Skip to comments.Gunmaker scaling back
Posted on 01/31/2006 12:39:01 PM PST by kiriath_jearim
Posted on Mon, Jan. 30, 2006
Gunmaker scaling back
BY TONY ADAMSStaff Writer
When German gunmaker Heckler & Koch showed up in Columbus more than two years ago, it had big plans for becoming one of the city's major local companies.
On the drawing board was a 100,000-square-foot manufacturing facility, a $25 million capital investment and at least 200 high-paying jobs -- maybe more. Georgia Gov. Sonny Perdue even visited Columbus to attend a groundbreaking at Muscogee Technology Park, the industrial area off Macon Road where H&K was supposed to construct its large facility.
But Sterling, Va.-based Heckler & Koch (pronounced "coke") had to scale back its strategy in a major way after learning last October that the U.S. military had cancelled competitive bidding for the next-generation assault rifle. H&K was hoping to land a lucrative contract with the government to replace its 40-year-old M4 carbine and M16 rifle.
Now the company is regrouping in Columbus, forgoing construction of a large plant for an existing 13,170-square-foot building near Columbus East Industrial Park off Macon Road. The structure, formerly used by Cessna Aircraft, is the U.S. distribution center for H&K's 80 models of weapons and accessories.
Peter Simon, H&K executive vice president for programs and government relations, in an interview last week, was cautious in his remarks about the company's downsized fortunes. He knows offending someone in the military's supply chain could harm H&K's chances of landing a huge contract.
Still, he said it has been tough watching the XM8 assault rifle developed by his company -- and generally applauded by soldiers testing it in the field -- get shot down in the bidding process.
"I'm disappointed that the program has not proceeded through a procurement stage, and because we have not had the opportunity to compete," said Simon, a retired U.S. Army lieutenant colonel. "From our point of view, we contracted with the United States Army to develop a certain capability and we fulfilled that contract." Sticking points in the process include the demand by other manufacturers that the bidding be wide open and that H&K not have an advantage because it developed the weapon. Col. Michael Smith, former weapons program manager at Picatinny Arsenal in New Jersey, commented during an XM8 live-fire demonstration at Fort Benning 14 months ago that the developing company often receives the contract ultimately.
"He's got it locked," Smith said of weapon developers. "He understands exactly how to build it. No one's ever going to build it better than he can." There also is the matter of the U.S. defense budget, which topped $400 million in 2005. Congressional committees and the Department of Defense are currently taking a critical look at military spending. A number of defense experts are betting there will be cuts in current and future weapons programs.
Weapons program still alive
Lt. Col. Tim Chyma, Smith's successor at Picatinny Arsenal, said the current conflict in the Middle East was the driving factor behind putting the brakes on the assault rifle bidding. Last May, he said, bidding was started after the U.S. Army decided to add a light machine gun capability to the new rifle.
But by May, the decision was made to suspend the process and rethink what is technically being called the "objective individual combat weapon" program. The military, Chyma said, then stopped the process completely in October.
"Right now, the Army is reassessing and re-evaluating its priorities for weapons, as well as the (weapons) requirements based on the stuff coming out of the field," he said.
That includes doing post-combat surveys of soldiers as they leave hot zones in Iraq and Afghanistan. The military wants to know what is working in the heat of battle and what isn't, particularly in urban settings, Chyma said.
"It's a matter of, hey, let's make sure we're doing the right thing before we proceed; make sure we capture everything and then we'll move forward," he said. Chyma insists the assault rifle program has not been shelved. Yet, he also doesn't have a feel for how long it might take to get the next-generation rifle into the hands of soldiers and U.S. Marines. Asked if that moment could come within five years, he replied, "That's a reasonable timeline."
"The big thing is just understanding it will be a competitive process," he said. "A full and open competition is the approach."
The M16 has been in the military's arsenal since 1964, making it one of the longest-running weapon programs in U.S. defense history. It has undergone modifications through the years. But Simon said the time has come to give troops something better, be it H&K's XM8 design or someone else's.
"I think that there are a number of manufacturers that have products either in their inventory right now or under development that represent an advancement over the current legacy systems," he said.
Until the military pulls the trigger on large contracts, a major expansion in Columbus will have to wait. The 13,170-square-foot distribution center -- although it will handle between $15 million and $20 million in weapons and accessories this year -- is a far cry from the 100,000-square-foot behemoth plant the company was hoping to construct. The seven employees there now are nowhere near the 200-plus workers pledged by Heckler & Koch at its October 2003 groundbreaking at Muscogee Technology Park.
"All of that planning was based on the program that the Army was pursuing for the development of the XM8 and fielding it," he said. "We have, obviously, had to significantly adjust our expansion plans."
Columbus Mayor Bob Poydasheff expressed disappointment that the XM8 has yet to lead to a huge contract for H&K and more than 200 jobs for city residents. But he said recent job announcements, including Aflac's 2,000-employee expansion -- on top of Fort Benning picking up thousands of troops and civilian workers over the next four years -- have eased the pain.
"Now that there's going to be a distribution center, it's not going to take too much of a jump (for H&K) to create and modify a portion it for manufacturing, which would then employ the 200 some odd people," he said.
Room to expand
Heckler & Koch is working on plans to turn about 5,000 square feet of the distribution center space into a manufacturing facility, Simon said. The company -- not the military -- still retains the rights to the XM8 design. He declined to say if H&K is shopping it around to other potential customers.
Richard Grantham, operations manager at the Columbus distribution center, will be the person heading that possible expansion. The distribution center, open since October, was relocated from Virginia, where it had been 16 years.
Grantham said the center has enough room to expand its walls by another 10,000 square feet if need be. That would mean investments in new equipment and the addition of several workers. It's simply a matter of landing a big contract -- although it really isn't all that simple.
"It's a different business when you're talking about dealing with the government," he said. "We've got so many government agencies and regulations, it's not like you can go in and sell paperclips. It was a learning experience for everybody."
The distribution center, which is surrounded by heavyweight fencing and uses alarms and security systems to control access, is steadily funneling pistols and rifles through it. On Friday, a box of ammunition magazines sat on the dock floor, bound for troops fighting in Afghanistan.
Last month, Heckler & Koch used a range at Fort Benning to test out a new grenade launcher it will market. The company also is setting up its Columbus facility to serve as a weapon repair center.
"It's all dealing with the government contracts," Grantham said. "If we receive government contracts, we're in the position where we can grow and expand in a very fast fashion."
Buy SWB stock!
Unlike FN, HK has been notably recalcitrant in manufacturing so-called "assault weapons" for the U.S. market since the ban ended over a year ago. FN is doing well here. HK could learn from their example.
Glad I dumped my HK-91A2 for $2,500.
Cetme has a clone for under $300.
Would you really want an XM8?
I have a USP .40 that I really like. H&K makes a fine firearm. What I wouldn't give for an MP5!
Not me, really. But only cuz I think it looks funny ;-p
I bought a bunch of it back when the company changed hands. Got it for $.77 cents a share.
I just checked and it's at $4.53 per share as I'm typing this.......
Not bad at all.
Well now, THERE's a novel idea coming from the military!
Is it possible they're learning that the .308 is a better caliber for sniper rifles than .223 or smaller?
Smith & Wesson
Not as my main "go-to" gun, but just for the fun of owning one? Certainly.
At least it would be a lot easier to feed than that FN PS90 (with the Picatinny rail) I'm on the waiting list for...
Why don't they do that? I'd like one of those, too...
It's 2006, why go with 1950's technology? There are a half dozen military rifles I'd like to be able to get my hands on, but the HK9x series aren't among them. Heck, there are already thousands of clones available at bargain basement prices. Guns I'd like to be able to buy are: Sig 55x, Tavor, FNC, QBZ 95, FN SCAR, XCR.
Well...my list of "fun to own" guns is far longer then my list of guns that I would actually spend (my) money on. The XM8 wasn't my type of rifle but if I became disgustingly wealthy, and I still had money leftover from buying the things I really wanted, I might have bought a couple.
The more firearms ~ the better!
I have a buddy who has a beautiful FNC in mint condition. It has to win the prize for "highest empty brass ejection velocity" -- I was off to his right when he was shooting offhand one day and I still have the scars. $;-)
I have a USC .45 carbine. MP5 would be a lot more fun.