Industry Execs Ponder a Shrinking Tactical Wheeled Vehicle Market

By Grace V. Jean and Stew Magnuson
OSHKOSH, Wis. — Inside a 350,000-square foot facility known as “South Plant,” Oshkosh Defense workers fabricate cabs for the Army’s family of medium tactical vehicles program. They are producing 60 trucks a day in two shifts on an assembly line that snakes its way through a building that was originally erected in 1972 and has been expanded several times since.

Military truck manufacturers, however, are beginning to worry about the long-term future of the industry. A 2010 report by Forecast International, a business intelligence firm, predicts nearly 26,750 light wheeled vehicles worth $12.4 billion will be produced worldwide during the next 10 years. The U.S. armed services plan to spend more than $3 billion annually on tactical wheeled vehicles over the next several years.

But the long-term outlook for suppliers still looks fuzzy as a result of several factors. One is that the U.S. military already has a huge inventory of trucks and is looking to save money by refurbishing rather than buying new ones. Another unexpected twist in the truck market has been the Pentagon’s fast-paced, $36 billion program to acquire armored vehicles known as mine-resistant ambush-protected, or MRAP. The scope of the MRAP investment means that the Pentagon is likely to scrutinize future truck buys to make sure that the services are incorporating MRAPs into their truck fleets, rather than storing them in warehouses for a future war.

Since 2007, a host of manufacturers have received contracts to produce up to 16,000 MRAPs.

“The nature of MRAP and its urgency and the choice of acquisition method did bring on a lot more players and develop some of them beyond their wildest dreams,” said Chris Chambers, line leader for BAE Systems global tactical systems.

But the MRAP business eventually will slow down. Companies expect that most of the money in the tactical wheeled vehicles business will be in maintenance and upgrades to the current fleet.

“There is still a lot of money in tactical wheeled vehicles in the whole recap arena and technology insertion within those programs,” Chambers said.

One of the most highly anticipated programs is the recapitalization of the Humvee fleet, executives said. Manufacturers better known for heavier trucks such as Oshkosh, BAE Systems and Navistar, are gearing up for the competition. All said they are currently investing their own research and development dollars in anticipation of requests for information later this year.

“We will continue to expand our portfolio across the medium and heavy tactical fleet, but we think we have good products and efficiencies to offer to the light tactical market as well,” said R. Andy Hove, executive vice president and president of defense at Oshkosh.  

Navistar’s vice president of government business, Pat MacArevey, said the company also will compete for Humvee work. “We’ve put some thought into it and done some tests to see what that would look like. I would anticipate that we will be putting forward a solution and a proposal.”

BAE Systems, which is trying to make a big comeback into the truck market after losing the medium-truck contract to Oshkosh, has offered detailed plans on what it will be offering for the Humvee upgrade program. BAE executives even have a brand name: Integrated Smart V.
Adnan Hiros, business development director of light tactical vehicles at BAE, said the company’s concept features a monocoque hull that will provide lighter weight and higher protection. The technology — used in vehicle, aircraft and boat construction — supports loads by using the exterior as opposed to an internal frame. The hull and capsule will use high-strength steels rather than “exotic materials” to keep costs down, Hiros said. BAE’s proposal will include blast resistant seats, the relocation of the fuel tank to the back of the vehicle and an improved suspension system, he added.

The per-unit cost of the BAE concept would be “well within the range” of the price that military officials said they are seeking, which is $150,000 to $180,000 per vehicle, Hiros said.
AM General, the only manufacturer of the Humvee, intends to compete for recapitalization of its signature vehicle as well.

The company declined to make executives available for interviews, but in an emailed statement, John Smreker, vice president of engineering, said AM General is pursuing self-funded research and development.

“The options we have developed and tested for new-production Humvees and recap applications include new designs to significantly improve survivability,” he said.

It has formed a partnership with Hardwire LLC that offers a structural blast chimney that redirects the force caused by explosions through a vent in the middle of the truck. The concept was developed and funded through the Defense Advanced Research Projects Agency.  
Smreker pointed to the company’s 25 years of experience building, supporting, recapitalizing and resetting the vehicles.

AM General has also developed improved suspension systems, engines, fire-suppression systems and other components to be available for new-production or refurbished Humvees, he said.

“We will be ready with a range of solutions, including an optimized and integrated balance of protection, performance and payload,” Smreker said.

Among the few new trucks that may be purchased in the coming decade is the joint light tactical vehicle, or JLTV. Despite widely predicted budget cuts and deep skepticism among analysts that the Marine Corps and the Army will be able to afford it, manufacturers remain enthusiastic about JLTV, which is now entering its third year of development.

Three vendors are providing a series of prototype vehicles — BAE Systems, Lockheed Martin and General Tactical Vehicles, which is a consortium of AM General and General Dynamics Land Systems.

Army and Marine Corps officials are running tests on the 21 variants they have received, collecting performance, protection and payload data, and will use what they learn to refine their requirements.

After that process is finished, there will be an open competition to select participants in the engineering and manufacturing development (EMD) phase. Two vendors will be chosen for this contract as early as this summer. They may or may not be one of the three who provided the prototype vehicles.

Oshkosh, who is not one of the three manufacturers, believes it still has a chance to be part of the EMD phase.

“Oshkosh is focused on developing technologies for the light tactical industry,” said Chris Yakes, vice president of advanced products.

The company is pursuing advances in armored systems, drive trains, power trains, suspensions and cooling packages.

The company is developing a next-generation independent suspension system, a diesel-electric powertrain and a capsule design. It is a modular hull that can be altered or upgraded in the field, company officials said.

“If you have a solution that doesn’t allow you to quickly change or address the need of the soldier, I think you’re somewhat limited,” said Yakes.

Scott Leitch, vice president for business development at BAE’s land armament systems division, said industry will have to be careful to not design overly expensive platforms. “Clearly [the military] is going to have to have a capable force in the future … specifically the light tactical vehicle — not only capable but affordable.”

Industry officials are hopeful that the Humvee recap program and JLTV will not vie for the same pot of money.

“We see them clearly as complementary; not in competition with each other,” Leitch said.

Glenn Lamartin, BAE’s JLTV manager, said the Army and Marine Corps want to bring the “iron triangle” of performance, payload and protection back into alignment. The MRAPs rushed into the field were all about protection against roadside bombs.

The million-dollar question has been how to give those who will be inside the vehicle the protection they need while making it light, transportable, and affordable.

“We’re certainly mindful of what [Defense Secretary Robert] Gates has said about the military having to settle for the 80 percent requirement rather than the exquisite capability with the higher cost and the longer development cycle,” Lamartin said.

For the JLTV, the challenge will be how to balance the iron triangle and get protection up and have the transportability the Marine Corps is demanding, he said.

As to whether it can be built affordably, “the short answer is ‘yes,’” he said. He believes that will be the case for the other two teams as well (BAE is also a partner in the Lockheed Martin program).

The services are studying all 21 JLTV demonstration models to gather information on the vehicles’ performance. This competitive prototyping acquisition method is supposed to help them understand the art of the possible and write realistic requirements documents that don’t demand specifications that can’t be achieved. Because the current phase is only meant to gather information, there is no down-select from the three teams. That is why Oshkosh believes it could still be one of the two chosen in the EMD phase and may ultimately be the winner of the JLTV contract, if it is ever built.

“The new process gives us confidence that [the iron triangle] can be rebalanced … We’re getting a lot of useful feedback from those real-world tests,” Lamartin said.

Another potential moneymaker in lean times will be the resetting or recapitalization of the MRAPs and its all-terrain variant, the M-ATVs.

Whether these rapidly fielded vehicles will remain in the inventory, or if they will become white elephants is unknown, but most manufacturers interviewed see a future for them, and possibly the opportunity to reconfigure them for different missions.

“It’s safe to say what the Army and Marine Corps are trying to do is evaluate the individual models,” said Chambers. They’re looking at what each has to offer and then laying out what their future roles may or may not be. BAE builds the Cayman series of vehicles.

The two services are certain of one thing: an MRAP is not a light tactical vehicle, he said.

Navistar was among the companies that answered the call for MRAPs in 2007. The company was mostly known as a manufacturer of trucks for the commercial market, and continues to be a big player outside the defense world. It builds the MaxPro line, and believes that the demand for mine-protected trucks is not going to disappear. Navistar intends to build a family of vehicles around the MaxPro and market them internationally.

“Unfortunately, IEDs and these enemy tactics are around to stay,” said MacArevey. “You see that in office of the secretary of defense policies and so on. That probably determines the need for mine-protected vehicles.”

Navistar produced an ambulance variant of the MRAP. “Now that we have all these vehicles, what do we do with them? We’re trying to help that vision,” MacArevey said.

Topics: Land Forces

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