Oshkosh Wins $6.75 Billion Military Contract to Replace Humvee - 25 Aug 2015
Company wins over rival bids from Lockheed Martin, AM General to provide Joint Light Tactical Vehicles
Oshkosh was chosen over Lockheed Martin and AM General to build as many as 55,000 Joint Light Tactical Vehicles, or JLTVs, over the next 25 years. Photo: Oshkosh Defense
Updated Aug. 25, 2015 7:57 p.m. ET
Corp. OSK 6.57 %
on Tuesday won a $6.75 billion contract to build almost 17,000 new light trucks to replace aging Humvees for the U.S. Army and Marine Corps, cementing the future of its defense business.
The Wisconsin-based company was chosen over competitors Lockheed Martin Corp. LMT -0.78 % and AM General LLC to build as many as 55,000 Joint Light Tactical Vehicles, or JLTVs, over the next 25 years to replace part of the Humvee fleet and some larger military trucks. The JLTV is one of the Army’s highest priorities and follows a series of budget cuts and shifting requirements that prompted the Pentagon to cancel helicopter, artillery and communications programs, after investing billions of dollars.
Oshkosh has a long history of producing military vehicles and offered a brand-new design to meet the Army’s requirements for a four-wheeled truck to carry two or four personnel that is resistant to mines and roadside bombs, but also is light enough to be carried by air.
“It’s a historic win for us,” Oshkosh Chief Executive Charles Szews said in an interview, adding that the defense business “supports the whole infrastructure for the company.”
Oshkosh shares soared 12% to $43 apiece in after-hours trade, erasing more than half of their 20% decline this year.
The deal gives Oshkosh a stable, long-running contract for assembly work to offset other, volatile business lines, including specialty vehicles such as firetrucks and cement mixers.
The company’s defense unit has struggled in recent years in the face of shrinking Pentagon spending on military trucks. The company laid off hundreds of assembly workers to lower expenses even as the company moved ahead with development work on its JLTV proposal.
“It’s the difference between having a viable defense business for the next five or 10 years and having a big question mark,” said Jefferies analyst Stephen Volkmann.
The new trucks will replace many of the 120,000 Humvee trucks built by AM General that have been worn out by use in Iraq and Afghanistan, and promise greater protection against mines and roadside bombs, as well as more range and durability to move troops and gear. They are also lighter than the Mine-Resistant Ambush-Protected vehicles introduced in Iraq.
The JLTV program was launched in 2007 and the Army, bruised by a series of cost overruns and canceled programs, stuck to its $250,000 price cap for each JLTV. Army officials said all three bids came in below the cap, with the average price of vehicles equipped with communications and other equipment expected to come in under $399,000, taking the total program cost to $30 billion.
The JLTV will replace aging Humvees used by the Army and Marine Corps. Photo: Yuriy Dyachyshyn/Agence France-Presse/Getty Images
The price cap pushed the three companies to use as many commercial, off-the-shelf parts as possible to lower production and maintenance costs. Oshkosh uses engines from General Motors Co. GM -1.06 % , with Allison Transmission Holdings Inc. ALSN 1.27 % supplying the gearboxes.
The Army plans to acquire 49,909 of the vehicles alongside 5,500 for the Marines, and has the option to choose another contractor for future production runs.
The final bidders emerged from a pack that included Navistar International Corp. NAV 0.85 % , General Dynamics Corp. GD 0.79 % and Ford Motor Co. F -0.62 % The trio made their final submissions in January after building a series of prototypes that the Army tested. The companies touted their offerings in a series of radio and print ads in Washington, D.C., and in Michigan, home to the Army’s contracting command.
Lockheed said it would await a debriefing from the Army before deciding whether to protest the award to Oshkosh. The potential loss is more of a blow for AM General, which has subsisted on a diet of Humvee exports and a recent deal to assemble vehicles for Mercedes-Benz at its plant in Mishawaka, Ind. The company had no immediate comment Tuesday.
—Bob Tita contributed
to this article.
Write to Doug Cameron at [email protected]
Company web site: http://www.oshkoshcorporation.com/
Oshkosh Corporation (Oshkosh) is a designer, manufacturer and marketer of a range of specialty vehicles and vehicle bodies, including defense trucks, access equipment, fire & emergency vehicles and concrete mixers and refuse collection vehicles. The Company operates in four business segments: defense, access equipment, fire & emergency, and commercial. It manufactures defense trucks under the Oshkosh brand name, and is a manufacturer of severe-duty heavy- and medium-payload tactical trucks for the United States Department of Defense (DoD). The Company is also the manufacturer of aerial work platforms under the JLG brand name. Under the Pierce brand name, the Company manufactures fire apparatus assembled on both custom and commercial chassis. The Company manufactures aircraft rescue and fire fighting (ARFF) and airport snow removal vehicles under the Oshkosh brand name and ambulances under the Medtec brand name.