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State loses out on bid to build Army vehicles

$87M in perks offered, but Wisconsin’s Oshkosh wins

By Brian Fanney , Michael R. Wickline

This article was published August 26, 2015 at 5:51 a.m.

a-lockheed-martin-version-of-the-joint-light-tactical-vehicle-sits-in-front-of-the-state-capitol-on-may-26-as-part-of-a-push-for-87-million-in-state-funds-to-back-lockheed-martins-bid-to-build-the-army-vehicle-near-camden-the-money-was-approved-in-a-special-legislative-session-but-the-contract-was-awarded-tuesday-to-a-company-in-wisconsin

A Lockheed Martin version of the joint light tactical vehicle sits in front of the state Capitol on May 26 as part of a push for $87 million in state funds to back Lockheed Martin’s bid to build the Army vehicle near Camden. The money was approved in a special legislative session, but the contract was awarded Tuesday to a company in Wisconsin.

More than $87 million from Arkansas taxpayers was not enough to convince the U.S. Army that the Humvee’s replacement should be made in the state.

The Army announced Tuesday that the joint light tactical vehicle will be made by Oshkosh Defense in Wisconsin — not by Lockheed Martin near Camden.

“It is a bad feeling, but the sun is going to come up again,” said Sen. Bobby Pierce, D-Sheridan, who sponsored legislation that authorized the bond issue for the project.

“I thought we had a better than 50 percent chance of getting it. I was wrong on that,” he said. “It sure would have helped south Arkansas.”

AM General LLC of Indiana, which makes the Humvee, also lost out on the $6.7 billion contract to make 17,000 vehicles, though both Lockheed Martin and AM General could protest the decision.

John Kent, a Lockheed Martin spokesman, would not rule out that possibility.

“We believe we presented a very strong solution and await the customers’ debrief to hear more detail regarding the reasons behind this selection before making a decision about a potential protest,” he said in an email.

In a statement, U.S. Sen. Tom Cotton, R-Ark., said “as Lockheed Martin explores their next steps, we stand ready to assist them however we can.”

ECONOMIC INCENTIVES

Unlike other states hoping to attract the Army’s business, Arkansas offered millions in economic development incentives to help Lockheed Martin’s bid to build the vehicles.

During a news conference Tuesday, Army officials would not say whether Arkansas’ economic incentives played a role in the selection process. They also would not discuss the strengths and weaknesses of each company’s proposal.

“The gap in today’s capabilities means that commanders often have to choose between payload, performance and protection,” said Scott Davis, Army program executive officer of combat support and combat service support. “The magic was in balancing those three things to come up with an optimal solution.”

Gov. Asa Hutchinson, who called a special session in May so lawmakers could approve the $87.1 million in incentives, said the state did the right thing.

“There is no doubt that we were competitive in terms of price, our workforce is second to none, and I remain very grateful for Lockheed Martin’s investment and confidence in our Camden facility,” he said. “That investment will pay off in the long term.”

The incentives were designed to make Lockheed Martin more competitive, Hutchinson said.

The company had committed to setting up a factory to build the vehicle in Camden in 2013. After the funding was approved, the company said it had already spent $30 million on the factory and planned to spend $125 million more if it was awarded the contract.

Kent declined to say what will happen to that factory, but in June, Randy O’Neal, vice president of production operations for Lockheed Martin Missiles and Fire Control, said it could be used for other things.

“We have a lot of possibilities in the near future … or even immediately if the selection is not Lockheed Martin, which I don’t believe is going to be the case,” he said at the time. “We already have growth here. We have lots of opportunities to use the facility. It was set up in a very simple manner. It’s re-configurable.”

Arkansas Economic Development Commission Executive Director Mike Preston said in a statement Tuesday that the company’s investment in Camden eventually will pay off.

“Lockheed Martin has added some of the most advanced technology in manufacturing at their Camden facility and I have no doubt this combined with the area’s workforce will bring growth opportunities to the company in the near future,” he said.

The Lockheed Martin project was the second time that the Arkansas Legislature has considered authorizing a bond issue for a “superproject.”

In 2013, the Legislature authorized a $125 million bond issue for the Big River Steel mill near Osceola. That mill is under construction.

Amendment 82, enacted in 2004, allows the state to fund projects as long as the funding does not exceed 5 percent of the state’s general revenue from the past fiscal year.

LOSS FOR CAMDEN

The Army’s move is a blow for Ouachita and Calhoun counties, which were anticipating more than 550 new jobs with Lockheed Martin, and the possibility of further economic activity from suppliers.

Camden, a city that has made some of the most potent weapons in the world, has a largely vacant downtown. The unemployment rate is above 7 percent; statewide the average is 5.6 percent.

Median earnings per job in the city are $27,794, lower than the national ($33,419) and state ($28,244) figures.

State Rep. Matthew Shepherd, R-El Dorado, who sponsored legislation authorizing the bond issue for the project, said he’s disappointed Lockheed Martin lost out.

“It would have been a very transformative project, not just for Camden and south Arkansas, but the whole state,” he said.

James Lee Silliman, executive director for the Camden Area Industrial Development Corp., said he was disappointed in the outcome, but the situation would be a lot worse without the existing war-related employment.

“The defense industry has been a large part of the Camden community since the ’40s,” he said. “It’s always been a large part of the community and will continue to be a large part of our community.”

Defense companies originally located in the area because it had manufacturing facilities and World War II bunkers for ordnance storage — the remains of the Shumaker Naval Ammunition Depot.

Lockheed Martin makes the PAC-3 missile, which was used during Operation Iraqi Freedom, the 2003 invasion that began the Iraq war. The plant also builds guided rockets, rocket launchers, longrange rockets and a defense system to knock out missiles in space.

General Dynamics has a facility near Camden that helps build the Hydra-70 2.75-inch rocket, often fired from helicopters to destroy materiel and personnel on the ground; the Hellfire air-to-surface missile; and the hand-held Javelin anti-tank missile.

Raytheon employs about 85 people at the park who help make the SeaSparrow ship-launched missile, Tomahawk cruise missile and the guided Standard Missile, for use in the navies of the United States and 15 allied nations.

Aerojet Roketdyne, Rheinmetall Defense and Esterline also have facilities in the industrial park, along with several non-defense companies.

In Ouachita and Calhoun counties, 2,600 people work in manufacturing, according to data from the U.S. Census Bureau.

THE COMPETITION

All the vehicles of the three competitors were designed to be agile — like a Humvee — but better protect troops from roadside bombs.

During the bidding, Lockheed Martin officials touted their vehicle’s four-cylinder engine, made by Indiana-based Cummins Inc.; the transmission, built by Indiana-based Allison Transmission; the suspension system, created by Michigan-based Meritor; and the combination starter-generator, manufactured by New York-based L-3 Communications.

The Lockheed Martin joint light tactical vehicle did not have an alternator, which produces electricity on most vehicles. Scott Green, vice president of ground vehicles for Lockheed Martin, said using a starter-generator as opposed to an alternator would provide greater power-generation capabilities.

The company has said the fuel efficiency of the 4.5-liter, four-cylinder diesel engine combined with the extra power generation would set the vehicle apart from the competition. The Humvee’s engine is much larger and has double the cylinders.

AM General, which makes the Humvee, says it delivers “the necessary experience and DNA to the [joint light tactical vehicle] program.” The company said it would manufacture its own engine, which allows for greater customization.

Oshkosh Defense touted its “97 years of vehicle production” experience. It already builds a variety of medium and heavy tactical vehicles, including trucks and tankers. The company says its suspension is battle-proven and that its use of advanced materials will best protect the vehicles’ occupants.

In after-hours trading, Oshkosh’s stock was up more than 11 percent.

Though Tuesday’s $6.7 billion contract is for about 17,000 vehicles, the Army and Marines expect to purchase about 55,000 by 2040. Other countries also could buy the vehicles.

“Our JLTV has been extensively tested and is proven to provide the ballistic protection of a light tank, the underbody protection of an MRAP-class vehicle, and the off-road mobility of a Baja racer,” said John Urias, president of Oshkosh Defense, in a statement.

The company said it was pleased with the outcome.

Arkansas officials say they’re on the lookout for the next big project.

“We had high hopes that Lockheed could be successful,” Shepherd said. “We continue to look forward to see the other opportunities out there.”

Print Headline: State loses out on bid to build Army vehicles

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Displaying 1 - 4 of 4 total comments

wolfman says... August 26, 2015 at 6:48 a.m.

We all know when dealing with the government it's who you know. The young freshman congressional team from Arkansas are in experienced and hAve no pull in dc. They too worried about putting themselves on the national stage.

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TuckerMax says... August 26, 2015 at 11:57 a.m.

I'd say this is Cotton and Boozman's fault for not sucking up enough. Our Congressional delegation is impotent because they're all amateurs. All Cotton wants is more war, and Boozman is a nonentity.

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mrcharles says... August 26, 2015 at 5:43 p.m.

If trump gets elected will he being the great business man he is outsource these to China to be built?

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KnuckleBall says... August 26, 2015 at 8:41 p.m.

AMEN to all above, Little Tom Cotton's handlers (Koch Brothers) are not interested in helping Camden. Camden is the proposed site of a new pulp mill for SUN Paper (China) a new pulp mill in Camden might make the Koch Brothers have to pay more for pine for their OSB MILL just south of Fordyce in the Northern part of Calhoun County. So the lip service from young Tom was just that....

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