BAE's Armored Vehicle Capacity Questioned in Trump Defense Study

(Bloomberg) -- A Pennsylvania factory run by BAE Systems Plc may not have the capacity needed to meet the U.S. military’s surging need for armored ground vehicles, according to the Trump administration’s new report on the nation’s endangered industrial base.

The report issued last week drew attention mostly for its emphasis on the dangers it said China’s aggressive policies are posing to U.S. national security. But laced throughout are case studies of gaps or potential bottlenecks domestically in defense sectors -- including shipbuilding, aircraft, munitions and ground systems -- that threaten President Donald Trump’s military buildup.

While London-based BAE isn’t named, the report describes operations at its York, Pennsylvania facility, which is producing as many as six military vehicles for the U.S. Army and Marine Corps and Japan’s military in a section titled “Capacity Shortfall for Future Armored Brigade Combat Team Goals.”

“Over 80 percent of Army and Marine Corps combat vehicle production” is “consolidated to one manufacturer at one assembly facility,” the report finds. “Almost none of these vehicles have ever been completely manufactured at this facility. None have been manufactured simultaneously” and the factory’s “capacity to support simultaneous manufacture is currently under examination.”

In a statement, BAE said it welcomed the study because it afforded “us an opportunity to partner with the administration in implementing recommendations that address gaps and weaknesses in the defense industrial base, especially in the areas of curbing burdensome regulations and policies, and addressing workforce challenges.”

BAE’s Investment

The company said “several manufacturing and production capacity studies led by the Army and the Defense Contract Management Agency validate that BAE Systems is capable of meeting” the military’s needs. BAE said it “continues to invest significantly in its own manufacturing industrial base network” to “diversify production, increase capacity and efficiency and expand jobs” in Pennsylvania and five other states.

But a May 30 assessment by the defense contract agency cautioned that the Pennsylvania facility’s capacity appears “to be inadequate because of welding and machining capability” as demand is expected to increase to about 600 vehicles in 2021 from about 200 this year.

Army Secretary Mark Esper and Bruce Jette, the service’s top weapons buyer expressed confidence in BAE at an Army conference in Washington on Monday. They visited the Pennsylvania facility last month to get a firsthand look at its production lines and assess the company’s progress in resolving quality and management issues.

“We spoke about all the different Army platforms they are building or rebuilding,” Esper said at a news conference. “I had a good discussion with them. I think they recognize” that “they had some challenges in particular lines and, of course, managing multiple lines. I think the leadership’s head is in the right place. They are eager to learn and make corrections, but it’s something that I pay close attention to.”

BAE’s factory capability and quality is a priority for the Army because it wants to increase production through 2023 for a new self-propelled howitzer system as well as the other major vehicles built by BAE: the Armored Multi-Purpose Vehicle and the M88A2 tank recovery vehicle. It’s also going to build the new Marines amphibious combat vehicle awarded in June.

The Army plans to surge production of the Armored Multi-Purpose Vehicle for deployment to Europe as part of the U.S.’s deterrence buildup against Russia. The service has scheduled a Nov. 14 meeting to review whether the vehicle is ready to proceed into limited production -- 469 vehicles valued at $1.3 billion. It has produced 29 prototypes to date. The Army wants to buy a total of 2,897.

©2018 Bloomberg L.P.