Tanks and Tank Components

SIC 3795

Industry report:

This category covers establishments primarily engaged in manufacturing complete tanks, specialized components for tanks, and self-propelled weapons. Establishments primarily engaged in manufacturing military vehicles, except tanks and self-propelled weapons, are classified in SIC 3710: Motor Vehicles and Motor Vehicle Equipment, and those manufacturing tank engines are classified in SIC 3510: International Combustion Engines, Not Elsewhere Classified.

Industry Snapshot

With the end of the Cold War in the early 1990s, U.S. production of heavyweight tanks was reduced to almost nothing. However, in the mid-years of the first decade of the 2000s, the U.S. military carried a surplus of tanks and armored vehicles, which remained from the rapid production rates of approximately 900 new tanks rolled out annually during the late 1980s. The tank played a key role in the Iraq War that began in 2003 and continued into the second half of the decade. Even with the proven importance of the M-1 Abrams tank, the U.S. Army in 2005 continued with plans to reduce its tank fleet to fewer than 2,200 tanks. The expense associated with designing and building new tanks remained prohibitive. Thus, much of the work in the industry involved modernization and retrofitting of main battle tanks. By 2009, value of shipments in the military armored vehicle, tank, and tank component manufacturing industry had reached $14.2 billion, according to the U.S. Census Bureau.

Also affecting the tank industry was a military policy shift toward lighter, faster wheeled armored vehicles. New production focused on increasing the number of Stryker armored vehicles, which feature eight-wheel, all-wheel-drive capability. Nonetheless, main tanks played an important role in the U.S. military action in Iraq. The durability and success of the M1A2 Abrams tank and the Bradley Fighting Vehicle led military experts to rethink the future role of the heavyweight duty tank in modern warfare. Although few new tanks were being built, contractors were engaged in building wheeled armored vehicles and upgrading existing main tanks and armored vehicles.

Modernization and retrofitting of main battle tanks is the main focus of the tank and tank components industry. New high-end tank production, including the Abrams M1A1, was expected to account for only 14 percent of global tank procurement through 2014.

Organization and Structure

The tank manufacturing and component industry has relied mostly on government procurement trends to fund both the development and production of military armor. With few exceptions, defense manufacturers are privately held. Most of the contracts issued by the U.S. Department of Defense are fixed-price contracts that cover both the research/development and production of armored vehicles. These contracts have been problematic for manufacturers because they require considerable investment during the development stage. Even though many of the contracts are multiyear and provide compensation if cancelled, payments usually do not cover the price of new machinery and plants. As a result, there has been a consolidation of players in the defense industry, with many manufacturers having to shed facilities and workers to remain competitive in an uncertain defense-spending environment.

Plants that manufacture tanks and tank components vary between those that are contractor owned and others that are government owned and contractor operated. In the latter case, a plant may close but the facilities remain for possible future mobilization. It is extremely expensive, however, to mothball such facilities and then reopen them.

The only tank production plant still active in the United States during the first decade of the 2000s was the General Dynamics facility in Lima, Ohio, operated by the company's Land Systems Division. General Dynamics closed its other tank facility in Michigan in December 1996. By the time the Detroit-area facility closed, manufacturing employment there had declined to fewer than 100 workers. In its heyday during the World War II years, the Detroit Arsenal Tank Plant built over 22,000 tanks. The modern Lima plant is capable of assembling completed tanks as well as producing tank components. While the Lima plant was responsible for the assembly of the M1A1 and M1A2 tanks, it relied on countless subcontractors across the United States to supply it with key components in the tank assembly process. The U.S. Army also contracts with numerous companies to provide upgrades to existing land systems.

Background and Development

The tank, a British invention from World War I, had the mission of advancing on the static German defense lines in northern France. It was developed to flatten thick coils of barbed wire, fend off machine-gun fire, and rumble over previously inviolable trenches. In short, the tank was to do what great waves of infantrymen had failed to do--break the stalemate of trench warfare.

The tank performed as required during World War I, but was viewed by most strategists as merely a precursor to infantry attack. That sentiment was ultimately put to rest by the German blitzkrieg into Poland in September 1939, when a Polish brigade of cavalry vainly attacked an onrushing wedge of German tanks.

In June 1920, the U.S. National Defense Act was passed into law. This act disbanded the Army's tank corps, a unit created three years previously, and placed all tanks under the command of the infantry branch. Further, the act stipulated that no new branch of the Army, such as a revived tank corps, could be created without Congressional approval. This decision was based on the Army's conclusion that the tank corps had failed to provide either a doctrine or a justification for itself as an independent arm of the U.S. war effort.

The early perception was that the tank-based armies of the twentieth century were slower than the foot soldier's marching rate of a century before. This speculation concerning tank warfare inhibited its role as a support weapon for the infantry for years.

Following World War I, the most plausible threat to U.S. security was a naval war in the Pacific against Japan. In the following decade, Congress reduced the military budget. Senior officers cut costs by halting production and maintenance of equipment. Inevitably, tanks suffered from this policy, and the U.S. Army had no large tank formations during this inter-war period.

The beginning of the mechanization of the U.S. Army began in 1928 after Secretary of War Dwight D. Davies observed the British Army's Experimental Mechanical Armed Force. In response, the United States developed the Christie, complete with a modern suspension system and capable of speeds approaching 40 miles per hour. It was during this period that the War Department recognized that the development of future armies depended on the proliferation of a mechanized force. The tank was, for the first time, perceived as an offensive power in its own right.

In the spring of 1939, the main battle tanks of the United States were still the M1917 and the Mark VIII of World War I vintage. In the prior several years the Army had produced several hundred tanks, the majority being experimental models of light tanks armored with only machine guns. Although some effort had been made to keep the United States abreast of mechanized warfare, until the outbreak of World War II the American experience of armor hardly existed.

Following the collapse of France in June 1940, Congress passed a munitions program to provide materiel for an army of 1.2 million. Supplemental defense appropriations acts authorized $5 billion for armed forces expenditure. By the end of 1940, the country had produced only 331 tanks. By the end of 1941, it had out-produced Germany with 4,052 tanks. Tank production for the next two years was 24,997 and 29,497 tanks, respectively. By the end of the war in Europe, U.S. industry had produced 88,410 tanks, of which 57,027 were medium tanks. More than 8,000 subcontractors working in some 850 different towns and cities throughout the United States had a hand in the production of these tanks.

By 1943, the U.S. Army had created 16 armored divisions and 65 independent tank battalions. Each of these armored divisions consisted of 10,937 men and 2,650 vehicles, of which 248 were tanks. Tanks were used as a highly mobile force for pursuit, exploitation, and disruption of unarmored forces, rather than as an arm of attack against other armored formations. This doctrine had important consequences for American tank design and development. The first of the wartime tanks, the M3 Stuart light tank and M3 Grant/Lee medium tank, were developed from pre-war designs. The main American battle tank of the war, the M4 Sherman, was first planned in March of 1941 and produced a year later. Weighing approximately 33 tons and equipped with a 75 mm dual-purpose gun, it was highly maneuverable and reliable and boasted a road speed of just under 30 miles per hour (mph).

The U.S. responded to Germany's Panther and Tiger tanks by producing the M26 Pershing. This tank held a 90 mm gun, weighed 42.5 tons, and had a top speed of 25 mph. This tank, however, played a relatively small role in the war because it had less speed and maneuverability than the M4 Sherman and because tactical air power was generally used to halt the German armored thrust. By 1947, due to the success of air power and the invention of atomic weapons, the role of the tank had again come into question.

During the Korean War, U.S.-made tanks proved to be less than perfect. The M26 Pershing was underpowered for Korea's mountainous terrain, and the Army at first was compelled to rely upon its Sherman tanks. The Army eventually added the more powerful M46 and M47 Patton tanks to its lineup. In fact, the Korean War confirmed the tank's role as an essential part of the U.S. fighting forces. The heavier armor developed during this conflict changed the tank's principal role to fighting and destroying other tanks.

Throughout the 1950s and early 1960s, the U.S. Army continued to regard its armored forces as central to its fighting doctrine. When U.S. forces were committed to Vietnam in 1965, however, armor had a reduced role. Still, the M48 tanks' firepower and mobility were valuable assets in creating quick reaction teams for preventing infiltration by enemy units. However, to work well, the teams had to be part of an all-arms formation. Without helicopters, air and artillery support, and infantry, the armored units could be unwieldy, noisy, and less than effective. Tank battalions successfully carried out roles such as route security, convoy escort, and border protection.

There were no major developments in the tanks industry during the 1970s. The anti-war movement of the late 1960s and early 1970s, coupled with the perception that the United States had fought a losing battle, resulted in the redeployment of government resources into domestic endeavors. In 1980, however, President Reagan vowed to rearm the United States with an unprecedented $1.6 trillion defense spending program over the next six years. The Defense Department's renewed interest in planning and multi-year funding of contracts boosted the sagging defense industry. The tank and tank component sector of the defense industry was expected to grow by 12.6 percent over this period with non-defense growth hovering at 4.5 percent.

The Army's M-1 tank benefited greatly from the increased defense expenditures. A heavy tank with a combat load of 54.5 tons, the M-1 was able to carry a crew of four and had a maximum speed of 45 mph on the road and 30 mph cross country. The tank's road range stood at 275 miles and its main armament was a 105 mm gun. The M-1 tank was criticized for transmission malfunctions and the need for frequent maintenance of other components during the test process. In addition, the M-1 was found to be incapable of digging itself into a hull-down battle position without the assistance of bulldozers. Nonetheless, the Defense Department budgeted for 7,058 M-1s at a cost of roughly $19 billion.

By 1986, defense budget outlays had grown to $200 million annually. These high levels of defense spending stimulated many U.S. industries. In 1986, 75 sectors of the economy produced at least 5 percent of output for defense purposes, and 13 sectors produced at least 30 percent of output for delivery to the U.S. Department of Defense. The passage of the Gramm-Rudman deficit reduction bill, as well as reduced government research and development budgets, however, resulted in declines in defense production throughout the remainder of the 1980s.

The multiyear structure of re-armature programs from the 1980s temporarily insulated the defense industry from budget cuts. In the wake of reduced defense expenditures, many manufacturers began turning to foreign markets to maintain and expand their production base.

Significant events in the 1990s that had a major impact on defense forces and their supporting industries included the departure of Soviet forces from Eastern Europe; the dismantling of the Warsaw Pact; the reunification of East and West Germany; the successful eviction of Iraq from Kuwait by the Allied Coalition forces; and various United Nations peacekeeping efforts. The very success of Operation Desert Storm prompted questioning in the U.S. legislature about the rationale behind developing costly new weapons systems. The ground war lasted just 100 hours with little loss of life or equipment on the Allied Coalition side while Iraqi forces suffered massive losses of both men and equipment.

In 2000, President Clinton authorized an increase in defense procurement spending, the first time in 13 years. The U.S. Army was in the third year of a 1996 contract with General Dynamics to upgrade 600 M1A2s. The digital command and control capabilities, new infrared gunner systems, and upgraded commander thermal sights were part of the ongoing Systems Enhancement Package (SEP). Further improvements in the upgrade included under-armor auxiliary power units, a new computer mass memory unit, and color display and maps. There also was ongoing fielding of M1A2 tanks to both Fort Hood, Texas and Fort Carson, Colorado in 1999.

The trend toward private venture projects and cooperative agreements with foreign countries was necessary for the survival of U.S. defense manufacturers. General Dynamics, for example, built between 500 and 1,000 tanks for Turkey between 2000 and 2010. This joint venture operation had the tanks designed here but both components and final assembly taking place jointly in both countries. General Dynamics also produced several hundred tanks for Greece.

The Land Systems unit of General Dynamics estimated delivery of 240 M1A2 Systems Enhancement Packages to the U.S. Army at a rate of 10 per month beginning in August 1999. An extension of that multiyear contract included refurbishing additional tanks through 2005. In 2000 General Dynamics landed part of a $4 billion contract with the U.S. Army to equip the Army's new Stryker Brigade Combat Teams with Stryker armored vehicles. An eight-wheeled vehicle, a Stryker is lighter and faster than its heavyweight cousins but carries less firepower and provides less protection.

Raytheon Company received a $13.3 million contract for the development of the Tank Extended Range Munition (TERM) for the Army's M1A2 tanks in 1999. This program was divided into two segments. Phase 2 provided a multimode seeker and chemical energy warhead. Phase 2A fabricated the multimode seeker components, developed software and fusion algorithms, and integrated hardware.

General Dynamics was the sole source of major battle tanks for the U.S. Army. Although the company completed its contract of 600 M1A2 Abrams tanks in 2001, manufactured in Lima, Ohio, the company continued to produce Abrams tanks for its international customers. For example, Egypt purchased 777 M1A1 tank kits, Saudi Arabia bought 315 M1A2 Abrams tanks, and Kuwait purchased 218 M1A2 Abrams tanks. The company was awarded a multiyear U.S. military contract for 307 M1A2 Abrams System Enhancement Program tanks to upgrade the existing systems.

In January 2005, General Dynamics Land Systems was awarded an additional $161 million for a $382 million contract to modify and modernize the entire fleet of 129 Abrams M1A2 tanks for the U.S. Army's 3rd Armored Cavalry Regiment. This was part of the Army's overhaul of all its Abrams tanks. Improvements to the British-made Bradley tanks also were underway.

New production also focused on continued increases in the number of Stryker armored vehicles. In April 2005 General Dynamics accepted a contract revision with the U.S. Army to provide an additional 99 Stryker armored vehicles, upping 2005 procurement totals from 575 to 674 with deliveries scheduled through 2007. General Dynamics already had delivered more than 1,000 Strykers, with the final production goal set at 2,100.

During the mid-years of the first decade of the 2000s, the military was undergoing a major modernization project titled Future Combat Systems (FCS). More than 30 percent of the Army Tank-Automotive and Armaments Command budget was allocated to FCS-related projects. The ambitious program was designed to create a technologically advanced military. The first step under study was the development of network technology to integrate all land and air vehicle operations. Estimated cost for research and development alone was $25 billion, with completion costs running $200 billion. The FCS network was scheduled to be operational between 2008 and 2014. The Abrams tank was expected to play a central role in the tank fleet of the FCS plan, with necessary equipment upgrades coming later in the project's development.

In 2006, world markets spent almost $3.2 billion for new production main battle tanks, while the U.S. Department of Defense awarded more than $2.5 billion worth of contracts for the maintenance, reset, and upgrade of its M1 Abrams inventories. Thus, the U.S. was spending almost 80 percent rebuilding its tanks compared with what the rest of the world was spending for new vehicles. For example, China spent $375.32 million for 110 new-production tanks, less than 15 percent what the U.S. government spent on the M1 Abrams.

That year, the industry manufactured $2.89 billion in tanks and tank components with 7,924 employees who earned more than $463 million in pay. As military actions in Iraq and Afghanistan continued into the late 2000s, spending and revenues increased dramatically. In 2007, there were 70 establishments producing tanks and tank components, which had 13.294 employees who earned just under $794 million in pay and produced approximately $9.27 billion in shipments. Forecast International, Inc., which provides market intelligence and analyses for the aerospace, defense, military electronics, and power systems industries, projected that the international market would produce more than 7,600 main battle tanks, worth in excess of $31.5 billion, through 2016.

Current Conditions

Because of the prohibitive costs involved in manufacturing armored tanks and vehicles, the production of high-end products was not expected to see significant growth into the early 2010s. According to a 2011 Forecast International report, "The upper tier of the international market for main battle tanks consists of the state-of-the-art designs with correspondingly high unit prices (more than $5 million) � we expect new production of high-end tanks (Ariete 2,Karan, and Merkava Mk 4/Mk 5) to remain relatively low." Lower-end tanks were expected to continue to dominate the global market through 2020.

Although IBISWorld concurred that domestic production in this industry would slow due to reduced demand as well as federal budget cuts, it predicted that demand from foreign governments would help offset a major decline in the industry According to a report released in August 2011, "Over the next five years, revenue will shrink marginally, as several factors cut into growth. In particular, the Army is set to cut its procurement budget for industry items, resulting in lower demand."

Industry Leaders

Based in Falls Church, Virginia, General Dynamics Corporation is among the nation's largest defense contractors and produces a wide range of major weapons systems for all branches of the armed forces. General Dynamics concentrated on shipbuilding and marine systems, land and amphibious combat systems, information systems, and business aviation, along with its tank business. Among its many military projects, the company's Land Systems Division produced the upgraded M1A2 battle tank and Stryker armored vehicles. The Land Division benefited from strong military spending during 2004, increasing its divisional revenues to $4.01 billion, up from $2.79 billion in 2003. In 2007, the company reported a first-quarter profit increase of 11 percent, helped by a strong demand for its Army vehicles and Gulfstream business jets. Abrams tanks and Stryker fighting vehicles continued the operations in Iraq and Afghanistan begun earlier in the decade. Increased military spending in the late 2000s resulted in company revenues of $2.4 billion in 2010, at which time the company employed 90,000 workers. About 70 percent of revenues came from the U.S. government.

Raytheon Company, a global leader in defense electronics, was headquartered in Waltham, Massachusetts, and had several divisions, including Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services. The company won a $32.5 million contract in 2006 from the U.S. Marine Corps for the M1A1 tank Firepower Enhancement Program (FEP). Reflecting the U.S. intention to upgrade its tank fleet, the contract involved production of FEP sensor kits, with $2 million dedicated to spare parts. Raytheon delivered the sensor kits and spare parts in the summer of 2007. While Raytheon does not manufacture tanks, it provides high-tech electronics and information systems components and upgrades. Raytheon reported overall revenues of $25 billion in 2010. The U.S. government accounted for nearly 85 percent of company sales.

Subcontractors make up the remainder of the industry players in the tank and tank components industry. This group includes not only many of the top 10 defense manufacturers but also hundreds of smaller entities that produce more specialized and highly sophisticated subsystem equipment.

Workforce

According to the U.S. Census Bureau, in 2008 the military armored vehicle, tank, and tank component manufacturing industry employed 19,304 workers, a figure that rose to 20,285 in 2009. Of these, 62 percent of workers were directly engaged in production, while the remainder were employed in management and support functions. At the turn of the century, companies like General Dynamics and Raytheon employed nearly 100,000 workers each in various defense-related capacities, although employment had dropped somewhat by the second decade of the twenty-first century.

America and the World

The United States's tank and tank components industry is the largest and most technically advanced in the world. The health of the industry is closely tied to its ability to forge international cooperative agreements with larger arms-producing countries such as Russia, Germany, Britain, France, and China and to increase foreign military sales of tanks and tank conversion kits. International sales of the Abrams M1A1 kits and M1A2 tanks were strong in the Middle East near the end of the twentieth century. Egypt, Greece, Turkey, Saudi Arabia, and Qatar expressed interest in the M1 tanks. Therefore, the U.S. Army and General Dynamics combined efforts to upgrade the tanks for sales to these countries. In 2005, General Dynamics continued to provide Abrams M1A1 kits to Egypt as part of a multiyear contract agreement for a total of 880 tanks.

According to Forecast International, Inc., the global market for main battle tank production was expected to reach 8,100 by 2014, with a value of $33 billion. Although Europe and the United States were expected to continue to produce high-end, technologically advanced tanks, new production will be dominated by lower-end, less expensive models, including Pakistan's Al-Khalid, the People's Republic of China's Type 98, and the Russian Federation's T-90. Dean Lockwood of Forecast International stated: "We expect production of these three tanks to account for nearly 43 percent of all new tanks rolling out worldwide, worth nearly 38 percent of the market in value, through 2014."

Research and Technology

Research and development funding focuses on upgrades of systems dealing with targeting and night vision. Much of the production in the defense industries is inherently inefficient because high volume, mass production techniques are not applicable. Except for the turret and hull components of a tank, most of the production involves small batch processing of relatively complex items with frequent modifications or changes in design. In this type of low volume manufacturing, specialized equipment is underutilized, and inventories are relatively high.

Although computer-aided automation has moved slowly into the tank production process, computer-controlled machine tools are standard fixtures in machining operations. Examples of these processes include automated spray systems used for coating metals; automated inspection and optical measuring systems; and computer-aided manufacturing applications used for forging and electron beam welding in tank production. Other areas of the production process that have been computerized consist of process modeling, performance measurement, and online production information systems.

Many of the technological changes that have taken place in tank manufacturing involve metalworking. Automated metal cutting systems are in place that use computer-controlled laser machining techniques. Computer-integrated welding systems are in places that make use of sensory process controls. The technology is available to transform the manufacturing system of tank production facilities into a totally computer-integrated process, but the economies of scale associated with expensive outlays in plant and equipment have deterred the manufacturers from pursuing this option.

The Department of Defense has made land navigational systems a priority for improvement and installation in all tank subsystems. In the wake of Operation Desert Storm, more emphasis was placed on the development of friend-or-foe devices to reduce friendly fire casualties. Such technology would become a part of the tank's vehicle protection system, which already included threat displays, sensors, and decoy launchers.

Other areas of research included ways to construct smaller and lighter main battle tanks, armored turrets to protect the vulnerable top of the tank, development of more powerful cannons, experimentation into a common chassis for futuristic combat vehicles, and guns that will utilize electromagnetic and electrothermal cannons. Electromagnetic guns use electric currents as their power source and can power a round farther and faster than a conventional cannon. Electrothermal guns use hot gases and a high-energy charge to propel artillery with comparable results.

By 1999 the Abrams tank featured increased armor protection; suspension improvements; nuclear, biological, and chemical protection; a Commander's Thermal Viewer and improved weapon station; data and power architecture; an embedded diagnostic system; and an upgraded fire control system. The new radio interface was compatible anywhere on the battlefield.

The improvement of armor performance was on the Army's research and development agenda in the mid- to late 2000s. The goal was to produce a lightweight, fast-moving vehicle that provided the same level of protection as a heavyweight tank. The problem was that adding sufficient steel armor adds too much weight, thus slowing down the vehicle, decreasing payload and causing engine strain. Other materials, such as ceramics, titanium, and Kevlar, are lighter weight, but have proven to be cost prohibitive. Whereas military-grade steel was approximately $1 per pound, ceramic composites cost $2 per pound; titanium, $7 to $8 per pound; and Kevlar, $25 per pound.

Another innovation scheduled for testing on Strykers was an active defense system that could detect and destroy rocket-propelled grenades before they hit the vehicle. Originally scheduled for installation as part of FCS, the war in Iraq caused the Army to speed up the project, which it planned to eventually install on all armored vehicles.

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