LMT Lockheed Martin Corp

By Doug Cameron 

Oshkosh Corp. was awarded a $6.7 Billion contract to build the first batch of as many as 55,000 light trucks to replace the aging Humvees used by the U.S. Army and Marine Corps, the Pentagon said Tuesday.

The company won over rival bids from Lockheed Martin Corp. and AM General LLC to build thousands of Joint Light Tactical Vehicles, or JLTVs.

The three companies emerged from a pack that included Navistar International Corp., General Dynamics Corp. and Ford Motor Co. for a crucial acquisition program that follows a series of stumbles by the Army that left it canceling helicopter, artillery and communications deals after investing billions of dollars.

Oshkosh shares soared 11.6% to $43 apiece in after-hours trade.

It is a vital win for Oshkosh, whose defense sales slid 60% in the latest quarter from a year earlier as the Pentagon slowed purchases of heavier military vehicles, though the company has dismissed speculation among analysts that it may sell or spin off the unit.

Chief Executive Charles Szews said on a recent investor call that defense was expected to be the company's growth driver next year--even if it lost the JLTV contract--led by export sales of heavier military trucks. It will start building the trucks this year, with the first of almost 17,000 vehicles being delivered in 2016. Oshkosh had said it would close two of its three facilities in Oshkosh, Wis., if it lost the JLTV contract.

The trio made their final submissions in January after building a series of prototypes that have been tested by the Army. They 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.

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 offer greater protection, range and durability to move troops and equipment. They are also lighter and easier to handle than the Mine-Resistant Ambush-Protected vehicles introduced in Iraq.

The initial contract covers three years of low-rate production, with a decision on boosting output expected in 2018.

Lockheed planned to build the trucks on a new line in Camden, Ark. and said has said it has alternative uses for the Camden facility, which already produces missile and artillery systems. The company said it would await a debriefing from the Army before deciding whether or not to protest the award to Oshkosh.

It is more of a blow for AM General, which has subsisted on a diet of Humvee exports and a recent deals to assemble vehicles for Mercedes-Benz at its plant in Mishikawa, Ind.

"If we didn't win JLTV, I'd be disappointed, but not discouraged," said AM General CEO Charlie Hall in an interview earlier this year. The company had no immediate comment Tuesday.

The JLTV program was launched in 2007 and the Army, bruised by a series of cost overruns and canceled programs, has resolutely stuck to its $250,000 price cap for each JLTV, a four-wheeled truck carrying two or four personnel that is resistant to mines and roadside bombs, but also light enough to be carried by air.

Army officials said all three bids came below the cap, with the average price of vehicles equipped with communications and other equipment expected to come in under $399,000.

The price cap pushed the three companies to use as many commercial, off-the-shelf parts as possible to lower production and maintenance costs. The Army plans to acquire 49,909 of the vehicles alongside 5,500 for the Marines.

While the Pentagon didn't explicitly include the export market in its list of more than 2,000 requirements, executives at all three companies have said the winner of the Pentagon contest would be the most attractive to overseas buyers, especially U.S. allies.

Oshkosh shares closed up 1.5% at $38.52 on Tuesday, and are down 21% this year.

Write to Doug Cameron at doug.cameron@wsj.com

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(END) Dow Jones Newswires

August 25, 2015 18:04 ET (22:04 GMT)

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