Defense cos battle for huge IDF artillery order

Athos howitzer Photo: Elbit Systems
Athos howitzer Photo: Elbit Systems

Elbit Systems is vying against a consortium of IAI, IMI, and German company AGW.

Who will sell the IDF the next generation of artillery to be aimed at targets and rocket launching areas in Lebanon, Syria, and the Gaza Strip? Tension is rising in the defense industries, due to uncertainty about the structure of the major artillery deal being planned by the Ministry of Defense, which is meanwhile keeping its cards close to its chest and deliberately making things unclear.

In this futuristic procurement plan, IDF artillery forces will be equipped with innovative self-propelled long-range cannons with a high degree of accuracy and rate of firing, and which can be deployed easily and quickly according to the dynamic operational needs on the battlefield. The new cannons are slated to replace some of the US M-109 cannons, which the IDF has been using for decades, in the coming years.

Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), which acquired the Soltam plant in Yokneam in 2010, is offering the Ministry of Defense its advanced 155-mm Athos howitzer. The Athos can shoot six shells a minute at a target 40 kilometers away.

Other defense companies can also smell the big money that will come from the Ministry of Defense, and they also want it. Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), Israel Military Industries Ltd. (IMI Systems), and German concern KMW have joined forces in preparation for the Ministry of Defense's procurement plan, and are offering a cannon developed by the German company. IAI does not make artillery, but it is convinced that its cooperative venture with IMI and the German concern can produce an effective system that will meet all of the IDF's future artillery needs.

It is believed that procurement of the new cannon will amount to hundreds of millions of dollars. The entire plan is in the hands of a Ministry of Defense Administration for the Development of Weapons and Technological Infrastructure special team. The team is engaged in devising specifications for the new weapons system, based on an analysis of the IDF artillery forces current and future needs.

The plan to procure a new self-propelled cannon for the IDF has been discussed for many years, and the defense companies have the impression that it is now approaching the final hurdle. Israel weapons companies sources believe that in the coming weeks, the specialist team will submit its recommendations to Ministry of Defense director general Maj. Gen. (res.) Udi Adam for his decision on the format for a contract with the company to supply the cannon.

While the Ministry of Defense is being sparing in the details and information it releases about its plans, emotions are simmering below the surface. Some of the defense companies fear that the Ministry of Defense is inclined to prefer Elbit Systems' cannons, and is considering a sole supplier agreement with the company. Elbit Systems has already set a precedent by winning a previous Defense Administration for the Development of Weapons and Technological Infrastructure tender for the development and production of a cannon for demonstrating technology for the IDF.

The other companies, which also want to benefit from a slice or two from this rich cream cake, are pondering the question of why the Ministry of Defense is avoiding the publication of a tender summoning companies to offer their systems in order to select the most suitable one, based on price and performance.

The group composed of IAI, IMI, and KMW plans to offer the Ministry of Defense the AGM cannon, which professional sources say fulfills the needs previously specified by the IDF artillery corps for the special team: a range of at least 40 kilometers, advanced mobility and navigability capabilities, and operation by a limited number of personnel.

"Why is the question of a sole supplier relevant when there are six other companies offering their own cannon?," wonders a source involved in the question, who is following the decision-making process in the emerging cannon deal.

The Ministry of Defense said in response, "Carrying out the project to develop a future self-propelled cannon for the IDF is now under consideration by a special Defense Administration for the Development of Weapons and Technological Infrastructure committee. When its work is completed, the committee's recommendations will be brought to the director general for discussion."

Questions by "Globes" about the timetable for a decision about the type of cannon to be procured; the monetary amount of the future deal, the timetable for supplying the new cannon to the IDF, and the considerations guiding it in deciding whether to prefer any particular company as a sole supplier went unanswered.

In recent weeks, IAI heads, including CEO Yossi Weiss, have asked the Ministry of Defense to open procurement of the cannon to a tender. To "Globes," the company commented, "IAI respects the examination process being conducted by the Ministry of Defense, and expects a decision that will allow fair competition for the benefit of the IDF and the Ministry of Defense."

Employment for thousands

Other sources involved in the matter see nothing wrong with a possible decision by the Ministry of Defense to contract with Elbit System as a sole supplier of the cannon. These sources mentioned past giant deals in which the Ministry of Defense contracted with companies like IMI and Rafael Advanced Defense Systems Ltd. as sole suppliers in procurement plans for radar, active defense systems for armored fighting vehicles (AFVs) and tanks, satellites, air defense systems, etc.

Elbit Systems said, "Elbit Systems Land Systems and Soltam is the only manufacturer of cannon in Israel, and one of the few in the world that have been developing and manufacturing advanced artillery for decades. The cannon that the company is offering the IDF is based on profound knowledge and experience acquired over decades of development, production, and supplying its cannon to the IDF and customers around the world."

Elbit Systems added, "The cannon that will be offered to the IDF will include ready and proven operational elements and systems supplied regularly by Elbit Systems to many customers around the world. These foundations are in addition to advanced technological capabilities that will make the cannon one of the most advanced in the world. If Elbit Systems wins the project, the new cannon will be a completely Israeli development, with more than 500 workers engaged in its production in the first circle and another 1,000 in the secondary circle, all in outlying areas."

Published by Globes [online], Israel Business News - - on January 17, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Athos howitzer Photo: Elbit Systems
Athos howitzer Photo: Elbit Systems
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018