Sen. Tammy Baldwin (D-Wis.) has sent a letter asking the Army for more information on its decision to select AM General for the potential $9.7 billion Joint Light Tactical Vehicle follow-on contract over current manufacturer
Oshkosh Defense [OSK], based in her state of Wisconsin.
Baldwin, a member of the Senate Appropriations Defense Subcommittee, cited concern with the Army’s choice to go with the private equity-owned AM General, which she said has a “very high credit risk.”
“I am concerned that the Army overlooked critical company information during the award process—specifically AM General’s ‘very high credit risk’ as a result of the leveraged buyout its private equity ownership group used to acquire the company—and the impact of high leverage on the company’s ability to stand up a new production line in a timely fashion,” Baldwin wrote in her letter to Army Secretary Christine Wormuth and Doug Bush, the service’s top acquisition official.
AM General in February beat out Oshkosh Defense for the 10-year JLTV re-compete production contract, which may cover delivery of up to 20,682 vehicles and up to 9,883 JLTV Trailers, with the latter having built the vehicles since 2015 (Defense Daily, Feb. 9).
Earlier this week, the Government Accountability Office (GAO) denied Oshkosh Defense’s protest of the award decision and concluded the Army “reasonably evaluated proposals” (Defense Daily, June 12).
Oshkosh Defense said in a statement to Defense Daily it will “assess the GAO’s findings and evaluate our next steps.”
Baldwin’s letter, sent before GAO denied Oshkosh Defense’s protest, asks the Army about the “significant startup costs” for AM General as it enters into JLTV production and how the company can deliver on its “low bid” for the work.
“This low bid has raised serious questions about the company’s ability to carry out the mission-critical production given its financial position. The company’s credit has been downgraded since it was acquired in a leveraged buyout by KPS Capital Partners in 2020, which saddled the company with $675 million in expensive debt. By increasing the chances of delayed delivery or a default, the award appears to pose a risk to the Tactical Wheeled Vehicle industrial base and the fighting men and women who depend on it,” Baldwin wrote.
Baldwin asks the Army to “carefully scrutinize” the business model of AM General’s ownership and to fully review the company’s ability to execute the contract.
The Wisconsin senator also requested the Army provide an update on its delayed Tactical Wheeled Vehicle (TWV) strategy and for details on how the Army plans to manage the defense industrial base for TWVs.
Jim Cannon, CEO of AM General, told Defense Daily in early March, before Oshkosh Defense filed its protest, that the company was “well into execution” in moving toward JLTV A2 production and is planning to build the platform in “some very non-traditional ways” (Defense Daily, March 2).
“It’s hard to sometimes win when there’s an incumbent. But I looked at it like a no-lose mission. We were either going to compete to win and win it. And we did. And, of course, we’re very humbled and fortunate for this opportunity now. Or, we would compete to win and be beaten, but the Army would get a better vehicle,” Cannon said.