 layers of data including information and intelligence from satellite and aerial reconnaissance, ground patrols and partners working in the same regions. Information that was previously held by external organisations in spread sheets – for example, lists of medical facilities in Afghanistan – can now be loaded once into DataMan, visualised in a geographic context and made accessible to all units and partners working in the vicinity.
“This significant award underlines both JAGO’s foresight in developing DataMan, and its achievement in bringing this new capability so quickly into theatre where it has been so well received,” commented Budgie Dhanda, General Manager, Defence & National Security, Esri UK. “Esri UK is extremely proud to support JAGO, and see their investment in ArcGIS software being so successfully exploited to deliver DataMan, providing information superiority for our armed forces.”
Filed under: Business Line, Canada, Companies, Contract Additions, Contract Awards, Countries, Department of Defense, development program, England, Events, General Dynamics, Lockheed Martin, logistics, production program, Proposal, Services, U.S. Army
Following up on Canada’s decision to award General Dynamics (GD) a contract to upgrade their existing fleet of LAV III armored vehicles two more major contracts were announced this week by the U.S. and United Kingdom related to their existing vehicle systems. While there are new armored vehicle programs in development the trend right now is to continue to procure and upgrade existing ones.
First the U.K. Ministry of Defence announced that they had awarded Lockheed Martin (LMT) a contract to upgrade their Warrior Infantry Fighting Vehicle (IFV) personnel transports. The Warrior is similar to the M2 Bradley and did see heavy use in Iraq. The goal of the over $1.6 billion contract is to extend the life of the Warrior out beyond 2040. The work will be done in Britain at the Lockheed facilities there. The upgrade program will add armor, new weapons and improvements to the turrets.
General Dynamics in the U.S. also received a production contract for more Stryker Interim Combat Vehicles (ICV). The Stryker is a wheeled armored vehicle that comes in different versions including troop transport, mortar, ambulance and anti-tank vehicle. It was originally planned to be a bridge between the current heavy armored force of M1 Abrams tanks and M2 Bradly IFV until the new Future Combat Systems (FCS) program delivered its family of vehicles. The FCS was cancelled in 2009. The Stryker has been used in Iraq and Afghanistan and this contract worth about $350 million is for a further 177 vehicles with improved armor and double hull to provide better protection against IED and mines.
The U.S. is working on a M2 replacement called the Ground Combat Vehicle (GCV). This is in the early stages of development with two EMD contracts recently awarded. Due to a protest by one of the losing bidders the program is on hold. Canada and the U.K. have decided for now to invest in upgrading the capabilities of their existing systems rather then develop a new one. The GCV and these different upgrades reflect the experience of fighting in Iraq and Afghanistan with a focus on better armor, improved weapons and networked capability.
With the withdrawals from these countries there should be a decline in investment in new systems and the manufacturers will have to look to other sources for contracts. The work though upgrading and “resetting” existing systems should be available over the next 5 years or so.
Filed under: Acquisitions, Boeing, Business Line, Cobham Defense Electronic Systems, Companies, Countries, Department of Defense, development program, England, Events, General Dynamics, Industry Analysis, IT, Lockheed Martin, logistics, MDA, Military Aviation, northrop grumman, Northrop Grumman Corp., production program, Raytheon, Restructuring, Services, training
In yet another M&A action in the defense industry British contractor, Cobham plc (COB:LSE), has agreed to sell its Analytic Solutions group to Parsons Corporation. The transaction is estimated at about $350 million.
Sparta was formerly a private company started in 1979 that provides SETA support as well as technical products and services to the U.S. defense and intelligence business sector. The company was acquired by Cobham a few years ago. Foreign defense contractors, especially those from Great Britain, had grown their presence in the U.S. defense market in the last decade through mergers, acquisitions as well as winning some contracts. Due to the rapid expansion of the defense budget post-9/11 the market was their for them to provide competition to the U.S. domestic industry.
Sparta provides design, development, fielding and sustainment support for ballistic missile defense systems primarily working through the Missile Defense Agency (MDA). It also supports tactical weapon systems especially in the area of logistics as well as network-centric warfare operations. Sparta also supports the intelligence community through developing software and hardware tools and operating computer networks and systems.
Parson’s is about a $2.7 billion engineering support company that not only provides defense services but also civil efforts across the globe. These include engineering and construction, transportation and infrastructure support. Many of their efforts in defense have synergy with Sparta’s but they provide some that are different such as range and training support. Parson’s revenue recently peaked in 2008 and is now about $700 million less then that year. Stock price and Net Operating Income though have gone up steadily though.
If the U.S. defense budget does see major cuts it might be harder for the U.K. and other non-U.S. companies to sustain their current level of revenue. The pressure to always choose a domestic provider will be high on the U.S. Defense Department and the Services. Cobham could also be looking at the market and believing that what Sparta provides may be an area of shrinkage or more competition and now has decided to focus on more core assets. Sparta formed one of nine business units in the company. Last year the company had revenue of about $3 billion.
If the expected decline in defense spending does occur then the U.S. defense industry may see major consolidation as happened in the 1990’s though M&A as well as companies moving out of the sector. The government reportedly has made it clear that they would not like to see any of the big 5 defense contractors (Boeing (BA), Raytheon (RTN), Lockheed Martin (LMT), Northrop Grumman (NOC) and General Dynamics (GD), who are the primary hardware providers merge as did happen in the 90’s.
Northrop Grumman Awarded Production Contract to Supply Navigation Lights Shapes and Sounds System for Next-Generation U.K. Aircraft Carriers — Press Release
Filed under: Business Line, Companies, Contract Additions, Contract Awards, Countries, England, Events, Northrop Grumman Corp., Press Releases, production program
Northrop Grumman Awarded Production Contract to Supply Navigation Lights Shapes and Sounds System for Next-Generation U.K. Aircraft Carriers
LONDON, October 12, 2011/PRNewswire/ —
Northrop Grumman Corporation (NYSE: NOC) has signed a full production contract for the Navigation Lights Shapes and Sounds (NLSS) signaling system for the Royal Navy’s next-generation Queen Elizabeth Class Aircraft Carriers. The contract was awarded to Northrop Grumman’s Sperry Marine business unit by the Aircraft Carrier Alliance, an industrial alliance between the UK Ministry of Defence, BAE Systems Surface Ships, BAE Systems Integrated System Technologies, Babcock Marine and Thales Naval.
Northrop Grumman’s Sperry Marine business unit will build and deliver the complete NLSS system for the new aircraft carriers. The system has been designed by Northrop Grumman together with its technology partner Oxley Developments and includes an innovative solution for navigation and signal lights plus control of ships’ audible signaling equipment.
The system includes 47 lights utilizing state-of-the-art LED technology to ensure that it is night vision-friendly. This reduction in interference with night vision systems, coupled with an increase in service life, operational redundancy and survivability, were the key factors in the choice of LED technology.
“This innovative approach will meet the carrier’s navigation light and sound system requirements efficiently and cost-effectively,” said Alan Dix, managing director of Northrop Grumman Sperry Marine. “Our proven automation technology will last longer and be more redundant.”
The NLSS control system is based upon Northrop Grumman’s standard products using network-based Commercial-off-the-Shelf (COTS) industrial automation technology. International regulation and signaling requirements are met in the NLSS by using pre-programmed commands from touch screen workstations with full status and diagnostic indication.
Deliveries will commence in 2012 as Northrop Grumman has already completed the initial design phase of the contract.
Northrop Grumman is already delivering the Integrated Navigation Bridge System, Inertial Navigation System, Navigation Data Distribution System and the Warship Electronic Chart Display and Information System (WECDIS). Based on the company’s advanced VisionMaster FT(TM) ship navigation technology, WECDIS will integrate all the ship’s navigation sensors and systems into a modern, efficient, ergonomic network of multifunction workstations to meet operational requirements.
Northrop Grumman Sperry Marine is a business unit of Northrop Grumman’s Naval and Marine Systems Division. Headquartered in Charlottesville, Va., and with major engineering and support offices in New Malden, United Kingdom, and Hamburg, Germany, it provides smart navigation and ship control solutions for the international marine industry with customer service and support through offices in 16 countries, sales representatives in 47 countries and authorized service depots in more than 250 locations worldwide.
Northrop Grumman is a leading global security company providing innovative systems, products and solutions in aerospace, electronics, information systems, and technical services to government and commercial customers worldwide. Please visit http://www.northropgrumman.com for more information.
Filed under: Business Line, Companies, Countries, development program, England, Events, Press Releases, Satellites, space
COM DEV USA wins military contract
EL SEGUNDO, CA, Sept. 29, 2011 /PRNewswire/ – COM DEV USA, LLC, a subsidiary of COM DEV International Ltd. (TSX: CDV), today announced that it has been awarded a contract to supply equipment for a military communications satellite. Valued in excess of US$5 million, the contract is a follow-on order for an additional flight set of equipment on a satellite program for which the Company is an incumbent supplier. COM DEV USA will be providing filters, diplexers, ferrite devices and switches for the satellite. Work on the contract will be carried out at the Company’s facility in El Segundo, California with completion expected by the end of fiscal 2012.
“When COM DEV entered the US military satellite communications market in 2008, our stated intention was to be the tier two supplier of choice for a full range of passive microwave devices into that market. Being the incumbent on a number of continuing milsatcom programs has given us the opportunity to demonstrate ourselves as an outstanding supply chain partner to the prime contractors in this market,” said Dan White, president of COM DEV USA. “More importantly, our performance on these programs has resulted in continuing contract awards, and we are grateful for the confidence our customer continues to show in us.”
Commenting on this contract award, Michael Pley, CEO of COM DEV International said, “Even as new government programs are delayed by spending restraint, our position as the incumbent supplier on a number of continuing legacy satellite programs, coupled with our demonstrated ability to deliver value to our customer, is providing our US based business with a significant and steady flow of work, which we expect will continue well into the future.”
About COM DEV
COM DEV International Ltd. (www.comdevintl.com) is a leading global provider of space hardware and services. With facilities in Canada, the United Kingdom and the United States, COM DEV manufactures advanced subsystems and microsatellites that are sold to major satellite prime contractors, government agencies and satellite operators, for use in communications, space science, remote sensing and defense applications. COM DEV’s majority-owned subsidiary, exactEarth Ltd., provides satellite data services.
This news release may contain certain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from results indicated in any forward-looking statements. The Company cautions that, among other things, in view of the rapid changes in communications markets and technologies, and other risks including the cost and market acceptance of the Company’s new products, the level of individual customer procurements and competitive product offerings and pricing, and general economic circumstances, the Company’s business prospects may be materially different from forward-looking statements made by the Company.
The triangular logo and the word COM DEV are each registered trademarks and the property of COM DEV Ltd. All rights reserved.
Filed under: BAE Systems, Boeing, Business Line, Companies, Congress, Contract Additions, Contract Awards, Countries, Department of Defense, England, Events, Federal Budget Process, FMS, General Dynamics, Lockheed Martin, Military Aviation, production program, Proposal, Restructuring, Services
As the big defense contractors continue to restructure themselves and their workforces for what is expected to be a period of decline in spending more layoffs were announced this week. The pressure too from the U.S. and other governments to be more price conscious is also affecting decisions related to the size of overhead and support employees.
Many of the major U.S. corporations have already announced plans to reduce their overall number of employees including General Dynamics (GD), Boeing (BA) and Lockheed Martin (LMT). Despite all three having strong sales and many major programs they feel that it is best to begin creating a leaner overall structure.
Lockheed followed up its earlier announcement of eliminating 1,500 jobs in its Aeronautics unit which builds the F-35 Joint Strike Fighter and the C-130 transport with word that it has already cut 540 of them. This includes over 200 at its Georgia plant making the C-130 and F-22 fighter. This is about 2.5 percent of the workforce at that facility.
In a bigger move British defense giant, BAE Systems (BAE:LSE), said that it would plan on reducing its workforce by about 3,000 positions. Most of these would be related to aircraft production where the Eurofighter Typhoon is near the end of its production run. Most of the original European customers have ordered all of that aircraft that they plan to buy leaving it needing Foreign Military Sales (FMS) customers to keep the line going beyond the next decade.
The Typhoon is being considered by India and potentially Japan for their new fighter but it is one of many that is being bid and price pressure is very strong for these deals making it hard to predict a winner.
BAE Systems has enjoyed a strong decade as it has grown in the U.S. market as well as supplying a British military involved in Iraq and Afghanistan. Now the U.K. is trying to reduce its overall spending which will seriously affect its defense spending while the U.K. has left Iraq and will leave Afghanistan with the U.S. in the next few years. The U.S. defense budget will also be reduced limiting further growth in that market.
BAE is one of the largest employers in the U.K. and these job losses will be a blow to that country’s economy and well being. The announced cuts represent almost 10 percent of their workers in that country. Earlier this year BAE had already began to make smaller cuts related to specific programs. This large one seems to be an adjustment to what is perceived as plans for the British Government’s future spending proposals.
As defense budgets decline it won’t only be contractor positions eliminated but also civil service and military as well. A large amount of money goes to these types of jobs and the quickest way to save is to cut back there. At a time when the U.S. and European economies are still struggling with higher then normal unemployment these types of moves will not help but must occur if budgets are to be balanced.
Filed under: Australia, Boeing, Business Line, Companies, Contract Additions, Contract Awards, Countries, D'Assault, Department of Defense, development program, England, Events, Holland, India, Japan, Lockheed Martin, MiG, Military Aviation, production program, Services, U.S. Air Force, United States
Currently there are two major fighter contests on-going as Brazil and India work to consider a new advanced fighter for their defense needs. Now it has been reported that Japan is interested in also starting a competition to add a later generation aircraft to its fleet of F-15J fighters. Sometime this month the country will want bids for 40 new aircraft.
In Brazil the discussion seems to be between the United States’ F/A-18 made by Boeing (BA) and the French company Dassault Rafael fighter. That contest continues to be delayed as Brazil faces some economic issues and re-thinks its commitment to spending so much money on defense items. One component of the contest that is key is the construction of manufacturing facilities in Brazil and the transfer of technology to help the South American country improve its aerospace industry.
In India the contest has reached a point where they downselected to only two bidders both European. After looking at proposals from Boeing, Lockheed Martin (LMT), MiG, Eurofighter and Dassault only the last two were chosen to proceed in the contest. The decision was a blow to the the American bidders as they had hoped this contract would offset potential reductions in U.S. defense spending.
Now the reports are that Japan will receive bids from Boeing, Lockheed and Eurofighter for their requirements. The Lockheed F-35 Joint Strike Fighter (JSF) is considered the front runner despite its cost and the current schedule issues the program is facing. This is primarily due to its more stealthy qualities over the earlier generation fighters.
The F-35 is in development and low rate production for the U.S. military, the U.K., Netherlands, Canada and Australia. Other foreign partners include Norway and Israel. The addition of Japan to the program would not be a big leap although they expect that the jet they order in the next few months would be in service by 2016. JSF production should be ramping up to higher quantities by then but any major cuts to the U.S. defense budget may affect production rates and quantities. If the JSF cannot meet the Japanese schedule they may end up considering one of the other options.
Filed under: Boeing, Business Line, Companies, Contract Additions, Contract Awards, Countries, England, Events, logistics, Military Aviation, production program, Services
The fighting in Afghanistan by the U.S. and its NATO allies has required large amounts of helicopters and vertical lift. Men and supplies need to be moved around and this is the easiest way in a country that has limited roads and facilities. The conditions which are very stressing on aircraft due to the altitude and temperature placing a premium on performance. This has led to the use of very large helicopters such as Boeing’s (BA) CH-47 Chinook twin rotor heavy lift aircraft.
The U.S. Army especially has relied on the Chinook as it has little if no internal fixed wing cargo assets for a variety of reasons that have existed over the last sixty years since the U.S. Air Force came into being. The demands of the mission have also seen major allies such as Canada and the United Kingdom invest in the Chinook which has seen major upgrades over the last decade of fighting as have all of the U.S. rotary wing platforms due to the demands of the war against terror versus a fight with a conventional enemy.
As part of this the United Kingdom’s Ministry of Defence just announced a further order for Chinooks. They have issued a contract to Boeing worth over $1.6 billion for 14 more of the helicopters. This will increase the British fleet to 60 of the versatile systems.
Boeing is obviously happy about the deal as they need them to offset any future declines in U.S. defense spending although the large aerospace and defense contractor has several programs that should continue over the next few years. These include the KC-46A aerial tanker, the V-22 aircraft as well as the Chinook and AH-64 Apache attack helicopter. There is the distinct possibility though of cuts to the number that the U.S. military will buy as well as reductions in annual buy quantities.
Foreign Military Sales (FMS) either through the U.S. government or directly to allied nations will help keep Boeing’s production lines going and maintaining revenue and earnings. Competition for available deals will be great but Boeing has the advantage with something like the Chinook in that there is limited competition from European providers.
Filed under: Business Line, Companies, Contract Awards, Countries, development program, England, Events, IT, Protest, Raytheon, Restructuring, Services
In 2010 Raytheon’s (RTN) earnings were reduced due to the decision by the British Government to cancel a border security database program that the Massachusetts based company had been contracted to build for the European country. The contract had been awarded by the previous Labour government and had a goal of keeping track of everyone entering or leaving the country. In the first quarter of this year Raytheon took a charge of about $80 million due to winding down of this contract.
The contract was not a small one valued at over $1 billion and its cancellation was not only a blow to Raytheon’s bottom line but also to there ability to grow this area of their business. It was not a traditional area for the company and success here potentially would have led to much greater opportunities with other governments interested in investing in the same capability.
Now Raytheon has announced that they are suing the U.K. for over $750 million due to unlawful termination and for damages. If they are successful they will recover most of the money they were due to gain by carrying out the contract.
In the United States contracts may be terminated for two reasons: cause and needs of the government. If for cause which is usually non-performance then the contractor is not guaranteed any money related to the termination but these are negotiated. If for needs of the government then termination costs must be paid. Normally these are identified up front so the government will know what they are and usually are based on buying material, paying for work not billed yet and for shutting down facilities.
In this case Raytheon is claiming unlawful termination and is due damages. The company’s believes that there product met the U.K.’s requirements as they were aware of them and thus they were performing. They said the customer was not clear on the requirements and it would be hard to claim they were non-performing when they had not metrics to measure against.
If Raytheon wins some or all of this money it will clearly help there future revenue in the short term. Obviously the suit will be first cleared by a Court or arbitrator and then the damages calculated. It could still be zero if the ruling body agrees with the U.K. government or it could be some amount up to $750 million.
No company likes to lose a contract especially if they feel they lost it for the wrong reasons. This is why there is a protest process and suits like this. The end result will most likely be a negotiated settlement unless the U.K. can prove that Raytheon clearly understood the contract’s requirements and metrics.
Filed under: BAE Systems, Business Line, Companies, Contract Additions, Contract Awards, Countries, development program, Editorial, England, Events, missile defense, production program, Services
Fresh off the first firing of the Sea Viper air defense missile from the Type 45 Destroyer, HMS Daring, MBDA was awarded a long term support contract for the system. Sea Viper utilizes the joint Ango-French-Italian company’s Aster 15 & 30 missiles. This is the primary armament for the new British fleet air defense ship.
The firing comes three years after the ship was commissioned and represents a major milestone for the program. The Sea Viper is the result of the Principal Anti-Air Missile System (PAAMS) developed by The multi-mode radar, Sampson, that supports the missile is made by BAE Systems (BAE:LSE) for the Royal Navy. Sea Viper includes the Aster missile, Sampson radar and the vertical launch canister system. The Type 45 is similar to the AEGIS missile destroyers and cruisers utilized by the U.S. Navy for self, air and missile defense.
MBDA’s support contract is worth about $270 million over the next six years. So far two ships have been commissioned with HMS Dauntless joining the Daring. Three others are under construction with a sixth planned.
The history of the class demonstrates what happens to many modern weapon systems where the development time for different components are not even. In this case the radar and hull were ready well before the missile and for a time the ships were limited to their gun armament. The Sea Viper is also not unique in having teething problems as many modern missiles have taken longer then planned.
Photo from Bob the courier’s Flickr photostream.
Filed under: BAE Systems, Business Line, Companies, Congress, Contract Additions, Contract Awards, Countries, Department of Defense, development program, Earnings, England, Events, Federal Budget Process, Military Aviation, Northrop Grumman Corp., Oshkosh Truck Corp, production program, Restructuring, Services
As the large defense contractors continue to post their results with most of the large U.S. companies reporting a fairly good quarter one of Europe’s two largest defense suppliers also announced. Unfortunately BAE Systems (BAE:LSE) did not do as well and is continuing to make preparations for a downsizing of its workforce.
The company put out an update prior to their upcoming annual meeting that made clear that 2011 will see further reductions in defense sales for this year. Much of this is due to the reduced size of the British military and its operations due to the planned strategic reorganization of the the U.K.’s defense forces.
In February when it announced results for the whole of 2010 the company made clear that it expected 2011 to be difficult. Even though it made a slight profit compared to 2009 when the London based company was buffeted by the loss of the U.S. FMTV truck contract as well as fines for settling a bribery investigation it still felt that the future as a whole would be challenging. The company needs to restructure some of its business groups and offerings to maximize profitability.
This has led to large amounts of job reductions in the past and more will be expected as 2011 goes forward. The loss of the FMTV contract was a big blow and will lead to large losses in Sealy, Texas where the plant was located. Oshkosh (OSK) won the latest production contract and moved the work to their facilities in Wisconsin.
The expected decline in U.S. defense spending will have similar results with contraction and reductions by all the different contractors. Northrop Grumman (NOC) has made the first major change through spinning off its shipbuilding parts to a new company, Huntington Ingalls Shipbuilding.
The large companies will see the first major job losses as they tend to make major systems which may require substantial workforces. If these systems are cut or cut back then the need for the production base will shrink. It may also be expected that more M&A will take place as it did nit he Nineties as company’s focus on less business areas.