Awaiting the downturn
WASHINGTON -- The Lake City Army Ammunition Plant in Independence, Mo., produces nearly 1.4 billion bullets a year, a dizzying figure driven by the demands of war.
"It's actually mind-boggling," said Karen Davies, Lake City's general manager.
The question is, for how long? Although no one knows when the conflicts in Iraq and Afghanistan will end, Davies and other ammunition industry executives understand the heavy orders won't last forever.
So as they churn out bullets -- and millions hope for an end to the wars -- ammunition makers are preparing for a downturn in business.
They worry about a return to the post-Cold War period when the Pentagon slashed spending for small-caliber rifle rounds and other munitions, forcing suppliers to cut payrolls, mothball manufacturing equipment and lose hard-to-get environmental permits. Some closed their doors.
"The demand is fast when it comes, and then it can drop off very quickly," Davies said.
After the Sept. 11 attacks, when the need for ammunition spiked, the Pentagon scrambled to meet requirements. Nearly $93 million in taxpayer money was spent overhauling domestic facilities. Foreign suppliers, including one from Israel, were called in to fill the gaps.
Military officials now talk about a need to protect the industrial base, but they also say it makes no sense to spend money for bullets and bombs the troops might not need.
President Bush is under pressure to begin withdrawing U.S. troops from Iraq early next year. The 2008 elections, which could result in Democrats running both the White House and Congress, add to the uncertainty.
"You don't want to go down to nothing and then say, 'Oh my gosh! We've got to ramp up again,'æ" said Davies.
Producing ammunition is a network of public and private facilities. In 1978, there were 318 plants in the U.S. involved in ammunition production. By 1995, six years after the Berlin Wall fell, there were fewer than 100, according to Loren Thompson, a defense analyst with the Lexington Institute in Arlington, Va.
U.S. spending for ammunition dropped 78 percent.
"Anytime the industry shrinks, you lose expertise and skill," Thompson said.
Officials at the military's Joint Munitions Command in Rock Island say there are now more than 170 commercial ammunition companies that make everything from gunpowder to grenades.
Adding to that base are 10 weapons production plants, including Lake City, that are owned by the government but managed by contractors. Three others are owned and run by the government. Of these 13 facilities, four will close by 2011, victims of the military base closing round conducted by the Pentagon in 2005.
Built in 1941, Lake City is operated by Alliant Techsystems, a multibillion-dollar weapons company headquartered in Edina, Minn. When Alliant began managing Lake City in April 2000, it had 650 employees there making 350 million small-caliber rounds annually. Now Alliant has 2,500 workers, and current output is 120 million rounds a month -- nearly 4 million bullets a day.
In May, Alliant's Ammunition Systems Group, which also operates a government plant in Radford, Va., reported sales of $1.28 billion, a 15 percent increase over the prior fiscal year, and an operating profit of $113 million.
Alan Beuster, chief of the Joint Munitions Command's industrial preparedness division, said his office is studying plans for minimum production rates that would keep manufacturing lines viable for longer periods.
Paradoxically, peace may be as profitable as combat to certain sectors of the ammunition industry. The military uses more gun rounds in training than in combat, according to defense industry analysts. Alliant also can sell its bullets to law enforcement and sporting communities, an option not available for companies manufacturing tank rounds and artillery shells.