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Gates urges 'reform,' cuts in US weapons programs

Boeing defense projects face threat of budget axe
US aerospace giant Boeing would be hit harder than other defense contractors if the Pentagon's proposed cuts to major weapons programs are approved, analysts said Tuesday. Boeing's stock fell 2.65 percent to 37.15 dollars in trading a day after Defense Secretary Robert Gates presented a "reform budget" that calls for deep cuts in some big projects led by the company. Gates' recommendations call for ending production of F-22 fighter jets, scaling back the Army's Future Combat Systems (FCS) program of hi-tech vehicles and robots, canceling plans for more C-17 transport planes and cutting elements of the missile defense program. All of those proposed cuts would deal a blow to Boeing's defense division, which generates about 32 billion in sales. Gates also recommended cancelling contracts that Boeing had hoped to secure, including plans for a new CSAR-X search and rescue helicopter, a long-range Air Force bomber and a series of communications satellites. "Boeing could face difficult times," the investment firm Collins Stewart wrote in an analysis. "FCS (Future Combat Systems), C-17 (transport planes) and missile defense are key programs for the company and all face cuts," it said. Apart from Boeing, the outlook for other defense contractors was not as bleak as anticipated and in some cases largely positive as budget recommendations removed uncertainty, analysts said. The defense secretary's budget offered more funding for certain weapons programs, including unmanned drones, Lockheed Martin's F-35 fighter jet and its close-to-shore naval ships. "For Lockheed Martin, the news was good. In our opinion, the key to the company's revenue and earnings growth is the F-35, and the F-35 received strong support," the according to Collins. Boeing "appears to be most at risk on the downside, with several programs under pressure," Fitch ratings agency wrote. The planned cutbacks in defense contracts came on top of bad news for Boeing's commercial operations, which has seen a drop in orders for new planes amid a global economic crisis. The Pentagon's recommendations still need to be formally endorsed by the White House and then approved by Congress, where some lawmakers have already blasted the suggested cuts in weapons projects.
by Staff Writers
Washington (AFP) April 6, 2009
Defense Secretary Robert Gates on Monday outlined plans to "profoundly reform" US military spending, urging a scaling back of major weapons programs while boosting funds for counter-insurgency warfare.

Gates said he was proposing halting production of F-22 fighter jets, canceling a new presidential helicopter and delaying ship building plans, while bolstering funding for surveillance drones and other resources for campaigns against insurgents like the ones in Iraq and Afghanistan.

"If approved, these recommendations will profoundly reform how this department does business," Gates told a news conference.

The defense secretary said he had tried to balance the need to combat immediate threats posed by insurgents linked to terror networks, with more traditional threats associated with conventional warfare.

"Collectively, they (the recommendations) represent a budget crafted to reshape the priorities of America's defense establishment," he said.

The budget was designed to help "fight the wars we are in today and the scenarios we are most likely to face in the years to come," said Gates, whose proposals will likely face stiff opposition from some members of Congress.

In an unusual step, Gates said he briefed lawmakers about his recommendations before making his proposals public.

"The president agreed to this unorthodox approach ... because of the scope and significance of the changes," he said.

The move suggested Gates and President Barack Obama were bracing for a political battle with lawmakers and influential defense industry contractors, who have often rebuffed past attempts to slash mammoth weapons projects.

The Pentagon chief said he recommended ending production for the F-22 Raptors, saying there was no need to greatly expand the aircraft fleet beyond the already approved production of 187.

The Raptors, equipped with radar-evading technology and built by Lockheed Martin and Boeing, cost about 350 million dollars each and have been in development since the Cold War.

The Air Force had proposed building nearly 400 of the aircraft but critics said such an expansion was excessive at a time when US troops in the deserts of Iraq or the mountains of Afghanistan are asking for unmanned drones to help them combat Islamist militants.

Gates called for cutting 1.4 billion dollars from missile defense weaponry in the 2010 budget, canceling plans for more C-17 transport aircraft and scrapping a US Army vehicle that forms part of a hi-tech network known as Future Combat Systems.

He said he recommended delays in ship building that would mean the US fleet of aircraft carriers would drop to 10 ships instead of the usual 11 ships after 2040.

An Air Force search-and-rescue helicopter would also be cut under Gates' advice but funds would be set aside to build more F-35 aircraft and to support the military's special forces -- a vital part of the US missions in Iraq and Afghanistan.

Gates said his proposals sought to change the way the Pentagon manages defense contracts, which have been plagued by cost overruns and incessant delays.

The recommendations still need to be formally endorsed by the White House and then approved by Congress.

The country's top US military officer, Admiral Mike Mullen, praised the secretary's recommendations, saying it was time the budget reflected the needs of counter-insurgency campaigns now underway.

"Some will argue he is tilting dangerously away from conventional capabilities. He is not," Mullen said in a statement.

"In truth, he is evening out what has been in this time of war a fairly lop-sided approach to defense acquisition," said the chairman of the Joint Chiefs of Staff.

Gates said he was not seeking to ignore conventional threats.

"What people have lost sight of is that I am not trying to have irregular capability take the place of conventional" weapons, he said.

"I am trying to get the irregular guys to have a seat at the table."

Despite recommended cuts in many programs, the Pentagon planned to go ahead with bidding this summer for a multi-billion contract to replace the Air Force's aging fleet of aerial refueling tankers, Gates said.

The contract has pitted aerospace rivals Boeing against Northrup Grumman and the European Aeronautic Defence and Space Company (EADS). A previous contract was awarded to Northrup and EADS but was cancelled after an appeal from Boeing.

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China, NKorea trade booming despite rocket tensions
Dandong, China (AFP) April 6, 2009
Trucks loaded with food, electronic goods, clothes and household items line up every day at the custom house here, awaiting final approval to cross the Friendship Bridge into North Korea.







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