By Sandra I. Erwin
BAE Systems' supplier base
A contentious political battle erupted last year when the Army opted to end production of the Abrams tank. Now the Army faces a repeat, this time, over the Bradley.
The manufacturer of the Army’s Bradley infantry fighting vehicle, BAE Systems, is seeking to persuade the service to reverse a decision to stop work at the company’s assembly line in York, Penn., for three years beginning in 2014.
BAE executives are pleading the case that is often made in these situations: It would be more costly to the government to shut down and reopen the line three years later than it would be to keep it open, even with a reduced workload. Army officials defend their decision as a necessary move to cut costs in the face of declining budgets. They also contend that closing down the BAE plant temporarily should not cause any risk to the force, as the Army owns a large fleet of more than 3,000 Bradleys, most of which have low mileage and have been updated with new weapons and electronics.
“We are very concerned about the industrial base in the current fiscal environment,” said Lt. Gen. William N. Phillips, the Army’s top acquisitions official. Without addressing the Bradley specifically, Phillips said Army officials have spent months poring over data about the combat vehicle industrial base that was compiled by the consulting firm AT Kearney. “We have to take a holistic look,” Phillips said during an Aviation Week and Space Technology conference.
A House appropriations bill for fiscal year 2013 approved $140 million for the Bradley vehicle, which would keep BAE’s plant open through the end of fiscal year 2014. The Senate is expected to go along with the proposal.
BAE officials are now warning that, unless there is enough work to keep the line going beyond 2014, the company will soon have to begin to lay off workers.
“We’re reaching the point where we are going to have to start shutting down lines and suppliers,” said Mark Signorelli, vice president and general manager of vehicle systems at BAE Systems Land and Armaments. “We’ve been working with the Army and Congress to mitigate this as much as we can,” he said in an interview.
BAE’s subcontractors include 586 large, medium and small businesses that work on the Bradley, the M88 recovery vehicle, the M109 family of vehicles, the Paladin integrated management howitzer and the M113 personnel carrier. The Bradley program employs 7,000 people in 44 states, according to BAE Systems.
Signorelli said about 1,200 jobs are at risk at the York plant. These workers, he added, possess specialized skills in armor welding, unique precision machining, complex assembly and laser production technology.
The Army’s plan would be to reopen the line in 2017, in anticipation of new orders for Bradley remanufacturing, Paladin howitzer improvements and M88 upgrade work. BAE also could increase the workload at the plant if it won upcoming competitions for new vehicles, including an Army multi-purpose armored vehicle and a Bradley replacement known as the infantry combat vehicle.
Signorelli said it would cost the Army $750 million to shut down and restart the Bradley production line in 2017. For the same amount, he said, the Army could keep skilled workers employed, not on unwanted vehicles, but on upgrades to the current Bradley and M88 fleets. BAE also is trying to drum up international sales. Saudi Arabia is the only non-U.S. buyer of Bradley vehicles, but the Army is helping BAE court other customers, said Signorelli. He insisted that, even if the York facility does go idle for three years, BAE’s land armaments business would not collapse. “We won’t go out of business,” he said. “It will be painful and expensive.”
If BAE can weather the storm, a three-year halt in Bradley work would most certainly hurt a company that is still recovering from tough losses such as the family of medium tactical vehicles — which now is being built by Oshkosh Defense — and a precipitous drop in orders for mine-resistant ambush-protected armored trucks. Having another plant go idle for any length of time would create huge inefficiency across the company’s entire vehicles business, industry analysts said.
Steven Grundman, George Lund Fellow at the Atlantic Council and a former Defense Department industrial policy official, said the Bradley program is one example of the many tough decisions the Pentagon must make in times of reduced budgets.
The Defense Department does not want to see its suppliers lobbying Congress for funds it can’t afford, Grundman said in an interview. “Everybody has signed up to the budget caps,” he said. Even when lawmakers’ district jobs are at stake, “adding money to the defense budget is not politically correct,” said Grundman. “You can’t protect everyone when there are budget cuts.”
The automatic spending cuts that went into effect this month will hurt companies, he said, and “bad things will happen in the industrial base.” There is not enough money to “rectify all the injuries that reductions will cause to the industrial base.”
In sectors such as combat vehicles, one option for the Army is to seek components from commercial suppliers to replace those purchased from vendors that might not survive the Pentagon cutbacks. While the design, assembly and integration of a military vehicle require an expert contractor such as BAE, many of the components could be obtained from commercial suppliers, he said. “I think that is a pattern of how defense systems will be bought in the future. We can’t afford to develop everything ourselves.” In those rare cases when there are no alternatives, the Pentagon would have to weigh the risk. “Capabilities are a lot easier to reconstitute than we give them credit for,” Grundman said. “We generally underestimate the capacity of a vibrant economy to reconstitute industrial capabilities.”
Photo Credit: BAE Systems