August 25, 2015 / 9:36 PM / 5 years ago

UPDATE 3-Oshkosh Corp wins U.S. Army award for Humvee replacement

(Adds quotes from Oshkosh CEO, share price movement)

By Andrea Shalal

WASHINGTON, Aug 25 (Reuters) - U.S. specialty truck maker Oshkosh Corp on Tuesday won a contract worth up to $6.75 billion to build 17,000 armored light tactical vehicles to replace aging Humvees used by the U.S. Army and Marine Corps, the U.S. Army announced.

Oshkosh, whose shares surged 11.6 percent on the news, beat a team made up of Lockheed Martin Corp and Britain’s BAE Systems Plc, as well as AM General, a privately held company that built the original Humvees, for a deal that could be worth $30 billion over time.

The two military services plan to buy a total of 55,000 of the Joint Light Tactical Vehicles, or JLTVs, to start replacing the current combined fleet of about 140,000 Humvees.

U.S. Army officials said they would maintain competition throughout the program, and the contract with Oshkosh included an option to buy the technical data rights to the new vehicles.

They said the firm, fixed-price terms of the contract prevent the government from having to absorb any cost overruns.

Officials praised the Oshkosh vehicles but declined to give any details on why they chose them until after any protests by rival bidders had been settled.

Analysts had favored Oshkosh to win the contract, citing the company’s record in cranking out thousands of tailor-made mine-resistant, ambush-protected all-terrain vehicles, or M-ATV for U.S. troops in Afghanistan.

Oshkosh Chief Executive Officer Charlie Szews, who said he was hoarse from “extreme exhuberance,” told Reuters the company won the lucrative contract because it had a superior product, and would fight hard to hold onto the contract in coming years.

“We will do everything we can to produce all 55,000 vehicles that the department is seeking,” he said in a phone interview.

Szews said Oshkosh gave the military exactly what it wanted: “the most vehicle they can get for under $250,000 in FY11 dollars.”

Including other equipment provided by the government, each vehicle would cost just under $399,000, Army officials said.

Szews said the Oshkosh JLTV was “fully loaded” and met the Army’s high-end targets for performance, at or below the target price. He was upbeat about future foreign military sales and said the company planned several demonstrations next summer.

Lockheed said it was disappointed by the decision and would await a briefing from government officials before deciding whether to protest the contract award. AM General said it was reviewing the decision and considering all options.

Oshkosh said it would start delivering the Humvee replacements to the military in about 10 months.

The Marine Corps will get its 5,500 JLTVs early in the program, with the first group of vehicles expected to be ready for combat use in fiscal year 2018. The Army’s plans calls for a first combat-ready unit a year later.

Army acquisition chief Heidi Shyu said the new trucks would deliver major improvements in protected mobility for soldiers, a key goal given how ubiquitous roadside bombs and other threats have become in recent years.

The Army announcement came after the Pentagon’s Defense Acquisition Board, led by chief arms buyer Frank Kendall, approved the start of low-rate production after 14 months of intense testing of 22 prototypes delivered by each team.

The U.S. military spent nearly $50 billion to buy and build over 27,000 armored mine-resistant, ambush- protected vehicles, or MRAPs, during the height of the wars in Iraq and Afghanistan. But it needs lighter, faster vehicles for the future.

The new JLTV aims to combine the protection of the MRAPs with the off-road mobility of the original Humvees, which were slowed considerably by the addition of protective armor. The Army also wants better communications gear for the trucks.

Oshkosh sharestraded at $43 in after-hours trading, up 11.6 percent from their closing price of $38.52. (Reporting by Andrea Shalal; Editing by David Gregorio and Cynthia Osterman)

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