BAE May Have to Suspend M777 Production

LONDON — BAE Systems will suspend production of the M777 howitzer unless it can quickly secure a long-talked about order from India for the lightweight 155mm weapon.

The company said in a statement on Thursday that it had begun consulting staff and unions ahead of the suspension of production at its Barrow, England, facility because of continuing delays in negotiations with the Indian government over the sale of 145 guns.

Up to 200 jobs are at risk at the Barrow site, where BAE also builds nuclear submarines and supports other artillery programs. Its Hattiesburg, Miss., site in the US, which undertakes final assembly and testing of the gun, is not immediately impacted, the BAE statement said.

“The [Barrow] move comes about because of ongoing delays in the US government foreign military sale of M777 howitzers to India,” the company said.

letter of agreement (LoA) between the US and Indian governments for the sale of the towed 155mm weapons expired on Tuesday, triggering a rise in the ceiling price of the package of guns, training and support from US $647 million to $885 million. That price, though, is likely subject to some flexibility if the deal can be finalized quickly.

Nobody is holding their breath for a quick deal. The major price escalation from the US government and BAE is likely to lead to further delay. In addition, India is gearing up for a general election.

India hasn’t managed to buy any new howitzers since the 1980s’ purchase of weapons from Bofors — a deal that became embroiled in a huge corruption scandal involving financial kickbacks.

letter of request for the M777s was received from India in late 2012, and all trials and evaluations completed in January this year. The LoA has been in place since February.

BAE ceased producing assemblies for new gun orders this year and has been investing its own cash, keeping the line alive with work on spares and various inventory items.

But the company said that after months of its own investment, it can no longer maintain staffing levels. The artillery side of the Barrow facility employs around 350 people, the majority on the M777.

The British-based defense contractor has been building the weapon since 2004, predominantly for the US Marines and Army. Over 1,000 guns have been ordered and the last of those weapons, destined for the Australian military, are being assembled at the company’s Hattiesburg.

Barrow is responsible for the welding, machining and fabrication of specialized titanium items, such as the howitzer’s saddle and cradle. Final assembly and test of the M777 is undertaken by around 50 employees at Hattiesburg.

BAE said the Hattiesburg facility is completing assembly of guns destined for the Australians and also resetting some weapons supplied to the US military.'

That work is expected to take the US side of the M777 operation through to around April next year.

The announcement of the potential closure of the UK howitzer production site comes just 24 hours after BAE’s US arm said it was closing its Sealy, Texas, wheeled armored vehicle facility, with the loss of up to 325 jobs

.