(Bloomberg) -- Initial deliveries of the U.S. Army’s $15 billion multipurpose combat vehicle built by BAE Systems Plc have slipped at least five months because of startup woes compounded by coronavirus impacts on the company and its subcontractors.
The first three production models in the planned 2,936-vehicle program were supposed to be delivered in March but are now delayed until mid-August following production challenges that included welding issues, parts availability, assembly line readiness and installation of advanced manufacturing capabilities. That was before Covid-19 caused further delays, the Army said in a statement.
The previously undisclosed slip in the Armored Multiple-Purpose Vehicle program marks the second major defense program publicly identified as experiencing delays related to Covid-19, the illness caused by the coronavirus.
Ellen Lord, the Pentagon’s undersecretary for acquisition and sustainment, said previously that some major defense programs were experiencing delays of three to five months but declined to name any projects or companies. Lockheed Martin Corp. disclosed F-35 delivery delays that it attributed to Covid impacts.
BAE notified the Army this month that August and September deliveries “will be challenged” due to Covid-19, as more than 20 suppliers were impacted, service spokeswoman Ashley John said in an email. The company’s York, Pennsylvania facility “has experienced shutdowns,” she said. With the pandemic continuing, the program “will continue to experience volatility in both supplier part delivery and production line progress,” she added, saying deliveries are anticipated in mid-August.
Contract Milestones
“Our second-, third-, and fourth-tier suppliers throughout the supply chain are impacting BAE’s ability to get parts to the assembly line in a timely manner,” John said.
John said the delivery slips were not enough to breach the program’s “no-later-than” mandated milestones, so they are not considered formal programs delays.
BAE Systems is the seventh-largest U.S. defense contractor, according to a Bloomberg Government ranking. The London-based company reports quarterly earnings Thursday.
The company is on contract so far to produce 457 vehicles; the full-rate production decision that triggers the program’s most lucrative phase has slipped to April 2022 from October 2021. The total program calls for a family of five separate vehicle types to replace the M-113 armored personnel carrier introduced in 1960.
Welding Issues
The Army’s fiscal 2021 Selected Acquisition Report -- prepared before the pandemic exploded -- said increased risks identified last year with “BAE’s ability to ramp-up to the required production rate” have “been realized” and the program adjusted its schedule to accommodate a four- to six-month shift in production deliveries.
Despite company efforts to mitigate manufacturing risks, “BAE encountered numerous issues in the weld process,” according to the report. The company earlier had welding issues on its self-propelled howitzer program that have since been solved.
“We worked closely with the Army to update and refine manufacturing processes to incorporate the modern weld and inspection technology,” BAE spokeswoman Alicia Gray said in a statement.
She said the company also worked to “assess and mitigate the impact of Covid-19.” The company in March temporarily shut down its York facility “in compliance with a state emergency order,” she said, and in April it temporarily paused production at York and Anniston, Alabama production lines “to implement safe work practices.”
“While we have seen a strong mitigation response from our suppliers, they have also faced COVID-19 disruptions,” she said.
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