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Tuesday, May 28, 2024

GM Defense: A Concord factory is helping revive a proud legacy.

The automotive giant has ambitious defense contracting plans.

General Motors is making a push to become a significant player in the defense industry, with Cabarrus County serving as a key beachhead.

The Detroit-based company already bases its motorsports technical division at the Hendrick Motorsports campus near Charlotte Motor Speedway, about 15 miles northeast of the Queen City’s downtown. A main mission there is to achieve success for Chevrolets speeding around NASCAR race tracks.

Now the company is pumping two vehicle product lines that it considers fundamental to its vision of meeting demand from supplying the U.S. defense complex and governments of friendly nations around the globe.

Nine-passenger vehicles that can be carried by helicopters are built in Concord.

Since 2020, GM Defense has been working on a $214 million U.S. Army contract to produce infantry squad vehicles, or ISVs. They are intended to help soldiers move quickly in tense military situations.

The first few ISVs were designed at GM’s Milford, Michigan, engineering center. But since 2021, about 750 ISVs have been completed — through mid-April — by about 30 GM employees at a company-owned, former warehouse building in Concord. Three-fourths of the team previously worked in the motorsports industry as mechanics and assemblers, says Chad Allman, the plant manager and a 32-year GM veteran.

Separately, GM Defense won a 10-year contract with the U.S. Department of State to deliver heavy-duty sport utility vehicles. The deal has the potential for as much as $300 million in revenue, GM said in November.

SUVs are aimed at providing greater safety for diplomats and other government officials riding around Washington, D.C., and other capitals across the globe, while offering the same ride, technology and comforts of GM’s commercial Suburban brand.

Production of both vehicle lines shifted in recent weeks a couple miles south to a new 275,000-square-foot building at the Hendrick acreage. Employment of assemblers of the infantry vehicles and SUVs is expected to reach about 80 over the next year or so. But the structure’s size suggests a much larger workforce is likely, depending on GM Defense’s ability to win more contracts and develop other products.

Cabarrus County is thrilled by expansions at the Hendrick campus, which represents an important employment hub, says Page Castrodale, executive director of the county’s economic development arm. She notes that GM’s experience “proves the ability of our residents to make just about anything in Cabarrus County.”

GM Defense’s President Stephen duMont

ATTACK PILOT
The automaker’s effort is led by GM Defense President Stephen duMont, who is based in northern Virginia. He joined GM in 2021 after a dozen years at Raytheon (now renamed RTX), holding key posts in its missile systems, intelligence and space units. He had previously worked for Boeing and BAE Systems.

Though never based in North Carolina, duMont served in the military for eight years. He was an attack helicopter pilot and did training flights over the Uwharrie Mountains from Fort Liberty, the largest U.S. Army base and formerly known as Fort Bragg.

He praises Cabarrus County as a logical site for GM Defense because of its rich talent base of experienced mechanics and car assemblers. 

Indeed, the N.C. location isn’t coincidental. Hendrick Motorsports owner Rick Hendrick is among GM’s most prominent auto dealers, having used his initial Chevrolet franchises in Bennettsville, South Carolina, and Charlotte in the late 1970s as a springboard to becoming owner of Hendrick Automotive Group. It now tops $12 billion in annual revenue, ranking among the largest U.S. dealership companies.

He’s probably even better known for the successful racing teams that have put him atop the NASCAR world for decades. His Concord site has been home to GM’s $45 million Charlotte Technical Center motorsports operation since 2022.

Hendrick Motorsports, which employs about 600 people, has diversified into defense work in recent years. It has about 100 employees working on making defense-related products such as carts that can carry 500 pounds of equipment. Many of them are engineers and mechanics with racing backgrounds, says Scott Lampe, the company’s chief financial officer.

For GM’s ISV, Hendrick assembles the steel skeleton used as the vehicle’s roll-over cage, helping soldiers avoid injury in the same way that race-car drivers survive horrific wrecks at Sunday NASCAR events. “The ISV is one of the best-protected vehicles out there, and we owe that to our experience in motorsports,” duMont says.

The company’s close relationship with Hendrick and the dealer’s personal passion for supporting the U.S. military convinced GM that North Carolina was the place to expand the defense unit, he adds.

GM Defense’s two key product lines have different military missions. The ISVs weigh about 5,000 pounds, light enough to be carried by military cargo planes or helicopters that can drop them into challenging environments. The program was developed out of the Army’s request to give more mobility to its 82nd and 101st Airborne Air Assault divisions, which are based at Fort Liberty and Fort Campbell in Kentucky, respectively, duMont says.

Those famous troopers drop into dangerous situations, then typically travel five or 10 kilometers to close on the enemy. The ISVs can transport as many as nine soldiers to an intended location, rather than relying on heavy tanks or walking through enemy terrain.

The vehicles can be modified to carry fewer troops and more cargo. They don’t have armor and aren’t intended to be involved in firefights.

Meanwhile, the SUVs are intended to protect diplomats and other government officials from harm, while generally looking like a Chevrolet Suburban for sale at a local dealership. Rather than just tacking on stronger armor, the new heavy-duty SUVs are designed by GM from the ground up to incorporate heavier materials and different systems that don’t harm the vehicle’s handling and performance.

GM Defense’s SUVs weigh at least double a typical Suburban, which puts greater pressure on brake systems, engines and other parts. That underlines GM’s conviction that it can shake up defense contracting by integrating its vaunted manufacturing and engineering prowess with military demands for high-quality vehicles

Traditionally, the Defense Department has helped fund development of new vehicles for companies that don’t specialize in such product innovation. But GM can modify its existing lineup to speed deployment and reduce expense, duMont says. That’s a different approach than the production of battlefield stalwarts such as Abrams or Bradley tanks, which are made in partnerships with General Dynamics and BAE Systems, respectively.

For GM, producing new vehicles for specialized military and diplomatic needs is a different world from its core business of mass-producing vehicles at a couple dozen global assembly plants. Assemblers at the former Concord plant started making four ISVs a week, and now about 10 roll off the line every week. By comparison, a Silverado, Colorado, Suburban or other model rolls off a GM assembly line every 50 seconds. 

In Concord, the ISVs are assembled at six stations with hundreds of processes required to create each vehicle. Bluetooth-enabled wrenches and other tools, along with computer monitors, provide needed precision. The effort won an innovation award from the National Association of Manufacturers trade association, while duMont says federal defense officials have noted the ISVs haven’t had the typical hiccups associated with new products.


RICH LEGACY
The Cabarrus operation is a return to the past for GM, which played a pivotal role in aiding the Allied victory in World War II by converting its vehicle factories for military use.

After the war intended to end all wars, GM returned to its car-making roots. Its defense business became a bit player, a strategy that worked as it remained one of the world’s largest, most highly valued companies for many years. But wars haven’t stopped, creating huge opportunities for the military-industrial complex, while the auto industry once dominated by GM has become more complicated.

GM was the Pentagon’s 23rd largest defense contractor in 1985, according to a Washington Post story. It quoted industry analysts saying that the company saw huge promise in diversifying by buying a leading defense company. Martin Marietta, Hughes Aircraft or Boeing were cited as potential targets.

The story proved prescient: GM paid $5 billion in late 1985 to buy Hughes Aircraft, which owned pioneering satellite technologies with military and civilian uses, such as DirecTV. It then added General Dynamics’ cruise missile business in 1992.

By the late ’80s and ’90s, competition from Japanese and European rivals was causing massive financial pressure at GM. The cash-strapped company sold Hughes Aircraft to Raytheon in 1998 for $9.5 billion, including about $4 billion in debt. Five years later, GM sold the rest of its defense business to General Dynamics for $1.1 billion. At the time, the unit had about $950 million in revenue and 2,400 employees, who mostly worked in a partnership with General Dynamics, making lightly armored Stryker combat vehicles.

After $80 billion in cumulative losses between 2005 and 2008, GM filed for bankruptcy protection in 2009, marking the biggest industrial insolvency in U.S. history. Emergency federal funding enabled the company to quickly restructure into a smaller entity, aided by the biggest initial public offering in U.S. history in 2010. A Center for Automotive Research study shows the bailout saved 1.2 million jobs and about $35 billion in tax revenue.

GM has rebounded significantly since those dark days, which analysts credit partly to Mary Barra, who was appointed CEO in 2014, and strong demand for the company’s large pickup trucks and SUVs. The company had revenue of $172 billion last year and has re

ported annual net income of about $10 billion for each of the past three years. It has an investment-grade credit rating from Moody’s and Standard & Poor’s.

Still, the company’s stock market value of about $50 billion in mid-April remains a tenth the size of electric vehicle leader Tesla and an eighth that of Toyota. It’s also lower than defense giants RTX, which had a market cap of about $135 billion, and Northrop Grumman, $68 billion.

No one expects defense to quickly turn the needle at GM. But in a world of conflict and U.S. defense budgets under constant pressure from Congress, having another viable competitor for government contractors is an attractive prospect. “The big prime defense companies have embraced us,” duMont says. “They know we will bring them new opportunities.”

He also notes that the automotive industry’s trends for electric-powered and autonomous vehicles will inevitably benefit the military and create opportunities for GM Defense. Barra pledged in 2021 that GM will only sell electric vehicles by 2035, though earlier this year she hedged a bit by citing plans to reintroduce some hybrid engines that would use some gasoline.

Electric vehicles have some big potential benefits for soldiers and armies. For example, vehicles using diesel fuel tend to be noisy, hot and easily detectable by infrared monitors. Studies show that at least half of the casualties in the Afghan and Iraq wars involved soldiers driving fuel or water to the frontlines.

“Everything that I targeted as an attack pilot, I used the infrared signature to lock on,” duMont says. But the bad guys have a harder time locating electric-battery-powered vehicles, which he adds run much cooler and more quietly.

GM has produced more material for U.S. defense than any other entity, mainly because of its World War II effort. It’s understandable, then, why duMont sees his work as more than bolstering an already powerful company.

“The reason I do this job is we have an amazing noble cause. We build amazing stuff for the best and bravest for the U.S. and our allies around the world. That’s why we do what we do.”

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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