By Tony Capaccio - Jan 27, 2012 6:40 AM GMT+0700
The Pentagon’s shift to forces focused on Asia and the Middle East in a budget outlined today may protect from deep cuts U.S. makers of aircraft carriers, submarines, surface-combat vessels, electronic-warfare sensors, drones, long-range bombers and tankers.
While the plan would slow the pace of shipbuilding, its emphasis on naval forces in an era of budget-cutting may help vessel-makers Huntington Ingalls Industries Inc., General Dynamics Corp. (GD), Lockheed Martin Corp. (LMT) and Austal Ltd. It also may provide opportunities for aircraft companies Northrop Grumman Corp. (NOC) and Boeing Co. (BA) and missile maker Raytheon Co. (RTN)
“This budget protects, and in some cases increases, investments that are critical to our ability to project power in Asia and the Middle East,” Defense Secretary Leon Panetta said at a news conference at the Pentagon today disclosing elements of a $613 billion defense proposal for fiscal 2013. That includes $88.4 billion for continuing combat, led by the war in Afghanistan.
Panetta and Joint Chiefs of Staff Chairman General Martin Dempsey presented the budget proposal as part of an effort to cut $487 billion, or 8.5 percent, from $5.62 trillion in spending that had been planned for 2012 to 2021. Of that, $259 billion in reductions would occur by 2017.
The fiscal 2013 budget proposes to save about $45 billion, increasing to $53 billion in fiscal 2014 and $54 billion by 2017, according to Pentagon figures.
‘Far More Lethal’
The biggest initiative other than military hardware is a reduction of the Army -- “gradually,” according to Panetta -- to 490,000 personnel from about 565,000 today. The Army numbered about 480,000 in February 2002, one year before the Iraq invasion. The budget also calls for reducing the Marines to 182,000 from about 202,000 today.
“They will be fundamentally shaped by a decade of war, far more lethal, battle-hardened and ready,” Panetta said of U.S. forces. The Army was increased by as much as 95,000 and the Marines by 30,000, largely because of the Iraq war.
Representative Howard “Buck” McKeon, a California Republican who is chairman of the House Armed Services Committee, said President Barack Obama “has abandoned the defense spending structure that has protected America for two generations, turning 100,000 soldiers and Marines out of the force.
‘‘Unmanned assets’’ and special forces that Panetta is relying on ‘‘are a vital component in defending America, but they are insufficient to meet the challenges America faces,’’ McKeon said.
Base Closings
Panetta said the troop reduction will be accompanied by a request to Congress for a new round of domestic base closings ‘‘with a goal of identifying additional savings and implementing them as soon as possible.’’ He provided no specifics about what bases might be at risk.
The Pentagon’s Asia and Middle East emphasis reinforces the need for a long-range, stealthy bomber, and sustaining the Navy’s 11-carrier force with 10 air wings and big-deck amphibious vessels, Panetta said.
Huntington Ingalls of Newport News, Virginia, is building the three-ship, $40 billion Gerald R. Ford class of carriers to be equipped with a new electromagnetic catapult system built by closely held General Atomics Aeronautical Systems Inc.
‘‘Modernizing our submarine fleet will be critical to our efforts to maintain maritime access in these vital regions,” Panetta said.
‘Strike Option’
The plan calls for increasing the size of the Navy’s current Virginia-class attack submarines to carry more Tomahawk cruise missiles and to develop an undersea, non-nuclear “strike option” similar to an intercontinental ballistic missile. Raytheon of Waltham, Massachusetts makes the Tomahawk. Huntington Ingalls and General Dynamics make the submarine.
The “strike option” concept was first proposed by the Bush administration and resurrected in fiscal 2011 under Obama.
The Littoral Combat vessels, made for operating close to shore by Lockheed Martin of Bethesda, Maryland, and Austal of Henderson, Australia, get an expanded role in the plan. Panetta said the Navy intends to base some of them in Singapore and other patrol craft in Bahrain. Still, two vessels are being cut from plans for 2013 to 2017, which had called for buying during that period at least 15 of the 55 ships planned.
The plan calls for retiring some existing ships, including seven cruisers that aren’t capable of defending against ballistic missiles.
Amphibious Vessel Delay
The largest shipbuilding reduction would eliminate, through 2017 eight of nine planned Austal Joint High Speed Vessels designed to carry Army personnel. There was no indication the vessels would be purchased later.
The budget proposal delays by one year the start of construction for the LHA-8 large-deck amphibious vessel to be built by Huntington Ingalls.
The budget doesn’t slow the Navy’s plan to buy additional Arleigh Burke-class DDG-51 destroyers from General Dynamics and Huntington.
F-35 Plans
Panetta said the Pentagon was making “substantial reductions to programs that are experiencing schedule, cost or performance issues.”
They include Lockheed Martin’s Joint Strike Fighter, the F-35, and the Army Ground Combat Vehicle that’s in competition between General Dynamics and a team of BAE Systems Plc (BA/) and Northrop Grumman.
The Pentagon remains committed to the F-35 “but in this budget we have slowed procurement to complete more testing and allow for developmental changes before buying significant quantities,” he said.
The Defense Department will propose spending about $9.2 billion to buy 29 F-35 jets in its fiscal 2013 budget, 13 fewer than previously planned.
Beyond the next budget year, the Pentagon’s previous plan to purchase 62 F-35s in fiscal 2014 is being reduced to 29, according to budget data. The request for 2015 is dropping to 44 from 81, and the planned purchase for 2016 will decline to 66 from 108.
The Pentagon plans to postpone 179 aircraft beyond 2017, according to officials who spoke on condition of anonymity before today’s announcement.
Global Hawk Curtailed
The Pentagon is canceling the final 10 of one version of Northrop Grumman’s Global Hawk drones it was to buy, stopping at 21 of the Block 30 model because of rising costs. Dollars will be shifted instead into maintaining U-2 manned aircraft made by Lockheed Martin.
Experience with the Block 30 version “will help other Global Hawk programs,” including the advanced Block 40 and maritime and NATO versions, according to the budget document.
The Pentagon reversed a decision to cancel the $6.8 billion Joint Air-to-Ground Missile, pitting Lockheed against Raytheon, “significantly reducing” the program instead, and continuing to buy Hellfire missiles from several contractors including Lockheed.
The Pentagon also is delaying by as much as five years an Army helicopter modernization program and terminating a multi- billion dollar program to upgrade its fleet of Humvee all- terrain vehicles.
Northrop Grumman’s Defense Weather Satellite System program also was canceled.
The fiscal 2013 budget proposal is 1 percent less, unadjusted for inflation, than this year’s $531 billion plan. The numbers include spending on military construction.
The defense number, not including combat, grows to $534 billion in fiscal 2014, $546 billion in fiscal 2015, $556 billion in fiscal 2016 and $567 billion in 2017.
Adjusted for inflation, the Pentagon projects a 1.6 percent reduction in real spending power between 2013 and 2017.
To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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