FMC, Harsco to Combine Defense Businesses
CHICAGO (AP) _ Two major manufacturers of military vehicles and other defense hardware have announced plans for partnership in a jointly owned company.
The agreement, announced Wednesday by the FMC Corp. and the Harsco Corp., covers most of the corporations’ defense businesses, and is the latest in a series of defense industry consolidations.
Under the letter of understanding signed by both companies, Chicago-based FMC would own 60 percent of the new company, while Harsco, based in Camp Hill, Pa., would own 40 percent.
The new entity, which has not yet been named, would have estimated sales next year of $1.2 billion, the companies said.
″This combination will create the most capable, diversified company in the combat vehicle industry,″ said Robert N. Burt, chairman and chief executive of FMC.
The agreement is subject to approval by directors of both companies, with completion of the transaction expected in the first half of 1993, FMC said.
Harsco chairman Malcolm W. Gambill said the project will allow the companies to consolidate their defense operations in an era of shrinking defense budgets.
″I think it’s a necessity,″ said Bill Highlander, a spokesman for FMC’s California-based Defense Systems Group. ″Current defense spending simply won’t support all the businesses and capacities that are out there.″
Highlander echoed views expressed last month by Norman R. Augustine, chief executive and chairman of the Martin Marietta Corp. when he announced that Marietta was buying General Electric Co.’s aerospace business for more than $3 billion. Augustine said a declining defense budget means defense companies must consolidate early to survive.
″These companies will be survivors,″ said J. Jeffrey Cianci, an analyst who tracks FMC for Bear Stearns & Co. in New York. ″These companies have great expertise, particularly in ground-based systems, and I think the outlook is good for both of them.″
For the newly announced partnership, FMC would contribute all its defense manufacturing operations, which include the Bradley Fighting Vehicle and other tanks and armored vehicles, and naval gun and rocket-launching systems.
Harsco would contribute its BMY Combat Systems Division, which makes tracked combat vehicles and the M109A2 self-propelled Howitzer, a cannon that is widely used around the world.
Harsco will retain its BMY Wheeled Vehicles Division, which makes five-ton Army trucks in Marysville, Ohio.
The companies did not say whether the transaction will result in job cuts. ″It’s an ongoing process and we’re still in the initial phases,″ said Harsco spokesman Rob McIlvaine. ″It’s too early for that type of analysis.″
FMC employs more than 6,000 people at its defense operations in Santa Clara and San Jose, Calif.; Minneapolis; Aiken, S.C.; Anniston, Ala., and Aberdeen, S.D.
BMY Combat Systems Division employs about 2,000 at operations in York, Pa.