Gunmaker scaling back

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.

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.

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."

They are using the 308 and 300 Win Mags right now in Iraq. People seem to think that the only firearm our military has are M-16's in one version or another. There are also a lot of shotguns being used by our troops for clearing houses.
I'm a rifle smith, and the scuttlebutt I hear is that they are opting for a larger caliber in our next battle rifle. I'm hearing everything from 6.2MM to 8MM based on a shortened version of the old 32 Rem rimless case. This new standard, larger caliber, is something from the returning troops and would explain the delay and rethinking of things.

Time to ramp up production of the M14 again. Still the best ... time to get the Springfield Armory up to speed making a few thousand a week.

The structure, formerly used by Cessna Aircraft, is the U.S. distribution
center for H&K's 80 models of weapons and accessories.

Interesting intersection of two industries that trial lawyers have
tried to drive from the face of the earth.

I suspect this has more to do with the late acknowledgement that the .223 and 9mm rounds suck than anything directly attributable to H&K.

Too late on the 91... The patent ran out long ago and JDL bought the H&K factory equipment from the Portugese Government and is producing the PTR91, a great rifle. It is on the market starting at about $800 and topping off at $1300 with the retractable stock & heavy barrel.

You haven't priced the Century CETMEs lately...

Century ran out of CETME parts for the clones and the price has jumped to around $450 plus for NIB CETMEs.

Soldiers who've fired it (MANY of them) have expressed an overwhelmingly positive attitude about the weapon. Lighter, agile, and very reliable.

However, the XM-8 was not sufficiently different (same caliber - although it could be rebarreled in 6.8mm, same basic functionality) to warrant a wholesale replacement of the M-16/M-4. Really, it's not that much different from the already excellent HK G-36 series.

The FN SCAR is coming out soon and will make civilian sales sometime this year (hopefuly). I'd get an XM-8 if they offered it (they'd have to make it here because of import restrictions).

I've been contending for years a .25 cal. like the .243 would be a great compremise battle round...

M-14s are pretty nice.
I sold my M1A to fund other rifles, though.

However, .308 rifles based on the M-16 platform (Armalite AR-10 and Stoner's SR-25) are receiving much more positive receptions. Similar ergonomics and more accurate than the M-14. Also tons more pricey. And don't get me started about Springfield's cast receivers. LRW makes the best new forged receiver, but it's a wait and $1400 minimum.

Too bad Bill Clinton exported THOUSANDS of M-14's to our "allies", and these rifles can never be reimported for civilian use.

31 posted on 01/31/2006 2:00:45 PM PST by Little_shoe ("For Sailor MEN in Battle fair since fighting days of old have earned the right.to the blue and gold)

I thought HK didn't like selling to Civvies? "We civilians don't need that kind of firepower" type BS...

Screw 'em. Let 'em flounder until they figure it out.

32 posted on 01/31/2006 2:00:54 PM PST by Dead Corpse (I believe that all government is evil, and that trying to improve it is largely a waste of time.)

There also is the matter of the U.S. defense budget, which topped $400 million in 2005

Missed a decimal point there somewhere, I'd guess the US military spent over 400 million on copier supplies.

I remember back in the late 80's holding a brand new Belgian FNC with folding stock at my local gunstore and liking it a lot. They wanted maybe $800 for it, which I thought was excessive at the time. I'd wait until the price came down.

Boy was I stupid.

35 posted on 01/31/2006 2:11:31 PM PST by Sender (As water has no constant form, there are in war no constant conditions. -Sun Tzu)

"I thought HK didn't like selling to Civvies?"

They don't, which was my point. If they have a money problem, they need to re-think their position. If not, let the market decide their fate.

Good afternoon.
"I thought HK didn't like selling to Civvies?"

This is off topic, but does anyone remember a .223 semi auto rifle made by HK for the civilian market in the 1980s?

I could be wrong about the manufacturer but I remember it looking like a Gew-43. I can't find anything on it.

Michael Frazier

I had an HK SL6 which was in .223. It had a wood stock but functioned just like the HK-93 except the operating handle was not on the left side of the barrel but was on the bolt.

Mine was uncommonly accurate, in fact more accurate than most bolt actions.

I sold it around 1987 while I was in grad school and needed the money. Wish I had it back although mine came with a five round clip and high capacity ones were hard to find.

I got in around $1.90 several years ago, and added to my position to get an average of around $1.35/share....

In March of last year, it hit 2.74, and then fell like a rock. When it hit $2, I sold off 90% of my stock, afraid I was going to lose all my profits....

So you have me to thank for the rebound it IMMEDIATELY did.... If I hadn't sold, it would've fallen to 4¢! ha ha.

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