Army Takes Steps to Shore Up Industrial Depots

While the Army is shrinking and buying less equipment, it will continue to invest in its industrial depots and recruit foreign customers in a bid to drum up business.

Despite a considerable slowdown in equipment repair work and manufacturing orders across the Army's 10 major industrial facilities — three manufacturing arsenals and seven maintenance depots — there are no plans to shut any of them down, said Gen. Dennis L. Via, commander of U.S. Army Materiel Command.

There is virtually no chance that Congress will greenlight any closures, but even if that were a possibility, the Army believes it needs to keep its depots in business in order to preserve unique industrial skills that would be needed for the next war.

The Army's organic industrial base is a "national asset that we have to have available," Via said July 23 during a breakfast meeting with reporters in Washington, D.C.

One of the lessons from the past decade of war is that depots are essential, he said. The workload at Army facilities more than doubled from 2001 to 2008, and exceeded production levels not seen since the Vietnam War. Armoring Humvee trucks was a key contribution the depots made in recent conflicts, he said. "We would not have been able to do that without the organic base."

The workload at Army depots collectively peaked in 2008 at 45 million direct labor hours, compared to 15 million before the war. Since then, however, business has been on a downward trajectory. An uptick is projected, though, as $10 billion worth of war-torn equipment returns from Afghanistan and is sent to the depots for repairs and upgrades. Another potential source of new business are private-sector companies that would use the depots to manufacture equipment. Foreign governments that buy U.S.-made weaponry also are invited to send it back to the depots for regular maintenance and repairs.

The Army in 2013 signed 207 "public-private partnerships" between depots and private firms that generated about $200 million in revenue, Via said. "We are reaching out to industry to use our facilities," he said, and noted that capital investments also are planned.

Current law requires that no less than 6 percent of the average workload for the past three years at all depots be set aside for capital investment programs and modernization of facilities. The

Defense Department's logistics office recently requested a study on how private industry manages capital investment. The study will analyze how companies involved in the maintenance, repair and overhaul business go about funding and investing in capital improvements.

In the wake of recent cancellations of major vehicle programs,experts have predicted the Army's excess industrial capacity is only going to grow. The Army's surviving vehicle programs — a new armored multi-purpose vehicle to replace aging M-113 armored personnel carriers and upgrades to existing M-1 tanks and Bradley fighting vehicles — do not provide enough work to sustain private sector suppliers and organic depots.

The Army's decision to cut back on purchases of new ground vehicles and helicopters means there will be a greater need to maintain current equipment for years and decades to come. That could be a boon for the depots, but it is not yet clear how much of that work will be shared with the private sector. Most weapon systems' design blueprints and intellectual property rights are owned by the original manufacturers, which usually guarantees them follow-on maintenance and upgrade work.

"That is a challenge that we have: Not having technical data rights and not being able to establish our own sustainment," Via said. The Army wants to bring more maintenance work in-house, he added, although it will seek a "balance" between the public and private sectors, especially in systems that are software-intensive and require more skilled technical support. Contractors, he said, are "expensive."

Under a law known as the “50-50 rule,” no more than 50 percent of depot maintenance funds provided to a military service or defense agency can be expended for private sector work.

Foreign military sales are viewed as a bright spot for the depots during these lean times, said Via. "FMS is growing," he said. The Army forecast up to $24 billion in orders over the coming years. "As partner nations come in and acquire equipment from the Army, we encourage them to use our industrial base to reset it, to keep the lines working," he said. "We are doing quite a bit of FMS work."

The Middle East is the busiest FMS region now, he said. Via cited Qatar's recent order of $10 billion worth of Patriot missile-defense systems, Apache attack helicopters and Javelin missiles. "I continue to see that increase," said Via. The United Arab Emirates is another key customer that is eyeing purchases of U.S.-made armored trucks. There is "increasing interest" from other regions, including Africa and Asia.

The Army also is courting U.S. manufacturers to set up shop at the depots, which helps lower the Army's overhead costs. Ammunition makers, for instance, can manufacture products at the Army's depots and sell them to commercial buyers. "We are looking at our depots to be more efficient," he said. "We have to be competitive. It's very challenging to bring in a partner to do business when the [overhead] rates are as high as they are."

Without congressional approval to close bases, the Army can still shed excess capacity, he said, although it is "very challenging with a declining workload."

One way to slash unneeded capacity is to mothball lines, even if fixed costs to keep the facility open still have to be paid, said Via. "We will determine the minimum workload we need to sustain depots, arsenals and ammo plants."

Political support for all Army depots is deeply rooted, Via noted. They are "economic engines" in their communities. He estimated the depots return $1.83 to the local economy for every $1 invested.

Army Industrial Facilities

• Sierra Army Depot in Herlong, California, specializes in petroleum and water distribution systems.
• Red River Army Depot in Texarkana, Texas, works on ground combat and tactical system sustainment.
• Joint Systems Manufacturing Center in Lima, Ohio, manufacturers, repairs and tests combat vehicles.
• Tobyhanna Army Depot in Tobyhanna, Pennsylvania, specializes in electronics and tactical communications systems.
• Corpus Christi Army Depot, in Texas, does repair and overhaul of helicopters, engines and components.
• Anniston Army Depot, in Alabama, refurbishes tanks and other equipment.
• Letterkenny Army Depot in Chambersburg, Pennsylvania, is known as the Army's "capabilities based depot."
• Pine Bluff Arsenal, in Arkansas, produces renovates and stores munitions and chemical/biological defense systems.
• Rock Island Arsenal, in Illinois, manufactures weapons, artillery components, gun mounts and other small arms systems.
• Watervliet Arsenal, in New York, is the nation’s only large-bore cannon production facility.

Topics: Logistics, Manufacturing, Strategic Weapons, Land Forces