U.S. Army nears high-stakes award for Humvee replacement

By Andrea Shalal

WASHINGTON, Aug 25 (Reuters) - The U.S (Other OTC: UBGXF - news) . Army is expected to award a contract on Tuesday for a new armored truck to replace thousands of aging Humvees, a long-awaited deal that could be worth up to $30 billion for the winning team.

Industry executives and defense officials said they expected the Army to announce an initial contract valued at up to $9 billion late on Tuesday for 17,000 of 55,000 vehicles to be built for the Army and Marine Corps in coming years,

Analysts see specialty truck maker Oshkosh Corp as the top contender to win a contract to build 55,000 new Joint Light Tactical Vehicles, or JLTVs, given its record in cranking out thousands of tailor-made mine-resistant, ambush-protected all-terrain vehicles, or M-ATV for U.S. troops in Afghanistan.

But the company faces stiff competition from Lockheed Martin (Swiss: LMT.SW - news) Corp, which is teamed with Britain's BAE Systems Plc (Other OTC: BAESF - news) , and AM General, the privately held company that built the original Humvees.

The Pentagon's Defense Acquisition Board, led by chief arms buyer Frank Kendall, met on Tuesday to review the acquisition strategy for the vehicles developed by the U.S. Army, clearing the way for the expected Army announcement.

It (Other OTC: ITGL - news) will likely be January before the winner can start work on the program, analysts said.

The Army views the JLTV program as its highest priority program given how ubiquitous roadside bombs and other threats have become in recent years.

The U.S. military spent nearly $50 billion to buy and build over 27,000 armored mine-resistant, ambush- protected vehicles, or MRAPs, during the height of the wars in Iraq and Afghanistan. But it needs lighter, faster vehicles for the future.

The new JLTV aims to combine the protection of the MRAPs with the off-road mobility of the original Humvees, which were slowed considerably by the addition of protective armor. The Army also wants better communications gear for the trucks.

Charlie Szews, chief executive of Oshkosh, told Reuters last week he was upbeat about his company's vehicle, which he said would offer the government exactly what it wanted: "the most vehicle they can get for under $250,000 in FY11 dollars."

Szews said the Oshkosh JLTV was "fully loaded" and meets the Army's high-end targets for performance, at or below the target price. He said the company also saw good prospects for future military sales and had several demonstrations planned for potential buyers next summer.

Chris Vanslager, vice president of business development and programs at AM General, told Reuters that his company's Blast Resistant Vehicle-Offroad, or BRV-O, offered the "right balance of performance, protection and payload at an affordable price."

AM General's offering includes communications screens for each of the four troops that man the trucks.

Oshkosh and AM General both have existing production lines, while Lockheed - which is new to the ground vehicle business - has built a brand new facility in a former diaper factory in Camden, Arkansas.

"Lockheed Martin has zero concerns about being able to produce the necessary quantities on the JLTV program," said spokesman John Kent.

The company has built more than 50 JLTVs at the site already, and was confident it could meet the planned production goals with just a single shift of workers.

(Reporting by Andrea Shalal; Editing by Dan Grebler)