• September 23, 2014

U.S. tank industry at a turning point

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Posted: Wednesday, February 5, 2014 4:30 am

YORK, PA. — When an armored vehicle pulled down the statue of Saddam Hussein in an iconic moment of the Iraq War, it triggered a wave of pride at the BAE Systems plant where that rig was built. The Marines who rolled to glory in it even showed up to pay their regards to the factory workers here.

That bond between the machinists and tradesmen supporting the war effort at home and those fighting on the front lines has held tight for generations — as long as the tank has served as a symbol of military might.

Now that representation of U.S. power is rolling into another sort of morass: the emotional debates playing out as Congress, the military and the defense industry adapt to stark new realities in modern warfare and in the nation’s finances.

As its orders dwindle, the BAE Systems plant is shrinking, too. The company is slowly trimming workers and closing buildings.

In York, there’s “sadness that somebody that has worked here 35 years and is close to retirement is getting laid off,” said Alice Conner, a manufacturing executive at the factory. “There’s also some frustration from management and my engineering staff as we see the skills erode, because we know one day we’re going to be asked to bring these back, and it’s going to be very difficult.”

The manufacturing of tanks — powerful but cumbersome — is no longer essential, the military says. In modern warfare, forces must deploy quickly and “project power over great distances.” Submarines and long-range bombers are needed. Weapons such as drones — nimble and tactical — are the future.

Tanks are something of a relic.

The Army has about 5,000 of them sitting idle or awaiting an upgrade. For the BAE Systems employees in York, keeping the armored vehicle in service means keeping a job. And jobs, after all, are what their representatives in Congress are working to protect in their home districts.

The Army is just one party to this decision. While the military sets its strategic priorities, it’s Congress that allocates money for any purchases. And the defense industry, which ultimately produces the weapons, seeks to influence both the military and Congress.

“The Army’s responsibility is to do what’s best for the taxpayer,” said Heidi Shyu, the top Army buying official. “The CEO of the corporation(‘s responsibility) is to do what’s best in terms of shareholders.”

Partial closure

The Army is pushing ahead on a path that could result in at least partial closure of the two U.S. facilities producing these vehicles — buoyed by a new study on the state of the combat vehicle industry due for release next month.

But its plans could be derailed by a Congress unwilling to yield and an industry with a powerful lobby. They argue that letting these lines idle or close would mean letting skills and technology honed over decades go to waste.

The Pentagon has “really made a turn in that they are now trying to solve million-dollar problems without billion-dollar solutions, but Congress keeps redirecting them,” said Brett Lambert, who oversaw the Pentagon’s industrial base policy until last year. “This is a zero-sum game. For every dollar the Pentagon spends on something we don’t need ... it is a dollar we can’t spend on something we do need.”

Since 1960s

For decades, BAE Systems’s facility in York has cranked out the Hercules, the Paladin and — most notably and most recently — the Bradley Fighting Vehicle, a 75,000-pound mainstay of the military’s traditional weapons, a kind of armored vehicle that can hold up to 10 men, move at nearly 40 miles per hour and fire a cannon, machine gun and missiles.

(Although the Bradley looks like a tank, it is not technically considered one by the military.)

The factory got its start in the early 1960s, when Bowen McLaughlin York bought a local farm. The construction contractor’s new business was military vehicle overhaul.

Business boomed for a time — but slowed in the mid-1980s. Eventually, BMY combined with another defense outfit to form United Defense, which consolidated its business into the York site. In 1997, private-equity firm the Carlyle Group bought United Defense and eventually took it public. In 2005, the company was sold to BAE for just shy of $4 billion.

In recent years, the contractor hasn’t built new Bradleys but is running old versions through a refurbishment program. In 2008, 2,500 BAE workers at the York plant were pushing out about seven upgraded Bradley Fighting Vehicles a day.

Rolling out vehicles

Mel Nace Jr., operations manager at the plant, grew up in its shadow. In the 1970s, he rode his minibike around the BAE Systems factory, at one point even jumping the fence to take a spin on the test track used to put the Army vehicles through their paces.

After vocational school, he got a job at the factory in 1979 working in the machine shop. With tuition help, he went to college and received his associate’s and bachelor’s degrees as well as an MBA — all while working full-time and raising two sons with his wife.

In 2008, Nace was promoted to plant manager. That year was one of the site’s busiest as it moved to refurbish vehicles that were sent to Iraq and Afghanistan and returned pummeled, sometimes with coffee cups welded to the roof.

“We basically had to hire 600 touch labor employees in a 12-month period,” he said. “We had to recruit, hire, train and acclimate all of those people.”

Not only was the plant rolling out Bradley vehicles, but it was planning production of the next generation of fighting vehicle. BAE had been tasked with building some of the combat vehicles included in the Army’s expansive Future Combat Systems program, envisioned as a sprawling arsenal of drones, vehicles and robots all connected by a powerful network.

The York facility was readying for the boost, even installing — at an $8 million price tag — a hulking high-speed, high-precision machine able to mill, cut and thread almost any material, from steel to aluminum to alloys. The company had hired younger employees, bringing the age of its average plant employee down to 44, seeking to build a workforce to take over once older employees retired.

Big blow

BAE — and the York facility — suffered a major blow when the Army canceled the Future Combat Systems program. The vehicles portion of the program, which was to be shared between BAE and General Dynamics, would have cost more than $87 billion, according to Defense Secretary Robert Gates.

Since then, the military has backed off vehicle refurbishment, too. The York operation has cut about half of its employees, the average age of plant workers has surged to 54 and lines are sitting idle at the facility, tucked into a swath of farmland. In December, BAE started another round of layoffs.

The home to the fighting vehicle has been a low, squat building — with tools in their places and signs reminding those on the floor to don hearing protection. A large “Partnering for the Soldier” banner was on display. Much of the Bradley equipment is being moved into another building as BAE consolidates.

“The reality of it is we’ve already started shutting down,” Conner, the manufacturing executive, said.

If BAE does not get any new Bradley funding — or win new work from commercial firms or foreign governments, it will close the line in 2015.

General Dynamics, which runs its tank-building program out of small-town Lima, Ohio, is facing a similar vehicle.

Past its peak

Just like the Bradley plant, the Abrams factory bustled over the past decade. At its peak in early 2009, the plant, which is owned by the government but operated by General Dynamics, was pushing 2½ refurbished tanks out the door each day.

For the first time in its history, it diversified, producing not just upgraded Abrams tanks but also Stryker vehicles and a prototype of an expeditionary fighting vehicle (able to travel by sea and by land), which was built for the Marine Corps but later canceled.

In 2004, the plant started spending millions to upgrade its systems, bracing to build not only the Marine Corps vehicle but also the ones planned for the Army’s Future Combat Systems effort.

The factory added a $15.5 million machining line — replacing a system installed in the 1980s — that essentially cuts steel and aluminum hulls so that they are ready to be pieced together, much like a person would expect an Ikea desk to be ready for assembly.

But today the facility is down to about 500 employees from a peak of 1,220. Following union rules, it has laid off the newest employees and has worked its way back to those hired in 2005, said Keith Deters, director of plant operations.

‘In good shape’

Military officials say they’ve given careful thought to their strategy and they simply can’t afford to pay for more upgraded tanks.

Gen. Raymond Odierno, the Army’s chief of staff, made its case before Congress in 2012.

“We don’t need the tanks,” he said. “Our tank fleet is 2½ years old average now. We’re in good shape, and these are additional tanks that we don’t need.”

The Army has been emboldened by the new study, which considered whether suppliers who are key to building combat vehicles could be replaced.

The study, which was run by consulting firm A.T. Kearney and took more than five months, found only a small number of companies that are vulnerable to closure and could not easily be replaced.

Shyu, the Army acquisition official, said the military expects that vehicle makers and suppliers will look to other customers and kinds of work.

“There’s obviously difficult decisions that every single service has to make somewhere along the line,” Shyu said. “We have to figure out what’s good enough.”

Congressional opposition

But the Army has run up against congressional opposition. To keep these lines running, Congress has allocated well more than the Army requested for the programs — an extra $181 million for Abrams in fiscal 2013 and about $140 million more for Bradley.

Legislators say they don’t want the money they’ve invested in building up the country’s vehicle-making capability to go to waste. The several hundred million dollars it would cost seems to them a small amount relative to the billions spent on defense annually.

The industry, too, has pushed Congress to support its work. Last year, BAE convened its suppliers — it has 586 across 44 states — in Washington to storm the Hill, chatting up representatives about the jobs they provide and pushing for Congress to help the Bradley program.

Critics say the companies are trying to fight off what should be inevitable: a wind-down of a product that the country doesn’t need.

“It looks like they’re protecting profits and using scare tactics about jobs,” said Angela Canterbury of the Project on Government Oversight. “It is really making us less safe when we’re throwing money that’s hard to come by at programs that don’t meet what should be our current national security strategy.”

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