Defense jobs at risk in tank cuts: Contractors lobby to preserve funding for Abrams program

Defense jobs at risk in tank cuts: Contractors lobby to preserve funding for Abrams program
17 May 2011

General Dynamics Land Systems and its Michigan suppliers could weather the suspension of a mainstay tank program under assault in Congress -- but not without casualties among Southeast Michigan's labor force.
A proposed three-year gap in federal funding for the M1 Abrams tank production would mean a drop of more than $500 million in current revenue from the U.S. Army Tacom Life Cycle Management Command in Warren by 2013, and hundreds of lost jobs in Michigan for the defense contractor and its local suppliers.
But even as they lobby next week to save the Abrams, General Dynamics and its suppliers are weighing contingency plans, such as ramping up foreign military sales and becoming competitive bidders on future vehicle programs.
Tacom awarded more than $535 million last year under contracts for upgrades and refits, or for systems technical support on the Abrams. The current fiscal year budget includes another $521 million.
That makes the program one of Tacom's 12 largest by contract funding and its second-largest contract with Sterling Heights-based GDLS, although a portion of that funding was already set to expire in 2012.
Only the Stryker, an eight-wheeled armored transport vehicle, is a larger GDLS contract with more than $1.4 billion in annual Tacom spending. The ground vehicles subsidiary of Falls Church, Va.-based General Dynamics Corp. has averaged around $5 billion in annual revenue in recent years.
The company and U.S. Rep. Sander Levin, D-Royal Oak, both estimated last week that the tank upgrade program supplied about 225 Michigan suppliers and subcontractors with more than $187 million in work during the past two years. (Source: Crain’s Detroit Business)


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BAE Systems wins big US Army ammo plant contract

BAE Systems wins big US Army ammo plant contract
May 13 (Reuters)

Britain's BAE Systems (BAES.L) said on Friday it had won a 10-year, $850 million contract to operate and maintain the U.S. Army's Radford ammunition plant in Virginia, the only domestic producer of a key material used in explosives and propellants.
BAE beat out long-time incumbent Alliant Techsystems (ATK.N) to win the contract, which also includes three 5-year options that could extend the award through 2036 and add significant new revenues, the company said.
Radford Army Ammunition Plant is a 6,900-acre government-owned, contractor-operated facility first built during World War Two that employs more than 850 people.
The facility, which sits on two sites straddling Virginia's New River, is the only domestic producer of nitrocellulose, the feedstock for explosives and propellants used by the military, police officers, hunters and other recreational shooters.
ATK had managed the facility since 1995.
BAE already operates the U.S. Army's Holston ammunition plant in Kingsport, Tennessee, under an Army contract awarded in 1998 that runs through 2023.
The contract win comes at an important time for BAE, which announced last month that it was laying off 600 workers at its Sealy, Texas plant, after losing a big Army truck contract.
The company managing the plant is allowed to sell ammunition to the private sector, as long as the U.S. military gets the bomb, bullet and mortar materials its forces need. By allowing commercial sales, the government is able to pay a lower price for what it buys from the plant operator.
BAE is one of the major subcontractors to Lockheed Martin Corp (LMT.N) on the $382 billion F-35 fighter program. (Source: Reuters)


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U.S. House Panel Creates Fund to Finance Projects

U.S. House Panel Creates Fund to Finance Projects
13 May 2011


As they marked up next year's defense authorization bill, members of the U.S. House Armed Services Committee moved hundreds of millions of dollars out of the "Mission Force Enhancement Transfer Fund" and put it toward new and existing programs in the defense budget.
But what is the Mission Force Enhancement Transfer Fund and why does it have so much extra cash to go around? Does the Mission Force, whatever that is, no longer need enhancing?
The unfamiliar funding source was created by the House Armed Services Committee, whose leadership is under a strict no-earmarks ban mandated by House Republican leadership. The ban forbids members from directing money toward specific projects in their districts. However, under the ban, House members may put forward district-neutral policy proposals but they have to identify offsets within the budget for each of these spending increases.
The Mission Force Enhancement Transfer Fund serves as the pot of money that members can use to offset their legislative adds.
House Armed Services Committee Chairman Rep. Buck McKeon, R-Calif., created this authority "so the Department of Defense will have significant resources to address long-standing capability gaps as identified by the committee's oversight and the Department of Defense's own Quadrennial Defense Review," McKeon spokesman Josh Holly said.
When marking up the defense authorization bill, the committee began by finding efficiencies and making cuts across the Pentagon's 2012 budget request. The committee used most of these savings for what it considers higher priority programs, for example, an extra $100 million for missile defense and $425 million to keep open production lines for the Army's Abrams tanks and the Bradley fighting vehicles. It also used the money to fund the service's unfunded requirements lists. (Source: Defense News)


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US House panel OKs $690 bln in 2012 military spending

US House panel OKs $690 bln in 2012 military spending
13 May 2011


A bill that would provide $690 billion for the U.S. military complex in fiscal 2012, including operations in Iraq and Afghanistan, has been approved by the U.S. House of Representatives' Armed Services Committee.
The legislation would authorize $553 billion for the Defense Department's base budget, the same amount sought by President Barack Obama in the request he sent to Congress in February.
The bill also includes $119 billion for "overseas contingency operations" such as Iraq and Afghanistan plus $18 billion for the Energy Department's military-related nuclear activities, Chairman Howard McKeon said in a statement on Thursday.
The Senate Armed Services Committee is expected to take up its version of the National Defense Authorization Act next month. The two versions must be passed by the full House and Senate and any differences must be ironed out before being sent to Obama for his signature into law.
Congress provided $668.6 billion for the U.S. military complex in fiscal 2011, which ends on Sept. 30, down from the $709 billion requested by Obama.
The House bill for 2012 added $425 million aimed at continuing the production line for the Army's M1 Abrams tanks, a General Dynamics Corp program, and M2 Bradley fighting vehicles, made by BAE Systems Plc.
The plan currently advocated by the Army would result in the first break in tank production since 1941, lasting one to three years. (Source: Reuters)


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General Dynamics Lobbies for $1.4 Billion to Avert Tank Cutback

General Dynamics Lobbies for $1.4 Billion to Avert Tank Cutback
May 13, 2011


General Dynamics Corp. and about 200 of its suppliers will gather in Washington to lobby lawmakers to add almost $1.4 billion to the budget for upgrading Abrams tanks and to override the Army’s plan to save money by suspending the program.
If the Army’s proposal to shut down work at the Lima, Ohio- based tank plant between 2013 and 2015 is carried out, suppliers like Continental, Ohio-based Verhoff Machine and Welding Inc. will have to dismiss workers. Of the company’s 100 employees, 75 work on the tank components such as seats and heavy armor, according to President Ed Verhoff. The company reported sales of $15 million last year, and Verhoff anticipates he may have to cut as many as 60 jobs.
“We are looking for other sources of revenue but, with the economy the way it is, it is pretty difficult,” he said.
The Army’s 2012 budget, which seeks at least $5 billion for all its ground vehicles, proposes to suspend the ongoing upgrade of older tanks to an enhanced Abrams M1A2 model while it assesses its future tank modernization strategy.
General Dynamics, based in Falls Church, Virginia, already has had a setback after Defense Secretary Robert Gates this year proposed canceling its $15.5 billion Expeditionary Fighting Vehicle program for the Marine Corps.
General Dynamics and its suppliers plan to use their annual meeting with lawmakers May 23-24 to try to reverse the Army’s decision on Abrams production. It would cost almost $1.4 billion over the next four years to continue buy 70 tank upgrades a year. Keeping the plant open would be less expensive than restarting after an almost three-year hiatus, the companies plan to argue.
Working the Hill
General Dynamics has been building the enhanced tanks since 2004. The most modern versions of the Abrams include digital terrain maps and command and communications systems, as well as composite armor. Under the current plans, the Army will have 1,547 of these tanks.
The suppliers plan to meet with politicians from their state delegations, including lawmakers such as Republican Representative Pete Sessions of Texas and Michigan Democratic Senators Carl Levin and Debbie Stabenow. As part of the “Abrams Supplier Days,” the contractors also meet with Defense Department officials.
“We hope they agree that it’s in the best interest of our national defense and Army” to keep the Abrams program going, Bruce Barron, chief executive officer of Barron Industries, in Oxford, Michigan said in a phone interview. He and other suppliers plan to tell lawmakers that once their manufacturing operations are shut or idled, “it’s not easy to turn it back on and it’s costly.” (Source: Bloomberg)


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Defense cuts mean tough strategic choices: Robert Gates

Defense cuts mean tough strategic choices: Robert Gates
13 May 2011


U.S. Defense Secretary Robert Gates said on Thursday his main goal before stepping down next month is to focus attention on strategic choices facing the nation as it flattens military spending to help curb the growing national debt.
He spoke hours after the House of Representatives Armed Services Committee authorized $690 billion for the U.S. military complex in fiscal 2012, including $119 billion to fund the war in Afghanistan and transition in Iraq.
The sum cleared by the committee for the year starting October 1 represented a small increase from the current fiscal year. It is projected to be a high-water mark as the wars wind down along with a post-September 11 military spending surge.
Gates told Marines at Camp Lejeune, North Carolina, that the issue involved tradeoffs between acceptable risks and defense capabilities that could be sacrificed.
"I am determined that we will not repeat what we did in the 1970s and 1990s, which is across-the-board cuts that end up hollowing out the force," he said.
Gates is to step down on June 30. While he did not offer specific recommendations on the military's future structure, he said he hoped to throw light on the choices at hand for President Barack Obama and other decision-makers, including his nominated successor as defense secretary, CIA director Leon Panetta.
"If you want to change the size of the budget in a dramatic way, what risk are you prepared to take in terms of future threats to the country?" Gates asked.
"How do you manage that risk as a part of a process of cutting the budget?" he added. "This is what I call strategy, not math. Right now the process is just the reverse. Everybody's doing math and not strategy."
Gates' warning followed several months of political brinkmanship over the fiscal 2011 federal budget, which ultimately funded the military complex at $668.6 billion compared to the $709 billion requested by Obama.
Pentagon leaders have cautioned against cutting too much too quickly, because rebuilding military capabilities in the future will be even more expensive.
On Wednesday, Deputy Defense Secretary William Lynn sounded a similar theme at an investors' conference in New York, stressing the need to pare back to essential missions while maintaining a healthy defense industrial base.
The House bill for 2012 added $425 million aimed at continuing the production line for the Army's M1 Abrams tanks, a General Dynamics Corp program, and M2 Bradley fighting vehicles, made by BAE Systems Plc. (Source: CNBC.com)


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Congress defends Abrams tanks in face of Pentagon proposal to end production in Sterling Heights

Congress defends Abrams tanks in face of Pentagon proposal to end production in Sterling Heights
13 May 2011

The Army's modernization plan for combat vehicles calls for a halt in U.S. tank production for the first time since 1941. A military budget bill currently before Congress would end production from 2013 to 2017 while improvements in the nation's primary battle tank are designed.
The House members, led by Levin, a Democrat whose district includes the tank-production facilities of General Dynamics Land Systems in Sterling Heights, called on McHugh to continue a minimal schedule of 72 new tanks per year — the current M1A2 SEP version — during that transition period.
"The tank industrial base is not a light switch that can just be switched on and off at will," said Levin, a Royal Oak Democrat who represents most of Macomb County. "Everyone needs to understand that it will take time and money to get this capability back if we let it go."
After the tank plant in Warren closed two decades ago, General Dynamics' specialty became upgrading tanks from the M1A1 category to the more advanced M1A2.
The tank retrofit program has been viewed as a cornerstone of Michigan's defense industrial base for 30 years.
The program run by General Dynamics has engaged with 224 Michigan suppliers and subcontractors who received a total of $187 million in Abrams work.
Though the final assembly of the tanks is handled at the General Dynamics plant in Lima, Ohio, Michigan has far more at stake in the Pentagon decision than any other state.
The potential production shutdown comes just as Macomb County officials are trying to attract new companies to Macomb by portraying the county as the defense capital of the Midwest. Two-thirds of the defense contracts landed by Michigan firms are based in Macomb County.
"Allowing the Abrams production capability to decay will inhibit the nation's ability to maintain the most modern fighting force in the world and to support the combat vehicle programs of our international allies," said spokesman Pete Keating of General Dynamics, adding that a halt in production will jeopardize tens of thousands of jobs that support the Army's future tank program and more than 560 businesses across the country. (Source: Daily Tribune)


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