January 20, 2006

Blair said to fail to win over Bush on F-35 engine

By Jim Wolf

WASHINGTON (Reuters) - British Prime Minister Tony Blair
has failed to get U.S. President George W. Bush to save a
multibillion-dollar engine-development contract for the F-35
Joint Strike Fighter, the world's costliest warplane project,
people familiar with the matter said on Friday.

The idea had been to offer a choice of engines for the
first F-35s -- which are being built in three versions to
replace a wide range of other U.S. and foreign fighters.

One engine is by Pratt & Whitney, a United Technologies
unit, while the other is being developed under a $2.4 billion
Pentagon contract by General Electric of the U.S. and
Rolls-Royce of Britain.

Blair left a videoconference with Bush this week
"empty-handed" after a review of a Pentagon plan to kill the
engine being built by GE and Rolls-Royce Plc, said Loren
Thompson, a consultant with close ties to defense contractors
and the Pentagon.

Blair and Bush speak on a regular basis "and we don't get
into characterizing those private conversations," said
Frederick Jones, a spokesman for the White House National
Security Council.

Blair has raised the issue in two videoconferences and in a
letter, said Rhian Chilcott, head of the Washington office of
CBI, an industry group for British-based companies.

"We've been very pleased by the British government's
support for the second engine program," she said.

GE and Rolls-Royce won their $2.4 billion development
contract in July. Due to run through September 2013, the deal,
if it survived, would lead to much more in spares and
maintenance of the engines over their projected 40-year life

The Pentagon plans to spend some $256 billion on the
radar-evading, single-seat F-35 aircraft being developed by
Lockheed Martin Corp., its biggest-ever purchase plan.

Boosters of an alternate engine have argued it would save
money in the long term through competition. They also describe
it as a hedge against grounding the fleet in case of engine
trouble. The Pentagon seeks to kill it as part of
belt-tightening while its Iraq war costs remain high.


Blair, Bush's staunchest foreign partner on Iraq, wrote
Bush before Christmas after the Pentagon's plan to scrap the
second engine became known, according to people familiar with
the matter.

Britain has committed $2 billion to F-35 development, twice
as much as Italy, the second biggest contributor of the eight
U.S. partners. The others are Australia, Canada, Denmark, the
Netherlands, Norway and Turkey.

Second-engine proponents will now try to persuade the U.S.
Congress, which holds the Pentagon's purse strings, said a
second person familiar with the matter.

A British embassy spokesman did not return a phone call
seeking comment. Daniel Meador, a GE spokesman, said, "We don't
know what happens government-to-government" ahead of Bush's
budget going to Congress February 6.

Current Pentagon plans, expected to be scaled back, call
for production of more than 2,400 aircraft in three models for
the U.S. Air Force, Navy, Marine Corps and Britain's Royal
Navy. For Britain, the F-35 is due to replace the Harrier
jump-jet on two new aircraft carriers.

In addition, hundreds or thousands may be sold overseas,
generating demand for perhaps 4,000 engines over coming
decades, with each engine costing several million dollars.