Ammo Makers Prepare for Drop in Demand

This 2004 handout photo provided by ATK Corporate Communications, shows an assembly line at the Lake City Army Ammunition Plant in Independence, Mo. The plant produces nearly 1.4 billion bullets a year, a dizzying figure driven by war demands. Although no one knows when the conflicts in Iraq and Afghanistan will end, the ammunition industry is preparing for a downturn in business, hoping to avoid a post-Cold War style drop-off that forced some to close doors. (AP Photo/ATK Corporate Communications) (AP)

Every gun round coming out of Lake City costs an average of 35 cents to make, according to military officials.

The Lake City deal is Alliant's largest single contract, accounting for 14 percent of the company's total sales.

Alan Beuster, chief of the Joint Munitions Command's industrial preparedness division, said his office is studying plans for minimum production rates that would keep manufacturing lines viable for longer periods.

"I think it's something that needs attention and we're giving it attention," Beuster said. "Are we in total desperation and ready to jump off a bridge? No."

Paradoxically, peace may be as profitable as combat to certain sectors of the ammunition industry. The military uses more gun rounds in training than in combat, a ratio that provides a cushion for Alliant and others, according to defense industry analysts.

Alliant also can sell its bullets to the law enforcement and sporting communities, an option not available for companies manufacturing tank rounds and artillery shells.

The phrase "soft landing" has emerged in discussions between government and industry representatives to describe a gradual ebb in ammunition demand that would give suppliers time to prepare for the shift.

"The objective is to have a graceful decline in production," said Richard Palaschak of the Munitions Industrial Base Task Force, an industry group in Arlington, Va.

But that's not as easy as it sounds. Despite an annual Defense Department budget of $624 billion, there always are more programs and initiatives than there is money.

Most ammunition suppliers are smaller, specialized firms that lack the influence wielded by larger sectors of the defense industry.

"As the intensity of the conflicts decreases, it's just natural for the planners at the Defense Department to look at other places to spend money," said William Holmes, president of Day & Zimmerman Munitions and Defense in Philadelphia. "It's the squeaky wheel that gets greased."

Holmes has been on both sides of the equation. He retired from the Army in 1996 as a brigadier general; his final assignment was as deputy chief of staff for ammunition.

"We see requirements being stable for the next year or so, but we've got some concerns as we look out a few years," he said. "We don't want to fall off the cliff like we did before."