Aug. 5 (Bloomberg) -- The U.S. Army may cut a planned order for satellite-guided artillery shells from Raytheon Co. or Alliant Techsystems Inc. by about 80 percent to help rein in costs, a service spokesman said.
The Army is considering reducing its purchase of Excalibur shells to 6,264 from about 30,000 to save as much as $1.4 billion through 2016, said Lieutenant Colonel Jimmie Cummings, an Army spokesman.
“There are a lot of things to be determined and negotiated as a final decision has not been made,” Cummings said.
Raytheon and Alliant Techsystems are the sole bidders in the winner-take-all competition, the value of which may drop to about $250 million from an original estimate of more than $1 billion, Cummings said. A decision on the competition is scheduled for this month. Defense Secretary Robert Gates is seeking savings of $100 billion over five years, and the Army wants to save about $10 billion through 2016.
The weapon has proven to be the Army’s most accurate shell and has minimized civilian casualties and accidental military deaths during its initial use in Afghanistan and Iraq, the Pentagon’s testing office said this year. The Excalibur has a 50-pound warhead and can be fired from either the lightweight 155mm howitzer cannon or the self-propelled Paladin howitzer.
Alliant Techsystems, based in Minneapolis, looks “forward to completing the competition,” Bryce Hallowell, a spokesman, said in an e-mail. John Patterson, a spokesman for Raytheon Missile Systems, had no comment on the proposed cut.
Raytheon, based in Waltham, Massachusetts, began producing the shells in 2007. Each Excalibur currently costs $102,000, and Army spokeswoman Audra Calloway said the service is seeking a price of $47,400.
Failing to win the Excalibur order wouldn’t be a setback for Alliant, Chief Executive Officer Mark DeYoung said in a telephone interview.
“If we win, it’s an upside to us, so not winning is not a downside,” he said.
Alliant makes other precision-guided mortar shells and if it doesn’t get Excalibur, “we have other irons in the fire,” he said.
Army Vice Chief of Staff General Peter Chiarelli highlighted the Excalibur in a July speech as the type of weapon the service is reviewing to reduce “hidden redundancies.”
The service is looking at a precision guidance kit that can be placed on existing shells for about $600 apiece, he said. That would be less accurate than the Excalibur, he said.
The Army is “performing a critical analysis of all requirements to ensure all capabilities regardless of performance and cost are indeed needed,” Cummings said.
Alliant rose $3.20, or 4.8 percent, to $69.45 at 11:50 a.m. in New York Stock Exchange composite trading. The shares fell 25 percent this year before today. Raytheon climbed 37 cents to $46.71.
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