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Pentagon to kill F-35 back-up engine-consultant

December 29, 2005

By Jim Wolf

WASHINGTON (Reuters) – The Pentagon has decided to kill a
planned back-up engine for the F-35 Joint Strike Fighter, the
most expensive U.S. warplane program ever, in a boost to United
Technologies Corp. and a blow to rivals, a well-placed defense
consultant said on Thursday.

The decision could mean tens of billion of dollars in extra
sales over 25 years for Pratt & Whitney, a United Technologies
unit, said Loren Thompson, chief executive of the Lexington
Institute, a nonpartisan, Virginia-based research group.

The plan, subject to approval by the White House budget
office and the U.S. Congress, would be a setback for General
Electric Co. and Rolls-Royce Plc, which have been developing a
separate but interchangeable engine.

“They have killed the alternative engine,” said Thompson,
who has close ties to the Pentagon and industry.

A spokeswoman for the Pentagon program office overseeing
the project did not immediately return a phone call seeking
comment. GE said the decision was far from final.

The F-35, which will be the Pentagon’s biggest purchase at
an estimated $256 billion, is a family of three warplane
variants being built by Lockheed Martin Corp. with eight
overseas co-development partners, including Britain, Italy and
Turkey.

The Pentagon plans to buy as many as 2,480 of the aircraft
in three versions being developed for the U.S. Air Force, Navy,
Marine Corps and the British Royal Navy.

Some of the biggest revenue from engines comes in
maintenance and spare parts over their lifetimes. GE and
Rolls-Royce are 60-40 partners in developing their version of
the turbofan engine that would power the single-engine,
radar-evading aircraft.

Thompson said the decision to cancel the back-up engine was
part of a December 23 Pentagon memorandum prepared for the
fiscal 2007 budget that President Bush is due to send to
Congress in early February.

Rick Kennedy, a GE spokesman, said the company was counting
on Congress to restore the engine, pushed by Britain and other
co-development partners.

“The budget process has a long way to go,” he said. “This
isn’t our first struggle. We’ve had them before.”

GE received a $2.4 billion development contract for the
alternative engine in July due to last until 2012, or about
$400 million per year, he said.

Congressional proponents of an interchangeable engine,
along with GE, have cited potential savings through
competition. They also describe it as a hedge against having to
ground the entire fleet in case of trouble with any one engine.
But a second engine has boosted the aircraft’s development
costs, something the Pentagon is under pressure to pare.

United Technologies shares were down 14 cents to $56.73,
while GE added 24 cents to $35.35, both on the New York Stock
Exchange. Rolls Royce shares closed at 429.48 pence in London
trading.


Source: reuters



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