April 15, 2014

Budget cuts could reduce F-35 orders for four years

Unless Congress intervenes, sequestration will trim 17 Lockheed jets from planned order of 343, a Pentagon report says.

The Pentagon will cut 17 of the 343 F-35 fighters it plans to buy from Lockheed Martin in fiscal 2016 through 2019 unless Congress repeals automatic budget cuts, according to a new Defense Department report.

The move would save about $1.7 billion from $45.5 billion in planned spending for the F-35, the costliest U.S. weapons program, which escaped the initial impact of sequestration last year because production was already funded.

The F-35, which is being developed and built at Lockheed’s aeronautics complex in west Fort Worth, currently costs $100 million per plane. That price is expected to drop to about $85 million in 2019, or about $75 million in today’s dollars, as production increases, Lt. Gen. Chris Bogdan, F-35 program manager at the Department of Defense, said in March.

The new report spells out an array of cuts that would hit other projected purchases, from air-to-air missiles made by Raytheon to aerial refueling tankers from Boeing Co.

The report, obtained by Bloomberg News, provides the Pentagon’s most detailed breakdown yet on the impact of the cuts. Defense Secretary Chuck Hagel and the military service chiefs have been pressing Congress to avert the process called sequestration, which is scheduled to take full effect again in fiscal 2016 after two years of temporary relief.

“Reviewing these cuts illustrates the additional war-fighting risk that the department will incur” if “automatic reductions persist,” according to the 37-page report.

The report comes just four days after U.S. Rep. Kay Granger, R-Texas, wrote a letter to leaders of the House Armed Services Committee and House Defense Appropriations Subcommittee asking them to restore funding for eight F-35s that were being eliminated due to sequestration in President Obama’s 2015 budget request.

Granger wrote that the program has reduced F-35 costs by over 50 percent in six years and that 80 percent of future cost reduction is predicated on aircraft quantities as the program ramps up production in Fort Worth, where Lockheed employs 12,500. More than 100 members of Congress co-signed the letter.

Cuts in federal spending on defense and domestic programs were embedded in a 2011 agreement to lift the federal debt limit. The report says the Defense Department will have to absorb $115 billion in additional reductions through fiscal 2019 if sequestration stays in effect, including $35.3 billion in fiscal 2016.

The cuts in F-35 funding would pare 15 planes from the Air Force’s version and two from the Navy’s.

Still, the document shows that Pentagon officials are standing by pledges to do what they can to protect the $391.2 billion F-35 program, which involves eight other nations.

The F-35 program recently surpassed 15,000 flight hours, Lockheed said in a news release Tuesday.

“Flying 15,000 hours itself demonstrates that the program is maturing, but what I think is even more impressive is the fact that operational F-35s accounted for more than half of those flight hours,” said J.D. McFarlan, Lockheed Martin’s vice president for F-35 Test & Verification. “While the fleet continues to train, we are actively flight testing the software and mission systems that will enable the Marine Corps to declare Initial Operational Capability [IOC] next year as planned.”

Planned funding of $11.1 billion for the Marine Corps version of the F-35 — the B model designed for short takeoffs and vertical landings — would be preserved, with none of 69 aircraft cut, according to the Pentagon report. The U.K. and Italy are also purchasing the B model.

The Pentagon’s anticipated five-year, $550 billion budget for weapons purchases would be cut by $48.3 billion. Its $337 billion research plan would be reduced by $18 billion.

The $1 trillion operations and maintenance account, which funds military readiness, would decline by $40 billion.

The new document, which was initiated by the Pentagon and not requested by Congress, offers projections that contractors, local governments and unions can use as ammunition in pressing lawmakers for the repeal of sequestration. The report may be publicly released this week.

The risk is that some members of Congress may view the litany of cuts as exaggerated in light of past warnings. Frank Kendall, the Defense Department’s top weapons buyer, said in February that “we cried wolf about this a lot” before fiscal 2013, when what resulted was “sort of the death of a 1,000 cuts,” none of them having a huge impact, according to an account by Defense One.

The Sikorsky Aircraft unit of United Technologies would see a delay of several years in the start of the new Combat Rescue Helicopter program.

The Air Force intends to award the contract in June. Sequestration would cut $957 million of the $1 billion the service planned to spend through 2019 on the contract.

Sikorsky would also lose 61 UH-60 Black Hawk helicopters of 410 planned through 2019, as the Army would cut $1.24 billion of a planned $7.2 billion.

Staff writer Steve Campbell contributed to this report.

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