Sunday, October 5, 2003

Humvees press keeps armor firm abuzz

By Mike Boyer
The Cincinnati Enquirer

FAIRFIELD - Military demand for armored Humvees has business at O'Gara-Hess & Eisenhardt armoring company humming.

Mike Kohrs (left) of Newport and Amaah Smith (right) of West Chester install an underbody on a Humvee at O'Gara-Hess & Eisenhardt in Fairfield.
(Glenn Hartong photo)
| ZOOM |
The company, sole source of armor for U.S. military Humvees, is now retrofitting the AM General Corp.-built vehicles at the rate of five a day and is studying scenarios to increase that to 8-10 a day, if the Pentagon requires, said Gary Allen, general manager and senior vice president-operations for parent Armor Holdings Inc.'s mobile security division.

"Our No. 1 mission is filling the need of the U.S. Army,'' he said. "We're focused on doing whatever it takes to do that.''

This year, O'Gara expects to install armor on more than 800 Humvees, up more than 25 percent from last year.

Allen expects production to rise again next year, although he can't say how much.

President Bush's $87 billion emergency aid request for Iraq and Afghanistan, now working its way through Congress, includes $177 million for more than 700 Humvees and spares.

That's in addition to the annual defense appropriation, part of a five-year Pentagon plan to buy up to 7,000 armored Humvees. About 3,000 remain to be bought under that plan.

Michael Hoffman, analyst with the Washington, D.C., investment firm of Friedman Billings Ramsey, said each armored Humvee costs about $150,000, which Armor Holdings and AM General basically split.

He estimates the Bush emergency aid request, if approved, will mean an additional $80 million in revenue in the next couple of years for Armor Holdings.

Based on historic operating margins, Hoffman estimates that the Bush emergency aid request could mean an additional 25 cents a share in earnings for Armor over the period.

The strength of the armored Humvee program is one reason he recently raised his price target for Armor Holdings from $16 to $21 a share.

Shares of the Jacksonville, Fla.-based company, which also produces bullet-proof vests, tactical armor and other items such as safety holsters, batons and anti-riot products, closed last week at $17.66. Since O'Gara began armoring Humvees for the Pentagon nine years ago, annual procurement has gone up and down, Allen said.

But this is the busiest the company has been since the Bosnian crisis in 1996 also spurred demand for armored Humvees. Humvee stands for High Mobility Multi-Purpose Wheeled Vehicles.

By early next month, O'Gara plans to move its commercial vehicle armoring activity to a leased 40,000-square-foot building down the street from its 125,000-square-foot plant and headquarters on LeSaint Drive. That will free more space for Humvee armoring, Allen said.

The company, which employs about 200 in Fairfield, has added about 25 employees plus additional temporary workers.

Also next month, Allen said the company expects to complete a $1 million investment in facilities at the Fairfield plant to produce its own ballistic glass for armored vehicles.

O'Gara purchases bullet-proof glass from outside suppliers and has its own glass-making plants in South America but wanted its own in-house capability to lower costs and improve delivery time, he said.

AM General has been making Humvees, successor to the World War II Jeep, since 1985. There are an estimated 140,000 in various versions in use around the globe.

The Pentagon didn't require armor for the lightweight diesel-powered vehicles until the ill-fated Army raid in Mogadishu, Somalia, in 1993 that resulted in the death of 18 soldiers.

That raid was the subject of the best-selling book and movie Black Hawk Down.

The Pentagon asked O'Gara, then privately held, and a half-dozen other armoring companies to submit prototypes for testing about a year later. O'Gara's version withstood the testing best and the company won an initial contract for 59 armored Humvees.

Allen, who joined O'Gara from GE Aircraft Engines, said it took the company about 10 months to fulfill the initial contract which was supposed to be completed in a month.

The Humvee armoring process, which takes about four days to complete, is more than just welding armor inside the passenger section of the home, Allen said.

"There's a lot of science and engineering involved,'' he said.

The company has developed armor that's like a sandwich of steel and composite material that not only stops the bullets and bomb blasts but also dissipates the force of the blast to protect occupants.

"We basically build an armored box, so that in a blast situation, the vehicle is destroyed but the occupants survive,'' Allen said.

"One of our requirements is that the doors must stay closed when the vehicle is hit,'' he said. That's to protect occupants from a follow-up ambush after an initial attack or bomb blast.

Nobody tracks how many lives have been saved in Iraq or Afghanistan by the armored Humvees, but both O'Gara and AM General have received testimonials from troops and their families.

Craig MacNab, spokesman for Mishawaka, Ind.-based AM General, said he received calls from parents of two soldiers in the last couple of months who said their sons survived attacks, thanks to the armored Humvees.

The need for more armored Humvees in Iraq is obvious, analyst Hoffman said.

About 90 casualties in Iraq in the past three months were in Humvees without armor, he said.

Testimony to the Humvees' value, he said, is that the Army has dropped research for now on its replacement.

The Pentagon expects to continue to deploy the vehicles through 2013.

That's good news for O'Gara, which has begun supplying armor for another Army vehicle, the sealed truck cabs for the High Mobility Artillery Rocket Systems, HIMARs, a multiple rocket-launching vehicle developed by Lockheed Martin Corp.

The HIMARs armoring was originally envisioned by Armor Holdings as a replacement for the Humvee work, Hoffman said. Now that work looks to be in addition to Humvee armoring.

Allen said O'Gara will armor 10 truck cabs for HIMARs this year and 44 next year. The Army envisions an eventual requirement for 1,500 of the vehicles.


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