Industry News: March 1999

By Robert M. Hausman

Worldwide Market For Military Arms Shrinking Dramatically

Arms sales to the developing world have been shrinking dramatically through the decade, according to a new report by the Congressional Research Service. Weapons deals dropped dramatically in 1997 to $24 billion, the lowest level since the Gulf War sales boom of 1990.

The United States remained as the top arms supplier, with about $5.3 billion, or 22 percent of defense related contracts. The figure is a significant drop from the $8.5 billion in new arms agreements reached in 1996. The second largest arms seller in 1997 was the United Kingdom with just under a 21 percent share of the total, followed by Russia with slightly over 18 percent and France’s total in excess of 10 percent.

Much of the loss comes from the developing world, where the financial crisis in Asia and low oil prices are making it hard to sell to heretofore steady buyers such as Japan, Taiwan, Kuwait and Saudi Arabia. America signed just $2.3 billion in sales to developing countries in 1997, down from $5.3 billion in 1996. The U.S. share of deals with developing countries dropped from 29.3 percent in 1996 to 13.3 percent in 1997. Persian Gulf countries remain the biggest buyers of U..S. arms worldwide.

In total arms deals, France came in at a close second in 1997 at $5.1 billion, a sharp increase over the $3 billion in arms deals it signed in 1996. Much of the gain came from developing nations. In fact, France ranks number one in deals with developing nations, with $4.6 billion, much of it in the Persian Gulf, where France offered financial incentives.

Russia ranks third, but is falling behind. Potential customers are “not likely” to buy unfamiliar Russian arms, “when newer versions of existing equipment are readily available from traditional suppliers,” such as the United States and France, the report notes. Russian arms export agreements dropped somewhat in 1997 to about $4.1 billion, from $4.7 billion in 1996. Deals with developing nations totaled $3.3 billion, a drop from the $4.1 billion achieved in 1997.

A large amount of America’s sales activity rests on the aftermath of past deals. “Much of the value of U.S. arms transfers to developing nations in 1997 reflects either the continuation of established defensive support arrangements, such as weapon systems upgrades, training and support services or the sale of generally less costly systems, ammunition and spare parts,” the report details.

While the relative peace between the world’s major powers has not helped the arms trade, unrest in certain spots around the world stills fuels activities in the arms bazaars. “The developing world continues to be the primary focus of foreign arms sales activity by conventional weapons suppliers,” the report concluded as it noted there is little indication the trend will change anytime soon.

Company News

Moving closer to home, CZ-USA, the new U.S. affiliate of Ceska Zbrojovka (CZ), has established headquarters in Kansas City, Kansas to support CZ firearms in the U.S. market. Sales and warranty departments have been established to assist dealers and distributors and a certified gunsmith has been hired. “CZ-USA is looking forward to establishing itself as a leader in the US by increasing awareness of these incredibly accurate and easy-to-shoot firearms,” said Josef Jares, CZ-USA’s director.

CZ has been a leader in firearms manufacturing since its creation in 1936 in Uhersky Brod, Czech Republic. The company’s use of state-of-the-art technology combined with European craftsmanship has gained them worldwide recognition for their lines of pistols, centerfire and rimfire rifles, over/under shotguns, and airguns.

Sturm, Ruger & Co., Inc., one of the nation’s largest producers of firearms, has reported 1998 third quarter net sales of $43.4 million, compared to $47.2 million in the third quarter of 1997. Net income for the quarter ended September 30, 1998, totaled $2.5 million or nine cents per share versus $4.8 million or eighteen cents per share in the comparable quarter of 1997.

For the nine months ended September 30, 1998, net sales were $161.9 million and net income was $18 million or sixty-seven cents per share. For the corresponding period in 1997, net sales were $156.8 million and net income was $20.2 million or seventy-five cents per share.

Commenting on the quarter, Chairman William B. Ruger noted his disappointment at the quarter’s profitability, caused in large part by significant start-up costs associated with new customers and products in the golf club market. “Satisfactory resolution of our customers’ concerns is our highest priority,” he said. The adverse impact on current earnings is an investment that we must make for the benefit of our future in the golf club market.” These additional costs are expected to continue for the remainder of 1998.

Encouraged by the second consecutive quarter in which firearms segment sales grew from the prior year, Ruger added, “The increase in firearms shipments and our continued success in defending product liability litigation exemplify our leadership in the firearms industry.”

Sturm, Ruger was founded in 1949. Since 1950, it has never failed to show an annual profit and has never required financing from outside sources. The company’s business segments are engaged in the manufacture of the Ruger brand of sporting and law enforcement firearms and titanium, ferrous, and aluminum investment castings for a wide variety of customers and end uses. Plants are located in Newport and Manchester, New Hampshire, and Prescott, Arizona. Corporate headquarters are situated in Southport, Connecticut.

With the acquisition of a plethora of M1 Carbine parts, Gun Parts Corp. of West Hurley, New York has put together a complete kit consisting of all parts needed to build an M1, except the receiver. The chrome-lined barrels include a bayonet lug. The wood is refinished walnut.

Sten Mark II parts kits are also available from Gun Parts Corp. Originally the basic submachine gun of England during World War Two, it has been favored by many armies as well as some partisan and guerrilla groups. All parts less the receiver are supplied in the kit, including a 20-round magazine.

Leupold & Stevens, Inc. of Beaverton, Oregon is introducing a new tactical scope geared towards military and law enforcement applications. The new Vari-X III 4.5-14x50mm long-range tactical scope has a side focus feature and features 1/4 minute click target style adjustments. The 30mm maintube provides as much as 80-minutes of elevation travel to adequately compensate for bullet drop in long range shooting situations.

The scope’s side focus mechanism uses a parallax adjustment dial positioned on the left side of the scope turret housing. This ergonomically designed feature allows the shooter to eliminate parallax while remaining in the shooting position. The larger exit pupil facilitated by the 50mm objective makes this scope especially good for low light conditions at higher powers. The scope is available in three reticle styles-duplex, 3/4 mil-dot, and target dot.

Sierra Bullets of Sedalia, Missouri has combined the accuracy of its MatchKing bullets with the explosive characteristics of their acetal resin bullet tip technology to create what it says are the world’s deadliest and most accurate varmint bullets. The new green-tipped BlitzKing bullets are constructed with MatchKing jackets and held to tight tolerances. With their match jacket design and construction, BlitzKing bullets are made to withstand even the high velocities of the .22-250 and .220 Swift, and are wildcat friendly.
Offerings include a .22 caliber, 55 grain BlitzKing, a .22 cal. 50 grain bullet, and a .22 cal. 40 grain projectile.

Firearms Training Systems, Inc. (FATS) of Suwanee, Georgia has been selected as the preferred tenderer by the Australian Army to supply its Weapons Training Simulation Systems and Indirect Fire Observer Trainers. “This selection further reinforces FATS’ business strategy to offer multiple training capabilities using a single platform. Customers may now consolidate procurements for gunnery training,” said Peter A. Marino, FATS’ CEO and President.

FATS is a leading worldwide producer of interactive simulation systems designed to provide training in the handling and use of small and supporting arms. Output also include air defense, anti-armor, and armored vehicle training products designed and manufactured by its Canadian subsidiary, Simtran Technologies, Inc. Commercial versions of FATS products supporting the sports shooting industry and professional hunter are designed and manufactured by its Colorado-based subsidiary, Dart International, Inc.

National News

Existing systems to distinguish friendly aircraft-or tanks, soldiers or anything else on a battlefield- from those of an enemy, rely on active transmissions which can give away a location to anyone with the proper listening equipment. Researchers at Los Alamos National Laboratory in New Mexico have developed an identification system allowing “friends” to recognize each other while giving nothing away to others.

The system, called synchronous identification of friendly targets, uses a method of frequency locking to identify a weak signal buried in the normal radiant energy emitted by an airplane, tank, or person. The device, for which a patent was recently awarded, is portable and reliable, and can be easily modified to prevent an enemy from determining its operating characteristics.

Also in New Mexico, following the death of Airman Marcus R. Zaharko by previously unexploded ordnance on the White Sands Missile Range, the U.S. Army has canceled all oryx and deer hunts at the site until it completes a safety evaluation. The Army is assigning additional ordnance experts to the range to expedite the investigation.

Pentagon officials are reported as developing plans to train National Guard and Reserve units as terrorist response teams, due to a perceived increased terrorist threat within the United States. National Guard and Reserve units are already trained to respond to natural disasters, and to threats or use of chemical, biological or nuclear weapons. The view that terrorist response training is necessary is based on recent testimony given before the Senate Judiciary Terrorism Subcommittee from Secret Service, FBI, and Immigration and Naturalization Service officials.

A federal grand jury has handed down a fourteen-count indictment of Curtis Lynn Debord and a thirteen-count indictment of Peter Tran in a multi-million dollar conspiracy involving the smuggling of machine guns, conventional firearms, and gun parts from Vietnam. In a joint investigation between the Bureau of Alcohol, Tobacco and Firearms (ATF) and the U.S. Customs Service, undercover agents infiltrated an illegal arms distribution network that lead them across the Pacific Northwest and Oklahoma, Vietnam, Singapore, Mexico, Costa Rica and Germany.

The joint ATF/Customs investigation exposed Debord and Tran’s alleged intricate plot to import about $5 million worth of weapons, weapon parts, and other munitions from Vietnam, a country from which federal law prohibits arms importation. The indictment further charges Debord with witness tampering, a charge by itself that carries a possible ten year federal prison sentence.

This case is the latest indictment stemming from the ATF/Customs investigation entitled, “Operation Dragon Fire” wherein, over a dozen individuals, both U.S. citizens and Chinese nationals were indicted. The agents seized over 2000 AK-47’s in the case, the largest machine gun seizure in U.S. history.
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