A parts shortage caused Oshkosh to close a manufacturing line for two weeks in the third quarter and contributed to lower defense revenues for the company in the quarter, executives said during an earnings call Thursday.
“Revenues for the defense segment were lower in the quarter versus the prior year due to lower vehicle production as a result of both significant production disruptions caused by parts shortages and planned reductions in [Defense Department] spending on tactical wheeled vehicles,” CEO John Pfeifer said on the call.
Supply chain struggles aren’t unique to Oshkosh and have been a frequent topic of discussion in the defense industry. On earnings calls this week, Raytheon and Boeing reported major financial hits in the third quarter caused by supply chain issues. Oshkosh reported a 20% decrease in defense sales in the third quarter.
“Axles and related components drove the most significant disruptions impacting both sales and manufacturing efficiencies,” Pfeifer said while briefing investors on defense earnings.
Shortly before the call ended, Oshkosh Chief Financial Officer Mike Pack downplayed the supply chain woes, noting that the company’s production lines are back on track.
“Defense really hasn't had a lot of significant disruption due to supply chain,” Pack said. “They've certainly had some, but not to the magnitude of some of our other businesses, with some of the mentioned axle casting challenges that shut our line down for two weeks. We're back to running at rates right now.”
After the call, Oshkosh Defense spokeswoman Alexandra Hittle told Inside Defense in an email that the company had “faced near-term supply constraints,” adding there hasn’t been a “long-term impact on the delivery schedule for Defense programs.”
“The specific reference to axle parts in [Thursday’s] earnings call was primarily related to the production of our commercial vehicles,” Hittle said in responding to a question about which assembly line was shut down. “Oshkosh Defense operates an integrated assembly line that produces both defense and commercial vehicles on the same line, and the impacted line was shut down for two weeks during this parts shortage.”
But on the earnings call, Pfeifer and Pack mentioned the axle issue almost exclusively when talking about the defense business.
Pfeifer said he was “proud of our team's resiliency” even as it contended with “a major shortage of axle castings in the defense segment, which caused two weeks of lost production.”
Pack also discussed the issue as it related to the defense business: “Defense production was impacted by a number of axle and related component shortages during the quarter.”
Briefing materials accompanying the call emphasized the impact of supply chain disruptions on multiple sectors of the company, including defense. A slide deck said Oshkosh’s defense business faced “lower year-over-year revenues driven by supply chain disruptions and lower DOD tactical wheeled vehicle requirements.”
An Oshkosh press release reporting the quarter’s results attributed the drop in sales in part to the supply chain disruptions: “Defense segment sales for the third quarter of fiscal 2022 decreased 20.2 percent to $518.7 million due to lower Joint Light Tactical Vehicle program volume driven by supply chain disruptions and lower customer demand.”
At the annual meeting of the Association of the United States Army earlier this month, George Mansfield, Oshkosh's vice president and general manager of joint programs, told Inside Defense that the company had faced supply chain hurdles on the JLTV, but said it has hit all its JLTV targets.
“We have a very efficient production facility,” Mansfield said. “Our supply chain is very robust. You know, we got a pandemic going on and we have not stopped our JLTV line ever since day one.”
The company has so far built more than 18,000 JLTVs since winning the initial production contract in 2015.
Oshkosh is participating in a competition for a follow-on production contract for the program. The company argues that its experience making the platform means it is best equipped to win that competition.
“We have not missed a delivery,” Mansfield said. “We have not missed a fielding and our line kept moving. And it continues to move every day.”