Who Wants to Be a 70-Billionaire?

As the Pentagon's quest to find America's next top model (of military transport vehicle) continues, an already crowded field is getting ever tighter. Dynamic defense duo Northrop Grumman (NYSE: NOC  ) and Oshkosh (NYSE: OSK  ) teamed up Tuesday to bid for their share of the booty.

Northrop will serve as "prime contractor and systems integrator," keeping the bulk of the profits and parceling out subcontracts to a series of companies that will do the actual work. Oshkosh, it appears, will be the main company getting its hands dirty. But while the press release didn't explicitly say so, I wouldn't be surprised if Oshkosh's partner on "MRAP II," lightweight ceramic armor specialist Ceradyne, finds a place at the table as well.

Which table would that be, exactly?
Reuters describes the Joint Light Tactical Vehicle (JLTV) deal as a $10 billion contract, which could potentially reach $70 billion in government contracts, to design and build a replacement to the venerable High Mobility Multipurpose Wheeled Vehicle (the "HMMWV," or "Humvee" to its friends). While most media outlets are now quoting the more conservative figure of $20 billion in value, spread over a decade, we're still talking more than a year's revenue at defense contractor Textron (NYSE: TXT  ) , or nearly a year's revenue for General Dynamics (NYSE: GD  ) .

For anyone to whom this project is still news, I can refer you to my original piece on the JLTV program from October 2006, and the update I penned back in November 2007. Basically, painful lessons in Iraq have taught the military that some spots are just too hot for a standard, thin-skinned Humvee. Armored Humvees are an improvement, and MRAPs tougher still. But the Army really needs a next-generation Humvee that can do the existing vehicle's job, but not be quite so vulnerable to the bad guys.

Enter the JLTV
As its name suggests, the Joint Light Tactical Vehicle will be used by at least two branches of the military -- the Army and Marine Corps. Like the Humvee it replaces, the new vehicle will need several configurations, ranging from "general purpose" to "reconnaissance" to "infantry carrier" to "heavy guns carrier" to "ambulance" (11 subconfigurations in all). In addition to versatility, the JLTV must possess higher survivability than the Humvee it replaces, without carrying so much armor that it sports the gas mileage of, say, an Abrams main battle tank. In short, Uncle Sam's asking the contractors to fill a tall order.

But as you can imagine, the scale of the overhaul is similarly huge. Various sources bandy about figures putting the current Humvee fleet at anywhere from 140,000 to 170,000 vehicles. Whether the cost of upgrading the fleet from Humvee to JLTV ultimately winds up at $20 billion or $70 billion, everyone who's anyone in defense contracting wants a piece of this pie. At last report, the major players angling to bid for the contract include:

  • Lockheed Martin (NYSE: LMT  ) , along with Armor Holdings (now owned by Britain's BAE Systems) and Alcoa.
  • BAE again, teaming up in its own right with Navistar.
  • Boeing (NYSE: BA  ) , along with Textron.
  • Force Protection (Nasdaq: FRPT  ) , which has no partner.
  • General Dynamics -- the odds-on favorite in this Fool's view, thanks to its "ringer" partner AM General, maker of the current Humvee.
  • And as of this week, Northrop-Oshkosh.

The timeline
According to the U.S. Army Tank-automotive and Armaments Command, bidding for and award of the JLTV contract will follow this schedule:

  • Feb. 1, 2008: The Pentagon plans to release a request for proposals.
  • April 1, 2008: Bids are due.
  • June 2008: The Pentagon awards two or more contracts, to produce seven prototype vehicles and four prototype trailers each.
  • September 2010: Prototypes submitted.
  • 2012: Wide-scale replacement of the Humvee by the JLTV.

Foolish takeaway
As you can see, with a good six months between today and the expected awards date, we'll know the identity of the next American Idol before we know who will build the next great American military vehicle.

To fill the time between now and then, I suggest a branding contest. We simply must come up with a cute nickname to stick on the new truck -- something as cool as "Humvee," and as easy for Detroit to convert into a gas-guzzling and profit-boosting civilian analogue. But personally, I'm blanking on "JLTV".

Suggestions, anyone?

Do you like to invest, but love to invest in stuff that makes other stuff go "boom?" Then you'll enjoy reading:


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  • Report this Comment On February 20, 2009, at 1:22 PM, rffk wrote:

    Force Protection does have a partener, General Dynamics Land Systems, a bussiness unit of General dynamics Corp. They have formed a joint venture called Force Dynamics, LLC. How do you like Frpt now?

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