By Bob Tita
Specialty truck maker Oshkosh Corp. (OSK) and defense contractor
Lockheed Martin Corp. (LMT) received contracts Wednesday to develop
a replacement for the U.S. military's Humvee utility truck.
AM General LLC of Indiana, the privately held incumbent
manufacturer of the Humvee, also received one of the three
engineering and development contracts, which range from $56 million
to $66 million. Over the next year, each contractor will deliver
nearly two dozen prototype trucks for testing and performance
evaluation. Designs and systems from the prototypes are expected to
be incorporated into the military's final specifications for a
production contract in 2015.
Defense contractors General Dynamics Corp. (GD) and Britain's
BAE Systems PLC (BAESY) and commercial truck and engine maker
Navistar International Corp. (NAV) also competed for the
development contracts but were not selected.
The development contracts for the so-called joint light tactical
vehicles, or JLTV, represent a milestone for a program that
narrowly escaped elimination last year as part of cuts to U.S.
Defense Department's budget.
Military planners once viewed the JLTV as a replacement for the
130,000 Humvees in service. But the cost for the new trucks became
untenable under the weight of requirements from the Army and Marine
Corps that the trucks provide a high degree of protection from
attacks without sacrificing the mobility and versatility of the
Humvees, which have been in service the early 1980s.
Under revised parameters for the JLTV program, the cost was
capped at $250,000 per truck and the initial production run was
limited to about 18,000 vehicles over five years. The U.S.
government has been purchasing Humvees in recent years for an
average price of about $143,000 a truck.
Oshkosh and rival truck maker Navistar aggressively pursued the
latest development contracts for the JLTV. Both companies built
prototype vehicles at their own expense last year to showcase their
manufacturing and design capabilities.
The companies hoped that their experience with building other
types of military trucks and their ability to leverage lower
expenses through their commercial truck businesses would give them
an edge over traditional defense contractors that assemble networks
of subcontractors and partnerships to perform specific defense work
like building trucks.
Since 2009 Oshkosh has built more than 8,700 all-terrain armored
patrol trucks, known as the M-ATVs, for U.S. troops in Afghanistan.
That truck provided Wisconsin-based Oshkosh with a set of
battle-tested systems and components to incorporate into its entry
for the JLTV competition.
"Oshkosh's M-ATV is the only vehicle in the combat theater in
Afghanistan performing the JLTV's mission profile," said John
Bryant, a vice president for Oshkosh's defense business, in a
written statement Thursday. "Oshkosh will bring the same level of
commitment to the JLTV program. We understand how critical this
light, protected, off-road vehicle will be."
Meanwhile, Navistar Defense President Archie Massicotte said the
Illinois-based truck and engine maker is "disappointed" that it was
not selected for the engineering and development phase of the JLTV
program, but vowed to press ahead with plans to market a modified
version of its JLTV entry to foreign militaries.
"We believe it is appealing to nations facing uncertain futures
and limited budgets," Mr. Massicotte said in a written
statement.
Navistar had delivered prototypes for the JLTV under the
original requirements for the truck. Navistar said it expects the
opportunity to bid on the production contract for the JLTV once the
latest development phase of the program is completed.
"We will seriously consider that option," Mr. Massicotte
said.
In recent trading, Navistar's stock was down 4.6% at $23.76 a
share; Oshkosh was up 0.97% at $25.
Write to Bob Tita at robert.tita@dowjones.com
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