U.S. TWV Industrial Base Includes a Number of Manufacturers Whose Reliance on Sales to DOD Vary

		Numerous Vehicle Manufacturers and Suppliers Comprise the U.S. TWV Industrial Base

The U.S. TWV industrial base includes seven vehicle manufacturers, over  90 major subsystem suppliers, and potentially thousands of parts and  component suppliers. Four of the seven manufacturers provided  approximately 92 percent of all TWVs purchased by DOD in fiscal years  2007 through 2011. DOD purchased over 158,000 TWVs in fiscal years 2007 through 2011  but plans to buy significantly less from now through fiscal year 2017. DOD  demands for TWVs increased dramatically in response to the operational  demands and threats experienced by U.S. forces during Operation  Enduring Freedom and Operation Iraqi Freedom. Manufacturer Reliance on Sales to DOD Varied

Despite the significant decrease in DOD TWV purchases, the four  manufacturers we met with generally reported that these sales remain an  important part of their revenue stream. For example, according to  manufacturers, suppliers generally produced parts, such as engines,  transmissions, axles, and tires for their commercial vehicles in addition to  supplying parts for the TWVs they produce. TWV Sales to Foreign Governments Were Relatively Few and Generally Purchased with U.S. Funds

U.S. manufacturers sold relatively few TWVs for use by foreign  governments in fiscal years 2007 through 2011, when compared to the  158,000 vehicles sold to DOD over that same period. However, most of  the manufacturers we met with stated that while sales of TWVs to foreign  governments have not equaled those sold to DOD, such sales are  becoming an increasingly important source of revenue as DOD  purchases fewer vehicles. While Afghanistan and  Iraq were the largest recipients of U.S. manufactured TWVs through such  assistance programs, DOD officials informed us that as the war efforts  conclude there, U.S. funding for TWVs for these two countries’ security  forces has declined and is not planned to continue. U.S. Manufacturers and Foreign Governments Identified Multiple Interrelated Factors That May Affect TWV Foreign Sales

U.S. manufacturers of TWVs and foreign government officials we met  with identified a number of interrelated factors that they perceive as  affecting whether a foreign government decides to purchase U.S.  manufactured TWVs. In addition,  these U.S. manufacturers and foreign government officials expressed  mixed views on the effect the U.S. arms transfer control regimes may  have on foreign governments’ decisions to buy U.S. vehicles. The four U.S. manufacturers consider these used vehicles to be  a risk to their future sales of U.S. TWVs to foreign governments because  foreign governments could be less likely to purchase new vehicles from  U.S. manufacturers if the U.S. Army transfers these used vehicles  through foreign assistance programs. Foreign Competition, Different Vehicle Requirements, and Concerns Associated with U.S. Arms Transfer Control Regimes Affect Foreign Governments’ Decisions to Purchase U.S. TWVs

Foreign government and manufacturer officials that we interviewed  identified a number of TWV manufacturers that compete with U.S.  manufacturers for international sales. Foreign government officials also explained that U.S. manufacturers can  generally produce TWVs to meet their governments’ requirements, but  the vehicles U.S. TWV manufacturers are producing for DOD do not  necessarily align with these requirements. While sales of TWVs to foreign governments are generally approved by  the U.S. government once initiated, U.S. manufacturers and foreign  officials said that foreign governments may prefer to purchase vehicle  manufactured outside the United States, in part, due to the amount of  time to process sales and licenses requests and end-use restrictions  associated with the U.S. arms transfer control regimes. Further, there are many foreign manufacturers that can supply vehicles  that meet foreign governments’ requirements. DOD and State provide technical  comments and two of the manufacturers provided clarifications, which we  incorporated into the report as appropriate.
Why GAO Did This Study

DODs need for TWVs dramatically increased in response to operational demands and threats experienced in Afghanistan and Iraq. TWVs primarily transport cargo and personnel in the field and include the High Mobility Multi-purpose Wheeled and Mine Resistant Ambush Protected vehicles. The U.S. TWV industrial base, which includes manufacturers and suppliers of major subsystems, increased production to meet DODs wartime requirements. That base now faces uncertainties as DODs budget declines and operational requirements for these vehicles decrease. In addition to sales to DOD, U.S. manufacturers sell vehicles to foreign governments.
The Senate Armed Services Committee Report on a bill for the National Defense Authorization Act for Fiscal Year 2012 directed GAO to (1) describe the composition of the U.S. TWV industrial base, (2) determine how many U.S. manufactured TWVs were purchased by foreign governments from fiscal years 2007 through 2011, and (3) identify factors perceived as affecting foreign governments decisions to purchase these vehicles. GAO analyzed data from DOD on U.S. and foreign government TWV purchases, as well as sales data from the four primary U.S. TWV manufacturers. GAO also collected data from five foreign governments, including those that did and did not purchase U.S. TWVs.

What GAO Found

The U.S. tactical wheeled vehicle (TWV) industrial base includes seven manufacturers that utilize common suppliers of major subsystems, such as engines and armor. Four of these manufacturers reported that their reliance on sales to the Department of Defense (DOD) varies, in part, as they also produce commercial vehicles or parts. Collectively, the seven manufacturers supplied DOD with over 158,000 TWVs to meet wartime needs from fiscal years 2007 through 2011. DOD, however, plans to return to pre-war purchasing levels, buying about 8,000 TWVs over the next several years, in part, due to fewer requirements.
Almost 28,000 U.S.-manufactured TWVs were purchased for use by foreign governments from fiscal years 2007 through 2011. Approximately 92 percent of these vehicles were paid for using U.S. security assistance funds provided to foreign governments. Iraq and Afghanistan were the largest recipients of such assistance, but officials stated that DOD does not plan to continue funding TWV purchases for these countries. While sales to foreign governments are unlikely to offset reductions in DOD purchases, manufacturers reported that foreign sales are becoming an increasingly important part of their revenue stream.
Sales of U.S.-manufactured TWVs to foreign governments may be affected by multiple interrelated factors, including the availability of used DOD vehicles for sale, foreign competition, differing vehicle requirements, and concerns associated with U.S. arms transfer control regimes. U.S. manufacturers said sales of used Army TWVs to foreign governments could affect their ability to sell new vehicles. U.S. manufacturers and foreign governments also identified a number of non-U.S. manufacturers that produce TWVs that meet foreign governments requirements, such as right-side drive vehicles. While U.S. manufacturers can produce vehicles that meet these requirements, vehicles they produced for DOD generally have not. Finally, manufacturers and foreign officials had mixed views on how the U.S. arms transfer control regimes may affect foreign governments decisions to purchase U.S. vehicles. U.S. manufacturers and foreign officials expressed concerns with processing times and U.S. end-use restrictions, but foreign officials also said that such concerns have not been a determining factor when purchasing TWVs that meet their requirements.

What GAO Recommends

GAO is not making recommendations in this report. DOD, the Department of State, and two manufacturers provided technical or clarifying comments on a report draft that were incorporated as appropriate.