still faces plenty of threats.
Fans view Force Protection as something of a superpower in the fight for billions of dollars worth of business available under the U.S. military's Mine-Resistant Ambush-Protected vehicle program.
To its credit, Force Protection boasts proven vehicles and an important partnership with heavyweight defense contractor
. It has secured the biggest MRAP awards so far.
But competition for the lucrative contracts is fierce. Some watchers worry that the company won't win as many contracts as backers expect -- and that demand for skilled workers in the fast-expanding blast-resistant vehicle business could hit profits by driving Force Protection's costs up.
For its part, Force Protection remains confident.
"Americans love to work for a good cause," Force Protection Vice President Mike Aldrich told
last week. "We've always been able to find the right people with the right talents and skills to work with us at our South Carolina facilities. We expect that to continue."
But Force Protection operates in the same region of South Carolina as Protected Vehicles, an upstart recently launched by one of its own founders. Force Protection has been hiring hundreds of workers as it races to meet strong demand for its products. But Protected Vehicles is tapping that same market for workers of its own.
To help attract workers, Protected Vehicles has forged relationships with government agencies -- and even resurrected a military welding school -- in preparation for its big hiring spree. The company believes it can meet its escalating labor requirements.
"As far as competing for labor, we offer a pretty good package" of wages and benefits, says Drew Felty, program manager for Protected Vehicles. "We have not had any (hiring) issues to date. We don't anticipate any issues" either.
Some worry about Force Protection instead. Specifically, they fear that the company will face rising labor costs -- and a corresponding hit to its margins -- even if it does manage to woo all of the workers it needs.
They foresee another threat to Force Protection's financial performance as well. Notably, with Protected Vehicles partner
now selling its vehicles for just $300,000 apiece, they wonder if Force Protection can keep on charging far more.
Force Protection has been securing about $500,000 for its own vehicles. The company calls its current prices "competitive" but suggests that operational improvements could lower its costs and prices.
Yet some sense mounting pressures right now.
"The Oshkosh contract ... will put significant pricing pressure on the other competitors and squeeze their already thin margins," one investor with no position in the stock wrote in a recent email to
. The U.S. military "will use this as a stick to beat down the pricing walls."
For now Force Protection faces no competition -- or resulting pricing pressure -- in one area at least. It alone produces a vehicle, known as the Buffalo, which meets the qualifications set forth under Category III of the MRAP program.
But even this situation could change. Importantly, Protected Vehicles says it is currently developing a next-generation vehicle that could fall into the Category III classification down the road.
"Competition is always a possibility when you have a good product that is working well," Aldrich concedes. But "our selection as the
Ground Standoff Minefield Detection System centerpiece vehicle for the Army's route clearance operations and the MRAP sole-source Cat III award are certainly gratifying because they essentially 'win' the U.S. market for the next four to five years."
Outside that category, however, some experts see other companies fielding new orders very soon. Notably, four of the nine vendors supplying the military with test MRAP vehicles have yet to land bigger contracts.
Thus, some experts see changes on the way. Ultimately, they feel that Force Protection could wind up sharing big chunks of MRAP with multiple competitors in the end.
"We believe the military will select at least two more vendors -- if not all four of the remaining vendors -- in order to meet the urgent requirements from Iraq by the end of April," Stanford analyst Josephine Millward wrote last week. "Final production awards will likely be evenly distributed and based on production capacity, in our view."
Millward currently has no rating on Force Protection or other companies in the group. Force Protection, a former penny stock, enjoyed a huge rally that ended as the shares approached $25 back in January. But the stock has come under intense selling pressure since that time. Shares rose 39 cents Friday to $16.54.
Aldrich views the plunge as a "typical, temporary correction for a stock that rose very rapidly" in the fourth quarter of last year. He blames some short-term profit taking for the decline as well. But he personally feels confident about the future of the company.
"Force Protection's objective is, and always has been, to build a long-term growth business," Aldrich says. "To do that, we're focused on doing what we do best: producing the highest-quality troop-protection vehicles in the world to keep our soldiers safe from harm."