Private equity firm buys Humvee-maker AM General

By: Joe Gould and Jen Judson

WASHINGTON — Humvee-maker AM General has been acquired by KPS Capital Partners, a private equity firm known for buying financially distressed manufacturers, the companies announced Wednesday.

KPS acquired AM General of South Bend, Indiana, from MacAndrews & Forbes in a deal in which terms were not disclosed. AM General has largely been stagnant since losing the competition for the U.S. Army's Joint Light Tactical Vehicle in 2015 to Oshkosh.

Following its loss in the JLTV competition, the company turned to the international market to continue growing its Humvee business, such as through offering to foreign customers a multipurpose truck with a military-grade rolling chassis from its Humvee design with a la carte add-ons.

KPS Partner Jay Bernstein said in a joint statement that the firm would continue to work with AM General's chief executive, Andy Hove, as well as its management and employees “to build on this great platform, organically and through acquisition.”

“We intend to leverage the Company's commitment to research, technology, innovation and new product development, as well as its heritage and iconic brand name,” Bernstein's statement read.

Hove said the firm would work with KPS “to continue to execute our strategy and invest in our very ambitious growth plan.”

“KPS' demonstrated commitment to manufacturing excellence, continuous improvement and commitment to invest in technology and innovation will only enhance the Company's ability to compete in today's military and commercial marketplace,” Hove said.

“Plenty of industrial companies and investment firms had considered buying AM General,” James Hasik, senior fellow at the Center for Government Contracting at George Mason University, told Defense News July 22. “And plenty of companies have considered teaming with AM General for a bid on a forthcoming production program.”

AM General has continued to try to adapt to the needs of the U.S. military, bringing a robotic combat vehicle to an Army demonstration last year as the service mulls the future of robots on the battlefield. The company also competed for the Squad Multipurpose Equipment Transport vehicle program but was not selected.

Yet, AM General has remained a single-product firm with the Humvee, Hasik noted, and the future of the Humvee is “hard to call.”

Many militaries around the world use Humvees, and the U.S. Army plans to keep some in its fleet, but the U.S. Marine Corps is divesting its stock. According to Hasik, it's possible that since the Humvee is less expensive than the JLTV and would likely be relegated to noncombat roles, the Army might choose to purchase pickup trucks instead.

“The Humvee was developed in part because the Army's pickup trucks of the 1970s were unimpressive, but that was 50 years ago, and automotive technology has advanced,” he said. “Today's pickup trucks are much cheaper to buy and operate, and that's what the Canadian Army has done.”

While AM General has come up with some novel ideas, “nothing has stuck,” Hasik said. For several years, the company has shown up at trade shows touting a howitzer on a Humvee, like it did at London's DSEI exposition in late 2019. Still, the U.S. Army is struggling to figure out how it would fit into formations.

The good news for KPS is that the company has a running factory with “efficient, medium-speed production of 4x4 military trucks and a production team who know how to do that,” Hasik said. “That's an important skill set, as it works better for military programs than enlisting a pickup truck factory, which must make them in the hundreds of thousands to make money.”

AM General has advertised on its website that it could build bigger trucks, and the Army has just issued a request for information for a program to replace all of its heavy trucks, Hasik pointed out. “It could also build small trucks, similar to the Humvee, for future autonomous applications. There's no guarantee, but we might see lots of those in a few years.”

“All in all, I suspect that KPS didn't buy AM General just to wring some more efficiencies out of the Humvee program. The folks there probably see some of these upside possibilities as well,” he added.

https://www.defensenews.com/land/2020/07/22/private-equity-firm-buys-humvee-maker-am-general/