BAE to Shut Texas Plant, Move Work on Planned Humvee Replacement to Arkansas

By Doug Cameron

BAE Systems PLC (BAESY, BA.LN) said Tuesday it will shutter an armored-vehicle facility in Texas next year and transfer work on a planned replacement for the Humvee to an Arkansas facility operated by partner Lockheed Martin Corp. (LMT).

The planned closure in Sealy, west of Houston, marks the third U.S. facility to be shuttered by the U.K. defense contractor in little over a year, with BAE lobbying hard to keep open a far-larger armored vehicle operation in York, Pa., during a lull in Pentagon procurement.

BAE said Tuesday said it expects to cut all 325 jobs at Sealy. The company has already cut more than 1,000 jobs over the past year at the plant, which it acquired in 2007 with its purchase of Armor Holdings Inc.

BAE and lead partner Lockheed Martin are in a three-way battle to produce a replacement for thousands of Humvees used by the U.S. military, with contractors delivering prototypes ahead of a full contract award expected in 2015 or 2016. Humvee maker AM General LLC and Oshkosh Corp. (OSK) are also vying for the contract. The three companies this summer delivered prototype vehicles for testing and performance evaluation over the next year.

The Lockheed prototype for the so-called Joint Light Tactical Vehicle, or JLTV, program, was built in Sealy, a facility that has produced armored vehicles since 1990s. Lockheed has less experience in the segment, but will move the work to an existing plant in Camden, Ark., that is focused on producing missiles, including vehicles used for mobile missile-defense systems.

Lockheed said concentrating the work in Camden will generate "significant"--though unspecified--cost savings that would make its JLTV offering more affordable for the Army and the Marine Corps.

Military planners once viewed the JLTV as replacement for all of the 130,000 Humvees in the service. But cuts in defense spending caused the Pentagon to scale back the JLTV program. The Army wants to assemble a fleet of 50,000 JLTVs over 20 years, while the Marines anticipate purchasing about 5,500 trucks.

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