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MILITARY VEHICLE NEWS

July 10, 2015 by

Web Page sponsored by MILLBROOK

Tel: +44 (0) 1525 408408

www.millbrook.co.uk/military

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07 Jul 15. Army cuts pose threat to tank, gunmakers as ground wars recede. Western suppliers of armaments spanning battle tanks to ammunition and soldiers’ ground kits face the risk of collapse if consolidation doesn’t accelerate in the shrinking land-warfare market, military chiefs said.
The U.S. is examining how funds can be stretched to sustain manufacturing capabilities, though without mergers to rescue smaller players the supply-chain’s ability to ramp up output in response to any new ground threat may be harmed, officials said. General Dynamics Corp. and BAE Systems Plc may be among buyers.
Land warfare has become less of a priority for the U.S. and its allies following the withdrawal of forces from wars in Iraq and Afghanistan that were heavily weighted toward armored vehicles and ground troops. That’s led U.S. spending on land capabilities and services to tumble $10bn since 2010 to $21bn last year, according to defense analysts IHS Jane’s.
“We have some instances where you have very small second-and third-tier vendors who, because they no longer have that work, go out of the business,” Michael Williamson, the U.S. Army’s principal deputy for acquisition, said in an interview at a Royal United Services Institute conference on land warfare. “The challenge for us is understanding the supply chain well enough to know where you have that kind of vulnerability. Cuts are going to happen: understand where you should not cut.”
Both the U.S and U.K. have asked suppliers and prime manufacturers of land-warfare equipment to trim costs as tensions with Russia and Beijing’s ambitions in the South China Sea make aerial threats a greater concern. Fighter programs such as Boeing Co. F-15, the Lockheed Martin Corp. F-35 and the pan-national Eurofighter venture have become a higher priority.
The U.S. has cut active troop numbers to just above 450,000 and budget changes mean the tally is likely to drop to 420,000 by 2019, Lieutenant General William Hix, director of strategy at the Army Capabilities Integration Center — which develops and communicates modernization — said at the RUSI event in London.
General Dynamics, maker of the Abrams tank, and Europe’s No. 1 defense company BAE, which produces the Bradley Fighting Vehicle, could play a part in consolidation, according to IHS analyst Ben Moores, who cites the ongoing merger of Germany’s Krauss-Maffei Wegmann GmbH, maker of the Leopard 2 battle tank, with Nexter Systems SA of France as an example of a top tier deal prompted by the drop in Western land-systems budgets.
GD spokeswoman Lucy Ryan declined to discuss acquisition possibilities or suppliers, and CEO Phebe Novakovic said May 27 at an investor conference that no takeovers are on the Falls Church, Virginia-based company’s “radar screen” right now.
London-based BAE declined to comment, citing company policy not to discuss acquisition activity.
Small technology specialists could also be bought up by larger suppliers for which they produce key parts, Moores said.
The U.K. is spending more cautiously on defense and favoring outsourcing as it awaits a new round of cuts across government departments from the Treasury on July 8, together with a review of security and military needs later in the year.
“I’m very hard-nosed now with my teams about getting people to think within fixed-cost envelopes, rather than automatically assume there’s more money,” Nick Pope, director of capability for the British Army, said in an interview.
There are “no bounds” to the outsourcing U.K. forces would contemplate, with the emphasis on offering wide-ranging, multi-year deals to a sole partner that would in turn shave costs significantly from current levels, he said at the conference.
“We’ve used commercial land power from certain sectors to do the infrastructure, we’ve ha

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