Former AEDC boss: Lockheed deal would be a big win for Arkansas

With one of the worst-kept economic development secrets officially out in the open, former Arkansas jobs chief Grant Tennille said the possible expansion of Lockheed’s Camden operation to manufacture a new military vehicle will have benefits far beyond that city’s industrial park.

Tennille, who served under Gov. Mike Beebe as executive director of the Arkansas Economic Development Commission, said ancillary effects of a new state-of-the-art military vehicle being built in Camden will be greater than the 600 or more new jobs from the production.

Gov. Asa Hutchinson said Monday (May 11) that a Special Session of the Arkansas Legislature will convene May 26 to authorize use of Amendment 82, the state’s superproject amendment. That legislation allows the state Legislature to approve up to 5% of the state’s general revenue budget to be used for bonding of large-scale economic development projects. The session would center on a potential economic development superproject involving Lockheed Martin in Camden, Ark. The aerospace and defense contractor is in the running for the Joint Light Tactical Vehicle (JLTV) being developed by the U.S. Army and the Marine Corps as a successor to the Humvee vehicle, which has been in service since 1985.

If Amendment 82 incentives are approved, it will be the second time in less than three years the law will be used. Legislators in early 2013 approved a $125 million bond issue to support a $1.3 billion investment by Big River Steel to build a steel mill near Osceola in east Arkansas.

JLTV BACKGROUND
The push for a new vehicle came in 2006 from Congress following several years of reports from fighting in Iraq and Afghanistan in which the Humvee was not adequate for many combat operations. The Department of Defense first issued contracts in October 2008 for JLTV development.

The 2016 fiscal year Department of Defense budget includes $456.9 million for procurement funding of the next JLTV. The U.S. Army plans to buy 49,909 JLTVs by 2040, and the U.S. Marine Corps plans to buy 5,500 JLTVs by 2022.

According to a March 9, 2015 report from Congressional Research Service, the Army will pick a winner by “late summer” 2015.

“The winning contractor would build approximately 17,000 JLTVs for the Army and Marines during three years of low-rate initial production, followed by five years of full-rate production,” noted the CRS report. “The first Army unit would be equipped with JLTVs in FY2018, and the Army’s complete acquisition of JLTVs would be completed in 2040. The Marines would begin acquiring their 5,500 JLTVs at the beginning of production and would be completed by FY2022.”

Grand Prairie, Texas-based Lockheed's vehicle is competing against Oshkosh and AM General.

South Bend, Ind.-based AM General was the lead contractor supplying the high-mobility multi-purpose wheeled vehicle (HMMWV, or Humvee) for U.S. Armed Forces at U.S. allies since 1985. AM General has delivered more than 250,000 of the vehicles to armed forces in the U.S. and to those of U.S. allies.

‘QUICK APPROVAL’
Tennille, who worked on the project up until Gov. Hutchinson’s economic development team took office, expects relatively “quick approval” from the Legislature compared to the process involved with Big River Steel. Not only did competitor Nucor – which has operations and connected suppliers in Arkansas – oppose Amendment 82 support for Big River, but Big River was not a company prior to funding of the new mill. Lockheed is an established company and there is no opposition from another company.

“Obviously, you not only have a company that exists, but is a global operation … Lockheed Martin is no slouch,” Tennille said.

He also said the project will be popular, noting that building the “next generation of a vehicle for our fighting Americans” is something “Arkansans will eat up with syrup on it.”

Another project detail that will be popular with Legislators is that Lockheed requires suppliers to have a facility within 125 miles of Camden, Tennille said, adding that a JLTV program “will have hundreds of suppliers.” And the more than 500 jobs with salaries averaging at least $50,000 a year also will be something Legislators will want to secure.

“I think this will capture the public imagination in a way that the steel mill never did,” Tennille said.

FUTURE RECRUITMENT IMPACT
If Lockheed’s JLTV program is selected, the resulting workforce training and market reputation will help the state recruit other production facilities in the auto, defense and aerospace industries, Tennille said.

He said the investment in and development of workforce training “will be massive” and will include public schools, two-year and four-year colleges. Lessons learned in what Tennille predicts will be “a lot of collaboration” between different layers of educational institutions will prove an example of what is possible to state leaders and decision makers outside Arkansas.

In addition to the workforce will be that Lockheed will build and operate for several decades one of the most advanced manufacturing facilities in the country. Tennille said Lockheed’s JLTV is a “big old massive truck with a number of different configurations, one of which is a command and control vehicle which will have more technology in it than the space shuttle.” Combine that with a supplier network and the deal just gets better.

“Within a year, we will have one of the most sophisticated vehicle assembly facilities in the United States. … And we will have a supply chain spread out from West Memphis, over to Little Rock down to Hope and over to Texarkana,” Tennille said.

All of that gives Arkansas a “huge advantage” in the recruitment of other auto assembly plants and advanced manufacturing operations.

“That’s been the whole ball game, for us, from the beginning” to have that added dimension, Tennille said.

LOCKHEED SELECTION
Prefacing his remarks that nothing is certain in the government procurement process, Tennille said there are several reasons he is optimistic Lockheed will get the nod to build the JLTV.

First, the Department of Defense often prefers larger companies with greater resources to build new systems. Tennille said that gives the edge to Lockheed.

Also, if war or hot spots around the globe require more JLTVs, Lockheed has other facilities around the nation and globe that could be ramped up. Tennille said Oshkosh and AM General would have “capacity issues” with respect to boosting production.

Tennille also said Lockheed’s Camden plant “has a good reputation” after many years of producing missile components and launching systems. He said the Camden operation in 2012 won the prestigious Malcolm Baldrige National Quality Award for manufacturing excellence.

“In that (defense contracting) industry, Camden is at the top of the list,” Tennille said about the plant’s reputation.