Oshkosh share price surges, wins $6.75-billion US Army contract to replace Humvee

US specialty truck maker Oshkosh Corp won on Tuesday a military contract to replace aging Humvees used by the US Army and the Marine Corps.

The Wisconsin-based company was chosen over Lockheed Martin, the biggest government contractor, Britains BAE Systems, and AM General, the Humvee’s maker, to build almost 17 000 new light trucks, valuing the initial contract at $6.75 billion. The Army plans to purchase about 49 900 of the multi-purpose land vehicles over the next 25 years, alongside 5 500 for the Marines, which could drive the value of the contract to over $30 billion.

The losing bidders have ten days to file a protest with the Government Accountability Office after theyve been briefed on the Armys decision, and Lockheed said it may do so. The potential loss would be a blow for AM General, which has been relying mainly on Humvee exports and a recent deal to assemble Mercedes-Benz vehicles at its plant in Mishawaka, Indiana.

Things, however, have turned good for Oshkosh, whose defense unit had struggled in recent years following a series of spending cuts by the Pentagon, including on military trucks, which forced the company to lower expenses by laying off hundreds of workers.

The new trucks will replace many of the 120 000 worn-out Humvee trucks and will provide soldiers with greater protection against mines and roadside bombs, one of the Armys requirements for the new vehicle. The Humvee entered service in 1985 when improvised explosive devices and other anti-vehicle explosive devices were not a major factor in military planning, a report by the Congressional Research Service stated.

Deadly attacks on Humvees during the Iraq war led to the accelerated delivery of Mine-Resistant Ambush-Protected vehicles, or MRAPs, which however have limited off-road capabilities. Oshkosh, which has been building tactical vehicles for the Department of Defense for 90 years, offered a completely new design to meet the Armys requirements for all-terrain mobility, mechanical reliability and easy maintenance. The trucks come in a two-seat and a four-seat variant and are light enough to be carried by air.

John M. Urias, retired US Army Major General, executive vice president of Oshkosh Corporation and president of Oshkosh Defense, said: “Our JLTV has been extensively tested and is proven to provide the ballistic protection of a light tank, the underbody protection of an MRAP-class vehicle, and the off-road mobility of a Baja racer.”

Oshkosh Corp settled 1.53% higher on Tuesday in New York at $38.52, trimming its year-to-date decline to 20.82% and valuing the company at $3.02 billion. Shares surged 11.58% to $42.98 per share in after-hours trading. According to CNN Money, the 16 analysts offering 12-month price forecasts for Oshkosh Corp have a median target of $43.50, with a high estimate of $60.00 and a low estimate of $30.00. The median estimate represents a 12.93% increase from the last price of $38.52.