Edina bullet maker can't meet Army demand Staff and wire reports May 7, 2004
Here's a new measure of the intensity of the fighting by the U.S. military.
Alliant Techsystems Inc., the Edina-based munitions maker that is the U.S. Army's sole supplier of bullets, said Thursday it can't keep up with demand from the Army, which is rising to its highest level since the Vietnam War.
Alliant made 1 billion rounds of small-caliber ammunition last year for the Army and will make 1.2 billion rounds this year. But the Army intends to set its annual requirement significantly higher, possibly as high as 2 billion rounds a year, and plans to look for a second supplier, Alliant Chief Executive Officer Daniel Murphy said.
Alliant's ammunition group "last year achieved the largest sales in its history," Murphy said in an earnings conference call with stock analysts. "At our Lake City, Mo., facility, we executed the greatest ramp-up in small-caliber ammunition since the Vietnam War." The higher bullet sales helped boost Alliant's fourth-quarter earnings, which increased 44 percent, the company said.
Murphy said that the Army's ammo demand could remain elevated for five years as the U.S. military, currently engaged in conflicts in Iraq and Afghanistan, continues to fight terrorism.
Boosting bullet production won't be easy, however.
The streamlining of military contractors not only has left Alliant as the sole small-caliber ammo producer, it has also left General Dynamics Corp. as the sole gunpowder supplier for making those bullets.
Gail Wilson, spokeswoman for General Dynamics, said the Falls Church, Va.-based company lacks production lines to make small-caliber ammunition and couldn't build a plant quickly enough to meet immediate demand.
There are few producers outside of Alliant or General Dynamics still capable of producing military ammunition on the scale required, said Loren Thompson, an analyst at the Arlington, Va.-based Lexington Institute, which studies national security issues.
"The Army's industrial base is busted," Thompson said. "A wide range of consumables from ammunition to armor simply can't be produced at an adequate rate during wartime. There is almost no surge capacity."
The Army tries to make up for the limited production capability by stockpiling material during peacetime, Thompson said. The strategy works when the nation enters into conflicts that turn out to be of short duration, but is becoming a problem as the war in Iraq enters its second year, he said.
Army spokesman Major Gary Tallman didn't return calls seeking comment.
Alliant could be the Army's best hope for replenishing its small-caliber firepower.
The company said it is in talks to expand its capacity by another 300 million rounds and will submit a proposal to the Army to become the supplier of the other 500 million the Army needs to reach 2 billion a year.
The Army has committed about $31 million to expand the Missouri plant and increase capacity, Murphy said.
Alliant also is evaluating the possibility of adding small-caliber ammunition production capacity to its Federal Cartridge plant in Anoka, according to company spokesman Bryce Hallowell. The plant employs about 750 people and mostly makes ammunition for hunting and other sports shooting, Hallowell said.
Alliant, which also makes a variety of larger military munitions and rocket boosters for NASA, said that for its fiscal fourth quarter ended March 31, it posted net profit of $50.9 million, or $1.31 per share, compared with $35.2 million, or 90 cents per share, a year earlier. The results included 43 cents from a tax benefit and a 13-cent restructuring charge.
Alliant said it expects to earn between $3.85 and $3.95 a share in fiscal 2005.
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/ dave /