BAE Systems Leverages Industrial Network As Ramp-Up Of Armored Vehicle Production Approaches

Loren Thompson

In the years following the collapse of the Soviet Union, production of heavy armored vehicles like tanks and troop carriers almost became a lost art in America. The Army and Marine Corps repeatedly deferred development of new vehicles, leaving industry with little work besides upgrading combat systems developed during the Reagan years. As a result, there are only two integrated manufacturing sites left where new heavy vehicles can be produced -- one for tanks, the other for almost everything else.

I wrote about the nation's sole surviving tank plant on November 2. Today's piece is about the plant where almost everything else is produced -- the sprawling BAE Systems manufacturing complex at York, Pennsylvania. BAE Systems is a contributor to my think tank and a consulting client, so I have a fairly detailed understanding of what goes on there. At the moment, York is in the midst of a renaissance, having recently won orders for a new Army troop carrier and a new Marine amphibious vehicle.

It is also upgrading the Army's Bradley fighting vehicle and Paladin self-propelled howitzer. The company is investing heavily in new machining systems and other capital equipment to sustain an expected surge in output, and is hiring hundreds of workers who must be trained to a high level of proficiency in specialized skills such as the welding of aluminum armor. This is all good news for the local economy, but to a large degree what BAE Systems is doing at York involves building back capacity that was lost during the Obama years.

BAE Systems has been highly successful at booking new business in the armored-vehicle segment of the military market as Army and Marine leaders have become increasingly worried about their reliance on Cold War combat vehicles. An industrial-base study released by the White House in September stated that over 80% of new armored-vehicle production for the two services will occur at York. The study speculated that all the new work might stress the production capabilities of the site.

However, that issue was thoroughly analyzed by the Army before it awarded recent contracts for Paladin howitzer upgrades and a new Armored Multi-Purpose Vehicle to replace Vietnam-era troop carriers in its armored brigades. The Army found no significant capacity constraints so long as BAE makes suitable investments and hires skilled workers. The findings of the Army's industrial-base analysis are not reflected in the White House report. Here are a few reasons why capacity concerns are overblown.

First, although York is the final assembly point for diverse armored vehicles, it is only one part of a nationwide manufacturing network on which BAE Systems relies to produce combat vehicles. The company operates other manufacturing facilities in Alabama, Oklahoma and South Carolina, including one of the nation's largest integrated forges for producing track components. It also works closely with Army depots (as does the tank plant), and has a supplier network containing over a thousand industrial partners.

Second, preparation of the White House report predated release of some details concerning how BAE Systems plans to invest in robotic welding, advanced machining technology and other cutting-edge capital equipment. The combination of these investments and programs with schools near manufacturing sites to train the necessary workforce will provide BAE Systems with more production capacity than it requires to address projected levels of demand.

Third, the current level of production capacity at York is the inevitable result of uneven demand from U.S. military customers over the last decade. The White House report identifies lack of stable funding as a key factor explaining the fragility of the military supplier base, but fails to explicitly make the connection in explaining why York is facilitized to its current capacity level. BAE Systems is now investing heavily to meet future demand, but it is understandably wary about building capacity much beyond what it expects to need.

The latter factor is critical in understanding why there are only two sites left in America capable of integrating heavy armored vehicles. There were many more in the past when high levels of demand were sustained for decades, but industry can't carry capacity indefinitely if no customer is prepared to fund the resulting costs. The reason the workforce assembling Abrams tanks at the Ohio plant dwindled to less than 100 personnel during the Obama years was that nobody was buying tanks. This is not a hard connection to grasp.

York has some advantages over the tank plant because it produces a diverse array of vehicles for multiple customers, and the industrial skills required are fungible across its portfolio. But if the Army or Marine Corps were to trim their production objectives for ground vehicles as they have repeatedly over the last decade, it is inevitable that production capacity will adjust to match the reduced level of funding. That's how an efficient industrial base works: supply matches demand.

At the moment, the York plant is generating products that satisfy all customer technical standards. There are no outstanding issues -- which is a good thing, because BAE Systems and its legacy enterprises have been the sole providers of Marine amphibious vehicles since World War Two and today manufacture a majority of the combat vehicles in the Army's armored brigades. Company executives do not anticipate problems as they gradually ramp up to two shifts per day at the site.

But the point they stressed to me is that York is the central node of an industrial network scattered across the nation, and there is adequate capacity going forward not only to meet expected demand, but also to cope with potential surges. The company estimates that combined demand from the Army and the Marine Corps will be the equivalent of one-and-a-half armored brigades worth of equipment per year, and that should be easily manageable within the limits imposed by planned capacity.

They are confident the company can deliver what warfighters need, when they need it.

https://www.forbes.com/sites/lorenthompson/2018/11/13/bae-systems-leverages-industrial-network-as-ramp-up-of-armored-vehicle-production-approaches