Oshkosh wins $6.75 billion military contract to replace Humvee

Friday, Aug 28, 2015

Oshkosh Corp. won a $6.75 billion contract to build almost 17,000 new light trucks to replace aging Humvees for the U.S. Army and Marine Corps, cementing the future of its defense business.

The Wisconsin-based company was chosen over competitors Lockheed Martin Corp. and AM General LLC to build as many as 55,000 Joint Light Tactical Vehicles, or JLTVs, over the next 25 years to replace part of the Humvee fleet and some larger military trucks.

The JLTV is one of the Army’s highest priorities and follows a series of budget cuts and shifting requirements that prompted the Pentagon to cancel helicopter, artillery and communications programs, after investing billions of dollars.

Oshkosh has a long history of producing military vehicles and offered a brand-new design to meet the Army’s requirements for a four-wheeled truck to carry two or four personnel that is resistant to mines and roadside bombs, but also is light enough to be carried by air.

“It’s a historic win for us,” Oshkosh Chief Executive Charles Szews said in an interview, adding that the defense business “supports the whole infrastructure for the company.”

Oshkosh shares soared 12% to $43 apiece in after-hours trade, erasing more than half of their 20% decline this year.

The deal gives Oshkosh a stable, long-running contract for assembly work to offset other, volatile business lines, including specialty vehicles such as firetrucks and cement mixers.

The company’s defense unit has struggled in recent years in the face of shrinking Pentagon spending on military trucks. The company laid off hundreds of assembly workers to lower expenses even as the company moved ahead with development work on its JLTV proposal.

“It’s the difference between having a viable defense business for the next five or 10 years and having a big question mark,” said Jefferies analyst Stephen Volkmann.

The new trucks will replace many of the 120,000 Humvee trucks built by AM General that have been worn out by use in Iraq and Afghanistan, and promise greater protection against mines and roadside bombs, as well as more range and durability to move troops and gear. They are also lighter than the Mine-Resistant Ambush-Protected vehicles introduced in Iraq.

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