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How secular shifts towards wheeled vehicles and modular technologies are changing the structure of the land warfare business
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THE ONCE AND FUTURE COMBAT SYSTEM
How secular shifts towards wheeled vehicles and modular technologies are changing the structure of the land warfare business
The third in a series on military-industrial markets in 2009
Hasik Analytic LLC
THE ONCE AND FUTURE COMBAT SYSTEM
The third in a series on military-industrial markets in 2009
Summary
After eight years of war in Afghanistan and Iraq, ground forces around the world have at their disposal a potential wealth of lessons to be learned. The emphasis in force structure has shifted to infantry, and the need for blast-protection in vehicles is essential. This might call for more MRAPs, but the demands of the campaign in Afghanistan are showing how a large off-road vehicle is needed. Heavier vehicles might offer greater ballistic protection, but a reasonable chance at stopping large caliber cannon rounds or anti-tank missiles requires a vehicle as massive as a heavy tank.
Thus, the next generation of troop carriers—and particularly those of the US Army—will likely be wheeled 8x8s, just with v-shaped hulls for robust blast-protection. Designs will likely be sourced from a company with experience in the 8x8 segment, and save General Dynamics, all of these are based outside the US. Those manufacturers are finding American production partners to ensure adequate domestic content and technology insertion. In the long run, though, the builders of these vehicles may not be solely those manufacturers of tracked combat vehicles with lineages in the Cold War. Rather, speciality truck manufacturers are increasingly showing how they have the skills needed for wheeled armored vehicle manufacturing.
Firms planning to compete for business in this environment face a challenging set of strategic questions, for which the answers are not obvious. Management in the armored vehicle industry today requires a whole-of-business approach, involving multiple functions of the enterprise in daily decisions. After all, these are wartime conditions, and the pace of change has picked up.
ABOUT THE AUTHORJames Hasik is a principal of Hasik Analytic, and a founder of the firm. He is a member of the Council on Emerging National Security Affairs, and serves as Senior Defense Consultant to CRA International. He can be reached at [email protected]
ABOUT USHasik Analytic LLC is a management consultancy dedicated to the success of the industrial organizations that supply the tools of global security
Hasik Analytic LLC
The Once and Future Combat SystemThe third in a series on military-industrial markets in 2009
After eight years of war in Afghanistan and Iraq, ground forces around the world have at their disposal a potential wealth of lessons to be learned. As Dan Ross, Canadian assis-tant deputy minister of national defence for materiel, commented recently, “we know to the millimeter what it takes to stop high velocity fragments from artillery shells. We know exactly how far seven-millimeter ballistic armour will bend from an anti-tank weapon. Armoured vehicles are going to change a lot.” 1 We agree. Specifically, and for a host of reasons, we think that the US Army’s next combat vehicle—and most like it throughout the world—could very well be wheeled. Herein we explain why, and provide our initial recommendations on what suppliers in land armaments business should do about it.
Understand what the Army wants
In preparing for its recent blue ribbon panel on future armored vehicles, in recent doc-trinal publications, in official testimony, and as reported elsewhere in the press, the Army has been emphasizing versatility in its forthcoming approach to organization, training, and equipment. Perhaps foremost, the Army wants “improved balance across all components... to address high demand-low density capabilities,” but particularly em-phasizing special operations, infantry, aviation, military police, intelligence, and engineers.2 The Army is reemphasizing that its brigades should be combined arms for-mations with plenty of “dismounted forces in urban areas for mutual protection.” 3 In particular, many experienced senior officers have been calling for a third maneuver bat-talion for each combat brigade.4 However, the brigades should now, the service recom-mends, incorporate their own information operations, public affairs, civil affairs, psy-
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1 Sharon Hobson, “Canada hopes to rebuild and reset after leaving Afghanistan in 2011” Jane’s Interna-tional Defence Review, 3 June 2009.
2 Headquarters, Department of the Army, Field Manual 3-0, Operations (USGPO, 27 February 2008), p. 3-1; Operation Iraqi Freedom lessons learned from post-combat interviews with officers of the 3d Brigade of the 4th Infantry Division, the 2nd Brigade of the 25th Infantry Division, and the 2nd Brigade of the 101st Air Assault Division; and Force Design Directorate lessons learned, 14 May 2009. Many notes here-after (as here) are drawn from the Army’s recent paper on “Comprehensive Lessons Learned” from com-bat in Afghanistan and Iraq (9 June 2009), and presented to the Blue Ribbon Panel on Ground Combat Vehicles.
3 Interview by the US Army’s Combat Studies Institute (hereafter CSI) with Colonel Peter Bayer, former G3, 3rd Infantry Division, April 2003, pp. 6-7; CSI interview with Col. Eric Schwartz, former battalion commander in the 2d Brigade of the 3rd Infantry Division, April 2003, p. 10; and notes from Former Bri-gade Commanders Seminar No. 2 (Headquarters, Department of the Army), 28 April 2009, p. 5
4 Andrew Feikart, CRS Report RL32476, US Army’s Modular Redesign: Issues for Congress, 5 May 2006, p. CR-3; and Former Brigade Commanders Seminar No.2, p. 5. The Stryker brigades, notably, have had three maneuver battalions since their initial establishment.
chological operations, and electronic warfare specialists, so that they can undertake sta-bility and civil support operations alongside traditional offensive and defense operations.5 In particular, many support units should be now equipped with heavier and more sophisticated weaponry, such as crew-served weapons, night vision devices, infrared-aiming devices, and indirect fire capabilities.6
This renewed emphasis on dismountable-but-armored troops calls for vehicles that permit protected mobility along predicted routes,7 with increased electrical and data ca-pacity to support systems that might be added in the future, 8 and an expandable archi-tecture to allow for advanced armoring technologies should they come available.9 Ro-bust defense against blast threats will not be sacrificed for near-term cost savings, as evidenced by the Army’s recent abandonment of the once-grand plans for ECV2 evolu-tion of the Humvee.10 Similarly, the decision to award a single contract in the Mine-Resistant Ambush-Protected All-Terrain Vehicle (MRAP-ATV) program—emphasizing single-fleeting within an emergent requirement—indicates how the Army expects ar-mored, wheeled, adverse-terrain vehicles to remain in the fleet for some time to come.11
Know what the Army can actually get
Armored vehicle design, however, may be today a poor target for bet-the-farm techno-logical development efforts. As Greg Grant wrote in April, the Army’s last combat vehi-cle initiative was doomed when its “progress on developing an active protection sys-
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5 CSI interviews with Brigadier General Michael Tucker, former commander of the 1st Brigade of the 1st Armored Division, April to July 2003, p. 8; Colonel James Boozer, former commander of the 214th Field Artillery Brigade, February 2003 to April 2004, p. 7; Colonel Joseph DiSalvo, former commander of the 2d Brigade of the 3rd Infantry Division, January 2005 to January 2006, p. 11; Colonel J. Mike Murray, former commander of the 3d Brigade of the 1st Cavalry Division, March 2004 to March 2005, p. 6; and Colonel Frederick Rudesheim, former commander of the 3d Brigade of the 4th Infantry Division, 4 No-vember 2005, p. 7.
6 CSI interviews with Colonel John D. Johnson, former commander of the 2d Brigade of the 1st Armored Division, May 2003 to Jan 2005, p. 4; and Col. Mark Hurley, former commander of the Division Support Command, 1st Cavalry Division, March 2004 to March 2005, p. 10.
7 Maneuver Support Center CDID lessons learned, May 2009; Capabilities Development for Rapid Transi-tion lessons learned, 1st iteration, 2004; Operations Enduring Freedom and Iraqi Freedom Top Five Les-sons Learned, Fires Center of Excellence (COE), 5 June 2009; Sustainment Center of Excellence, CAS-COM Top Five lessons learned, 30 May 2009.
8 U.S. Army Armor Center and Fort Knox lessons learned, 15 May 2009.
9 VCSA-led Future Combat Systems After Action Review, Fort Myer Officers Club, 3 June 2009.
10 “Army Ditches Plans to Consider Sole-Source Improved Humvee Bid,” Inside Defense, 19 June 2009. ECV stands for “Expanded Capacity Vehicle”.
11 “Brogan Meets with M-ATV Competitors, Stresses Goal of One Award,” Inside the Army, 22 June 2009. The official acronym for this vehicle (and program) is M-ATV; I use the stretched moniker MRAP-ATV herein for clarity, as well as to emphasize the connection to the preceding MRAP program.
tem—a complex defensive suite designed to shoot down incoming projectiles—ran into technological roadblocks.” This was to have been one of the early spin-outs to the Abrams and Bradley fleets,12 but spinning out communications networking equipment is proving far more feasible, whether in Australia, France, or the United States. 13 The sub-sequent decision to extend the network and robotics spinouts to all 73 line brigades of the Army and National Guard shows the change in thinking.14 Related testimony in April by Rudy de Leon, David Chu, David Berteau, and Paul Francis before the House Armed Services Committee is rather telling. One article on the matter was entitled "Fix Re-quirements, You Fix Costs"; Chu went as far as to say that the word requirement needs to be removed from the lexicon—objective would much better describe the matter. 15 As Edmund Burke put it, those things which are not practicable are not desirable. 16
Perhaps accordingly, despite all this enthusiasm for more robust equipment, no consen-sus has emerged to make money available for a fresh-start replacement program. Rather, Defense Secretary Robert Gates is reportedly considering options to move $25 to $75 billion from current budget plans into “new capabilities and units designed to deal with high-end asymmetric threats and irregular operations.”17 Again, on the ground, this mostly means dismountable forces. Thus, whether with economy, techno-logical conservatism, or combat performance in mind, the House Armed Services Com-mittee wrote in its report on the 2010 budget bill that the Army should “focus its new ground combat vehicle effort on providing a Bradley and M113 replacement while plan-ning upgrades for the Abrams tank, the Paladin and the Stryker vehicle program.”18 The Bradley has proven relatively vulnerable to mine and bomb blasts, and the M113 is not much allowed outside the wire in Iraq, clocking only one-tenth the monthly mileage of MRAPs, and one-twentieth that of Strykers.19
Several years ago,we predicted the eventual demise of the FCS manned ground vehicles (MGV) program, and began hinting that the Stryker might be the real ‘future combat
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12 Greg Grant, “FCS and the Sherman Dilemma,” DoD Buzz, 9 April 2009.
13 Bushmaster Bonanza at Bendigo, Defense Industry Daily, 8 April 2009; Army Sending MRAPs, Stryk-ers to Fort Bliss for Network Integration, Inside the Army, 18 May 2009.
14 Dana Hedgpeth, “Army to Restructure Weapons Program, Expand it to All Combat Brigades,” Washing-ton Post, 19 May 2009.
15 Colin Clark, “Fix Requirements, You Fix Costs, DoD Buzz, 30 April 2009.
16 The Writings and Speeches of Edmund Burke Vol. VII, India: The Hastings Trial, 1788-1795, P.J. Mar-shall, editor (Oxford University Press, 2000), p. 546
17 “Gates Mulls Options for Shifting Up To $75 Billion to Reshape the Military, Inside Defense, 19 June 2009.
18 “House Authorizers See Bradley, M113 as Top Candidates for New Army Vehicle Initiative,” Inside De-fense, 22 June 2009.
19 Replacing and Repairing Equipment Used in Iraq and Afghanistan: The Army’s Reset Program, US Congressional Budget Office, September 2007
system’. 20 The Army may have earlier gotten the message by renaming FCS with the moniker Army Brigade Combat Team Modernization (ABCTM).21 Echoing one-time criticism of the Stryker program, there are again today complaints that the Army’s ap-proach is leaning too far in the direction of converting the service wholesale to counter-insurgency at the expense of big-war capabilities. These, however, represent a false di-chotomy. With all the recent chatter about so-called hybrid warfare, the Army is indeed encouraging its field commanders in Afghanistan to shift towards “traditional combined arms techniques that use artillery, mortars, and tank fire to clear the way for armored forces.”22
Admittedly, for all its recent pronouncements, the Army has otherwise little mentioned artillery, saying simply that it wants “responsive, persistent, and precise fires to counter fleeting targets [while reducing] collateral damage. 23 There is similarly little mention of tanks; rather, the Army is implicitly but clearly signaling that it does not need more ar-tillery or tanks—just more accurate weapons for those arms. Importantly, as Stephen Biddle has argued, it is neither the volume of firepower nor the raw number of heavy tanks that predict victory in land battles. Rather, it is a force’s organizational ability to employ what he called the modern systems of combined arms, maneuver, and conceal-ment. Ballistic protection and firepower are important, but the US armed forces today possess nearly an embarrassment of such riches.24 Or, as General Peter Pace, former chairman of the joint chiefs of staff, once said, “if we have nine ways of killing a tank, then maybe we only need seven ways.” 25
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20 We refer to our comments at the March 2006 SRI Aerospace & Defense Conference, during our briefing “Shock, Awe and EBITDA: Networked Warfare, Network Economics, and the Effect on Industrial Strat-egy,” Jim Hasik and Steve Grundman, CRA International.
21 Kris Osborn, “FCS Is Dead; Programs Live On: U.S. Army To Dissolve Flagship Acquisition Effort, De-fense News, 18 May 2009.
22 Kris Osborn, “U.S. Army May Use Combined-Arms Tactics More in Afghanistan,”and “U.S. Army Stud-ies Lessons from Lebanon,” Defense News, 15 June 2009, p. 40
23 OEF/OIF Top 5 Lessons Learned, Fires Center of Excellence (COE), 5 June 2009; CSI interviews with Colonel James Boozer, February 2003 to April, 2004, p. 3; CSI interviews with Col. James C. McConville, former commander of the Aviation Brigade of the 1st Cavalry Division; March 2004 to February 2005, pp. 3-5; CSI interviews with Col. Gregory Gass, former commander of the 101st Aviation Brigade, May 2003 to January 2005, p. 16.
24 Stephen Biddle, Military Power: Explaining Victory and Defeat in Modern Battle (Princeton Univer-sity Press, 2004), p. 204. For an alternative view, see David E. Johnson, Adam Grissom, and Olga Oliker, In the Middle of the Fight: An Assessment of Medium-Armored Forces in Past Military Operations (RAND, 2008). Johnson et alia acknowledge the value of training and precision firepower in offsetting the weight of armor, but with a more cautionary tone.
25 Briefing at the University of Chicago Graduate School of Business, 18 May 2006.
Start with the MRAP
While initially considered by some a one-off program, the MRAP class of vehicles form a good starting point for analyzing needs. After all, Robert Gates terminated the FCS MGV effort after learning that the vehicles were planned to have flat bottoms that sat just eighteen inches off the ground. The MRAP has now become the new standard to which all vehicles will be compared. The House Armed Services Committee, in its version of the 2010 authorization bill, called upon the Navy Department to report by next February on the relative levels of blast protection of the Marines’ Expeditionary Fighting Vehicle and the MRAPs in service today.26 We expect that any vehicle that fails to compare rea-sonably to this standard will face more than just scrutiny—rather, it may not get built at all.
As we wrote in January, the key to the MRAP is understanding what it is not, and need not be.27 An MRAP's protection is optimized against the three classes of weapons to which insurgents hew: the assault rifle, the shoulder-fired rocket, and the improvised explosive. While guerrillas are frequently innovating new tactics and techniques, these three weapons have constituted the big three ways of doing violence for about forty years now. The MRAPs’ monocoque steel hull and sometimes surrounding cage armor provide substantial proof against these threats, and also provide a relatively large inte-rior, which has already been shown reconfigurable in many ways. They are entirely street-legal, and strategically air-transportable by C-17 or A400M. Excepting the rela-tively enclosed vehicles ordered by the British Army, MRAPs’ visibility is better than that of almost any other armored vehicles. As they are built on commercial parts, logis-tics should be simpler and faster.28 And perhaps most usefully, a huge cadre of veterans from several countries is already experienced in operating them.
Nonetheless, today’s MRAPs have at least two salient deficiencies compared to other armored vehicles, whether wheeled or tracked. First, they simply do not perform well off-road. This, after all, is the whole point of the MRAP-ATV program for the Afghan campaign, though it should be noted that off-road driving in counterinsurgency is not all that it is made out to be. One simply cannot repeatedly drive tracked vehicles across farmers’ fields without political repercussions. MRAPs also generally do not ford rivers well, though this was admittedly not part of the original requirement. Second, firepower thus far has been generally limited to 12.7 mm machineguns and automatic grenade launchers. Comments above notwithstanding, the weight of shell and the range of the missile have some value. Fortunately, both these problems are quite fixable.
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26 “Navy required to report on Survivability of EFV, compare to MRAP,” Inside the Navy, 29 June 2009.
27 See James Hasik, Arming the Bug Hunt: why the economics of the JDAM and the MRAP are changing customer demand, and how military contractors can adapt to succeed, January 2009.
28 By contrast, delivery to the Army’s depots of an engine for an Abrams tank takes 13 months, and of the transmission for a Bradley fighting vehicle, 14 months. See comments by Lt. Gen. James Pillsbury, deputy commander of Army Materiel Command, in Sandra I. Erwin, “Army’s Industrial Depots Prepare for Surge,” National Defense, April 2009.
Move on to the 8x8
Indeed, in dealing with those issues, the second starting point can be existing eight-by-eight armored vehicles in service with land forces around the world. The leading vehi-cles by sales—General Dynamics’ Piranha Light Armored Vehicle (LAV) and Pandur se-ries, ARTEC’s Boxer, Nexter’s Véhicule Blindé de Combat d'Infanterie (VBCI), and Pa-tria’s Armored Modular Vehicle (AMV)—all feature better off-road mobility and weap-onry up through 30 mm cannons and anti-tank missile launchers. The attractiveness of this package begs the question of a robustly blast-resistant 8x8. Building such a vehicle is admittedly not a simple exercise of adding some v-shaped plating to an existing de-sign. As Marine Corps Commandant General James Conway noted recently, even the independent-suspension version of Force Protection’s Cougar needed three rounds of engineering and testing to achieve the right survivability. The general’s observation that "the dummies inside all died" in the first two rounds was particularly enlightening.29
All the same, an effective design should be imminently achievable: we have heard of no fundamental technological challenges to combining the blast-resistance of an MRAP with the mobility of existing 8x8 carriers. This is not to say that the problem is trivial. There is a meaningful trade-off between keeping a low combat profile and center of gravity for off-road mobility, and maintaining enough ground clearance for blast gas venting. There is a further desire for more interior headroom than many current 8x8s offer, both for passenger comfort and the greater effectiveness of blast-attenuating seats. Much of these challenges, however, seem to have been addressed in Oshkosh’s winning MRAP-ATV design.30 Thus, if such a prototype vehicle could survive its ‘trials of truth’, it could eventually subsume many of the roles of today’s MRAPs and 8x8s. These would include more than troop transport; such a vehicle would be valued as a platform for chemical, biological, and radiological (CBR) reconnaissance; armored medevac; elec-tronic warfare; battlefield surveillance; and as a robot mothership. Some manufacturers are already touting the improved mine-resistance of their 8x8s, and the issue has al-ready been raised as the central argument in BAE Systems Hägglunds’ lawsuit against the Swedish government’s selection of Patria’s AMV as the Army’s next infantry carrier.31 We therefore anticipate that at least one vehicle manufacturer will soon enter this segment with a relatively fresh design.
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29 Fred W. Baker III, “Marines Engineer Afghanistan-Worthy MRAP,” American Forces Press Service, 29 April 2009.
30 Our thanks go to Ryan Peoples of CRA International for his comments on this section.
31 Matthew Bell, “BAE plans to appeal Swedish AWV decision, axes Hägglunds jobs,” Jane’s Defence In-dustry, 2 July 2009
Donʼt try to build a tank
Some will argue that this is all moving too fast, and point to the Israeli Army’s embrace of the Namer armored troop carrier as the better way forward. Rather like similar proto-type Russian and Ukrainian vehicles built in the 1990s, the Namer is based on the chas-sis of a heavy tank—in this case, the Merkava IV. Note, though, that the footprint of a heavy tank may be what is required to match the practical survivability of an MRAP in a more traditional armored vehicle design. Like the Merkava, the Namer reportedly can be fitted with a removable v-shaped underside armoring package. Since this approach leaves even less room for venting blast gases, the armor is presumably quite heavy to achieve reasonable protection.
The Israeli Army has already outfitted Battalion 13 of the Golani Brigade with the Namer, anticipates outfitting the rest of the brigade over the next three years, and then plans to buy hundreds more for other formations from 2012 onward. Because budget constraints are encouraging use of foreign military assistance funds from the United States for the program, the the Israeli Defense Ministry is reportedly about to release its request for proposals to US firms for either kitting or assembly in full-rate production of the vehicles.32 This could lead to American armored vehicle manufacturers building rather light troop carriers for American troops while simultaneously building rather heavy ones for Israelis.
Such a situation would be remarked on, but not so remarkable. First, Israeli national re-quirements differ meaningfully from those of the United States. Israeli Army’s strategic mobility requirement for armored vehicles is virtually nil, and its tactical mobility re-quirements do not extend very far into hostile territory. For better or worse, the Israeli approach to counterinsurgency has long favored minds over hearts, so tearing up roads and fields with heavy tracks may not practically do more harm. Either way, the added logistical and physical footprint of the Namer may be moot.
Others will point to the recent announcement that the Canadian Department of National Defence will seek a ‘Close Combat Vehicle’ (CCV) of 25 to 45 tons—presumably track-ed—as evidence to the contrary. This is an important development, but for several rea-sons, it is not generally conclusive. First, the CCV will not replace any existing vehicle, but rather, will supplement the existing LAV-IIIs. The LAV-III fleet is large enough to motorize only six of the Canadian Army’s nine infantry battalions, and the 108 CCVs planned in the order will be enough to equip one or two more battalions of infantry. Further, the CCVs will be found in an off-the-shelf vehicle line, most likely either KMW and Rheinmetall’s Puma, or BAE Systems Hägglunds’ CV90. This is an an important procurement, but probably not a harbinger of a return to Cold War designs.
But perhaps more importantly for US needs, there is little middle ground between the approach with the MRAP and that with the Puma or the Namer. Providing enough bal-
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32 Yaakov Katz, “IDF looks to US firms to build APCs,” Jerusalem Post, 4 July 2009.
listic protection to avoid penetration by at least some large caliber cannon rounds and antitank missiles—as in any heavy tank—makes for an enormously heavy vehicle. With the increasing prevalence of top-attack missiles, even this may not be enough. Regard-less, vehicles like the Bradley, the Warrior, and the CV90 cannot withstand these kinds of attacks even frontally. Thus, there are clear design breakpoints at resistance to artil-lery splinters and 14.5 mm machinegun fire—the heaviest indirect and insurgent threats that a vehicle might be reasonably expected to face, and with which dismounting infan-try should be primarily concerned.
Pick your partner
As we do not, then, expect for the US Army to attempt to convert some of its older Abrams tanks to troop carriers, we conclude that the ABCTM program will most likely call for a wheeled infantry transporter. Ashton Carter’s termination memorandum makes clear that he prefers that the next armored vehicle program be jointly shared by the Army and the Marine Corps, and the Marines clearly prefer an eight-wheeled vehicle as their proposed Marine Personnel Carrier (MPC). The MPC program is expected to call for a mostly off-the-shelf vehicle, but we are uncertain as to whether the scope of the engineering problem merits a fresh start. Either way, those two programs are the largest opportunities before the industry, and European companies with existing designs are finding US teammates. So far, Textron has teamed up with Nexter and its VBCI, and Lockheed Martin has teamed with Patria and its AMV. That pattern leaves considerable room for maneuver, as Textron and Lockheed represent radically different approaches to what one would want in a US partner. Most notably, ARTEC has thus far announced no US partner for its well-regarded Boxer (developed for the Dutch Landmacht and German Bundeswehr), nor has Singapore Engineering Technologies for its Terrex (built for the Singaporean and Turkish Armies).
Observe how differently now we are viewing the structure of this industry. This week, the British Ministry of Defence released a draft of its invitation to tender in the FRES-Scout program, which aims to procure a light tank to replace Scimitars and Spartans currently serving in Afghanistan. BAE Systems and General Dynamics were alone asked in, because they already produce the two vehicles thought closest to what the MoD has in mind: the CV90 and the ASCOD. In the United States, the selection of those two firms could be taken as a throwback to an earlier time. When GD initially proposed to buy GM Defence in December 2002, United Defense argued in its antitrust filing that the con-solidation would be anticompetitive, leaving only GD and UD (later to become part of BAE) as firms “capable” of producing armored vehicles in North America, and bundling too much of that capacity at GD. At the time, this ignored Textron Land & Marine, which was building its Armored Security Vehicle (ASV) for the US Army’s Military Police Corps. The ASV has since been used enthusiastically for convoy escort all over Iraq and Afghanistan. More generally, the MRAP program disproved the notion that only incum-bents could develop new armored vehicles in response to new needs, and that all in-cumbents necessarily would. On the one hand, GD declined to engineer its own new ve-
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hicle for the MRAP program, preferring instead to exercise its North American license to the RG31; on the other, Oshkosh—the winner of the MRAP-ATV program—had never previously designed and built a vehicle more protected than an up-armored truck.
Grasp your proper role in the value chain
Thus, despite this first decision over FRES-Scout, or even the Bundeswehr’s order this week of 405 Pumas from Rheinmetall and KMW for €3.1 billion, established contrac-tors are in for change, at least in the wheeled segment. As Oshkosh has just demon-strated with its armored and off-roading MRAP-ATV, today’s truck builders are more than meaningful market entrants in this business: with their long experience in special-ity vehicle production, they can be formidable competitors. Further, competition for mastering value is increasingly found not just laterally, but from upstream in the value chain. Fully half the dollar value of each MRAP has been installed after the vehicles have left the factories, and proceeded to Space and Naval Warfare Systems Center (SSC) Charleston for fitting out with weapons, sensors, jammers, and communications gear. Components and payloads have become more important because the technologies have become more modular. The effects of modularity are uneven, as shown by Force Protec-tion’s aforementioned experience with the TAK-4 suspension on the Cougar. The com-ponent was critical, but the integration wasn’t trivial.
Today, Arvin Meritor and Oshkosh are intensely competing to build more capable (and survivable) suspensions. ITT, though its acquisition of EDO, leads in producing elec-tronic jammers, but will draw competitors for this important and lucrative business. Kongsberg is the US Army’s favorite for remote weapon stations, but Rafael, BAE Sys-tems Bofors, and others offer excellent alternatives. But for all these companies with a hand in the armored vehicle business, the connection to vehicle assembly is neither missing nor obvious. Oshkosh builds excellent suspensions, but Arvin Meritor does not build actual trucks. Bofors makes weapons, but few BAE Systems vehicles actually carry them—indeed, sister company Hägglunds has for years offered turret and weapons inte-gration as part of every local industrial participation package. Sometimes, the organiza-tion of production is path-dependent, the accumulated result of acquisition decisions taken for a variety of not wholly related reasons. Sometimes, actual synergies between steps in the value chain are indeed properties of entire industries, but they are also often endemic to individual firms and their particular bundles of capabilities.
This means that anyone in the industry today, from subcomponent providers to final as-semblers, faces a set of challenging strategic questions regarding its place in the indus-try. These are not questions limited to the armored vehicles business, but with secular shifts towards wheeled vehicles and modular technologies for modern battlefields, they are all the more important therein:
✦ Is any company’s set of internal resources the right one for proceeding to the next phase of contract competitions?
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✦ Are the company’s connections to suppliers, customers, and even competitors of the right depth and breadth?
✦ Is the company sharing its intellectual property to the right degree for profitable co-operation?
✦ Has the company planned how it will itself need to evolve as probable technological trajectories unfold?
✦ Can deficiencies in any of these areas be addressed by mergers or acquisitions?
The problem requires, to turn a trendy phrase, a whole-of-business approach, with im-plications for corporate development, engineering, finance, marketing, and human re-sources. Acquisition integration planning—a daunting task under any circumstances— can be particularly challenging under the operational stress of supporting the campaign in Afghanistan. The technologies that can be developed to enable success in that war are naturally difficult to forecast. However, the plausible range of possibilities must be ex-amined for their fit with the projected capabilities of the company and its supply chain partners. Those capabilities need to be priced in a way that reflects not just their under-lying cost, but their ultimate value to the end user on the front lines. Capabilities should also be marketed holistically, as an integrated package, and this requires coordination across company lines. Moreover, capabilities ultimately reside largely in people; with production ramping up-and-down, and talent on the move throughout the automotive business, properly staffing the company is a consuming task.
In short, these are wartime conditions, and the pace of change has quickened. It is a challenging time to be a CEO or company president in this business, and an excellent time to have a good strategist alongside.
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