06.01.2010

Oshkosh wins new Military contract

Oshkosh the parent company of JLG, has won a new $290 million contract from the US Army for 725 palletised truck and trailer units.

The order from the Army’s Tank-automotive and Armaments Command Life Cycle Management Command (TACOM LCMC) is for a modernised ‘next-generation’ version of the PLS - Palletized Load Systems dubbed the PLSA1.
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The Oshkosh PLS with container and hook loading device

Production will begin in April and be completed by September 2011. The PLS is designed by the U.S. Army's distribution and resupply needs for its most challenging military missions. The vehicle features a Long Term Armour Strategy (LTAS)-compliant cab and a 600-hp engine. The truck and trailer carry a hook lift type demountable cargo bed, which offers a 16.5-ton payload capacity.

Andy Hove, Oshkosh president of Defense said: "The modernized PLS A1 truck and trailer delivers superior performance and protection capabilities and can load and unload a variety of heavy-payload cargo, which helps eliminate the need for material-handling equipment and results in leaner, more efficient logistics units."

Oshkosh stresses that it has the available capacity and workforce to deliver this order along with it other contracts as well as cope with any further surges in production. The company has bee sub contracting a large portion of its defence work to the JLG aerial lift and telehandler plant in McConnelsburg.

In December, the Government Accountability Office ruled that parts of the $3 billion Army contracts already awarded to Oshkosh should be reconsidered, giving two losing bidders- BAE Systems and Navistar- an opportunity to take over some of the deal.

The two had questioned whether Oshkosh had sufficient capacity to meet the tight delivery demands of the entire contract. This new order could exasperate this review. The army has until February to respond to the GAO concerns.

Vertikal Comment

The incredible success of Oshkosh with these new military contracts is likely to have a further beneficial effect on JLG, which has already called back a good number of its employees to work on the military contracts, helping the company maintain its skilled workforce and cover its overheads.

If JLG manages this advantage well, investing in its aerial lift and telehandler business through the downturn, it could use this period to gain a significant advantage over its major competitors and to lay the foundations to move well ahead of them as the market picks up.

There will be financial/accounting temptations to cut investment in what is still its core business and focus more on the military work. However these large contracts driven by the US commitments in Afghanistan and Iraq will of course not last forever and are likely to be followed by a period of low investment in military vehicles. Oshkosh will then be well served by the resurgent lift market, confirming its stated strategy of diversification to cope with the different business cycles.
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