Implementing our strategy
Case study one:
A global leader in land systems
US military vehicles
Strategic acquisitions in both the wheeled and tracked vehicle sectors have resulted in BAE Systems’ leadership positions in these key growth areas. Further convergence of these two sectors will continue to create growth opportunities for the Group as it begins to focus on the development of light wheeled vehicles.
Figure 1
Mine protected vehicles
Demand for a new class of utility vehicle which incorporates the mobility of wheeled utility vehicles with the survivability of tracked combat vehicles has led to the development of mine protected wheeled vehicles. BAE Systems’ land systems strategy and key acquisitions have ensured it is a leading player in this key growth area.
Figure 2
Wheeled utility vehicle route map
BAE Systems has developed its land systems strategy at a time of significant growth in activity. Production of FMTV (Family of Medium Tactical Vehicles) has increased and MRAP vehicles have been in demand throughout 2007. This is likely to continue in the short term with MMPVs and JLTVs likely to become the focus. BAE Systems currently has two distinct JLTV bids underway.
Figure 3
- 2005 acquisition of United Defense established BAE Systems’ strong position in the tracked combat vehicle sector
- 2007 acquisition of Armor Holdings positioned BAE Systems as a leader in the growing military wheeled vehicle sector
- Further convergence of such tracked combat and wheeled vehicle technology will present future growth opportunities for the Group
BAE Systems is today a leader in military land systems with sales of $7.1bn in 2007 and principal operations in the US, UK, Sweden and South Africa. This large global presence has been established over a short period. The Group embarked on a distinct and cohesive strategy to enter both the tracked and wheeled vehicle sectors, and the convergence of these capabilities is now providing significant growth opportunities.
Prior to 2004 BAE Systems’ involvement in the land systems sector was limited to its RO Defence activities in the UK. In 2004 BAE Systems acquired Alvis plc, recognising the opportunity to address the market for through-life support of the UK armoured Fighting Vehicle fleet and to better address the opportunity to participate in the UK’s largest projected land systems programme, the Future Rapid Effect System (FRES). Alvis included not only the principal constituents of the UK armoured vehicle capability but also the Swedish Hägglunds business and OMC in South Africa.
With its newly expanded land sector presence and its strategy to grow in the US market, BAE Systems targeted the good growth prospects for support and reset work in the large armoured vehicle fleets in the US. Reset is the process of taking worn vehicles out of service and refurbishing them to an "as new" condition for return to service. BAE Systems identified United Defense, a major tracked combat vehicle business in the US, as a focus for increased reset activity and has seen substantial growth since its acquisition of that company in June 2005.
Having established a strong position in the tracked combat vehicle sector, BAE Systems looked to address the newly emerging opportunities for wheeled military vehicles. Wheeled vehicle fleets have in the past been assigned primarily to utility and support applications while the heavier combat vehicles, with their enhanced survivability, were deployed for combat operations.
The growth of insurgency and the terrorist threat, including the use of mines and improvised explosive devices has led to a demand for a new class of utility vehicle. These more sophisticated utility vehicles retain wheeled mobility but have the survivability characteristics of tracked combat vehicles. This evolving convergence of utility and combat vehicle capabilities led BAE Systems to acquire Armor Holdings, Inc., a leading US supplier of wheeled utility vehicles and armour protection technology. The Armor Holdings capabilities complement the tracked combat vehicle capabilities of the former United Defense business in the US (see figure 1).
When BAE Systems acquired Armor Holdings the requirement in the US for Mine Resistant Ambush Protected (MRAP) vehicles was just emerging. BAE Systems has been able to respond to this urgent requirement, winning large orders for MRAP vehicles sourced from three of its operations: the OMC business in South Africa; the former United Defense facilities in York, Pennsylvania; and the recently acquired former Armor Holdings facilities in Sealy, Texas and Fairfield, Ohio (see figure 2).
Mine Resistant Ambush Protected (MRAP) vehicle – RG33
The MRAP programme awards reflect both the Group’s industrial capacity and its ability to collaborate across sites and businesses globally.
New generation vehicle programmes are likely to emerge in response to the continuing convergence of utility and combat vehicle requirements. Near-term MRAP requirements are expected to evolve in two directions. Medium Mine Protected Vehicle (MMPV) is the US Army programme of record for future MRAP-like requirements, while the proposed Joint Light Tactical Vehicle (JLTV) programme is likely to involve the application of advanced new technologies to achieve a range of three types of light to medium vehicles of comparable size and mass to the lightweight High Mobility Multipurpose Wheeled Vehicles (HMMWV) in use by the American military (see figure 3). The requirements for the JLTV will apply lessons learned by the US military for survivable, combat-ready utility vehicles, as have been demonstrated with up-armoured HMMWVs and MRAPs. BAE Systems is approaching the JLTV requirement through the formation of two entirely separate teaming arrangements.
