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Is keeping me waiting ...
-- Carly Simon, "Anticipation," 1971
Hmm? Excuse my reverie. The muzak made me nod off for a moment -- or four months, as the case may be.
Way back in May, I sounded the wake-up call for defense-industry investors regarding the Army's then-imminent announcement of the winners in its contest to build the Army's next Humvee -- the "JLTV." The military's original plan was to accept bids up until April 1, then pick two or more winners in June, and finally accept delivery of prototypes in September 2010. But plans change.
One out of three ain't bad ... right?
According to a report from Reuters last night, the Army has pushed its decision all the way from June into October. (Nice of them to tell us about this in August.) The September deadline for delivery is still in effect -- but only because that's September 2010.
However, the stakes involved haven't changed. Reuters dialed back the excitement over this deal a bit in its most recent update, calling it a contract for "$10 billion in new truck orders," but this same Reuters noted in November that the contract's value could ultimately reach $70 billion.
How do you figure?
Start with 170,000 Humvees in the various military motor pools. Multiply that by the most recent per-unit estimate of the cost to build these behemoths, which has risen to $400,000. That works out to $68 billion, easy -- not counting the effects of inflation between now and when production starts in 2012 ... and whenever it finishes. And that's not even counting potential sales to foreign militaries.
The anticipation is painful, but with a lottery ticket as big as this one, I doubt anyone will drop out of the contest in a huff. To recap, major contestants currently include:
- Lockheed Martin (NYSE: LMT ) and BAE Systems
- BAE again, this time with Navistar (NYSE: NAV )
- Boeing (NYSE: BA ) , along with Textron (NYSE: TXT )
- Force Protection (Nasdaq: FRPT ) and DRS Technologies
- General Dynamics (NYSE: GD ) and AM General
- Northrop Grumman (NYSE: NOC ) and Oshkosh
Who will win when all is said and done (if ever)? My money's still on General Dynamics and -- more importantly -- partner and current Humvee-manufacturer AM General. For second place, BAE/Navistar seems to be a teacher's pet over at the Pentagon. Third and finally -- and according to the rumor mill, the reason the award was delayed, to give these upstarts time to squeeze into the winner's circle -- come Northrop/Oshkosh. Time will tell.
... Perhaps more time than we think.
Further JTLV-focused Foolishness: