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FACTBOX-How Pentagon's 2015 budget affects key weapons programs

Monday, 24 Feb 2014 | 2:51 PM ET

Feb 24 (Reuters) - The Pentagon's fiscal 2015 budget proposal will have a major impact on many key weapons programs and the companies that build them, according to details released on Monday by U.S. Defense Secretary Chuck Hagel and senior defense officials. If Congress enacts the plan, some programs will be terminated, others will be slowed, and the Defense Department will begin a few new procurement programs. The following are some of the projected winners and losers in the Pentagon's fiscal 2015 budget and its priorities in the coming years:

F-35 JOINT STRIKE FIGHTER The Pentagon said it remained strongly committed to the Lockheed Martin Corp F-35 fighter jet program, which includes an engine built by Pratt & Whitney, a unit of United Technologies Corp. Northrop Grumman Corp and Britain's BAE Systems Plc also provide significant components for the aircraft. Hagel did not provide details as to how many F-35 jets would be funded in the fiscal 2015 budget or over the next five years. But he said that if mandatory spending cuts remain in effect in fiscal 2016 and beyond, the Air Force would have to defer the purchase of 24 jets and the Navy would postpone procurement of the F-35 carrier variant for two years. A senior military official said it did not make sense to cancel the Navy variant outright, since that would drive higher cost of the remaining airplanes to be purchased by the Air Force and the Marine Corps, and could unsettle international partners on the program.

GLOBAL HAWK UNMANNED SPY PLANES Hagel said the Air Force would retire its fleet of older U-2 spy planes, opting instead to maintain and modernize its fleet of Global Hawk unmanned spy planes built by Northrop. He said the decision was "a close call," and marked a reversal of the position the department took in its fiscal 2014 budget proposal - a proposal ultimately overturned by Congress. He said Northrop had reduced the operating costs of the unmanned plane and its longer range and endurance made it a better platform for the future. "We can't afford them both," said one senior defense official, who spoke on background.

ENGINE MAKERS Pratt & Whitney and General Electric Co would get a boost from the Pentagon's decision to add $1 billion in funding for work on new jet engine technology. Some initial money has already been put toward this effort, but the department is adding significant funding for a program that will help protect the design teams of the main enginemakers.

SHIPBUILDERS The Pentagon's proposed 2015 budget cut would truncate the Littoral Combat Ship (LCS) program at 32 ships, instead of 52 as currently planned. However, it calls for the Navy to examine the range of options for developing a new surface warship that would be more heavily armed. Hagel said he had asked the Navy to submit proposals later this year on the new program, including the possibility of a new design and a modified version of the LCS ships. Lockheed and Australia's Austal build two different models of the current LCS ships. In addition, Hagel said half of the Navy's cruiser fleet - or eleven ships - would be "laid up" and placed in reduced operating status while they are modernized and eventually returned to service with greater capability and a longer lifespan. That could result in significant orders for General Dynamics and Huntington Ingalls Industries, which build and service ships, as well as BAE Systems, which also does much of the ships' maintenance work. At the same time, Hagel said the Navy would continue to buy two destroyers and two attack submarines per year, orders that benefit General Dynamics and Huntington Ingalls, as well as one additional Afloat Staging Base built by a unit of General Dynamics. If sequestration budget cuts remained in effect, the Navy would have to retire the USS George Washington aircraft carrier, skipping a mid-year refueling that would have been carried out by Huntington Ingalls and saving $6 billion, Hagel said. He said the Navy would also have to slow the rate at which it bought new destroyers.

BOEING The Pentagon's budget preserves funding for the KC-46 refueling tanker being built by Boeing Co, but it will not include funding for the company's F/A-18 Super Hornets or EA-18G Growlers, according to defense officials. Senior U.S. defense officials said the F/A-18 remained a "very good airplane," but the F-35 offered the military additional electronic warfare capabilities. "The F/A-1-8 is just not going to do it any more in those out years," said a senior military official.

GROUND VEHICLES Hagel said the Army would cancel its Ground Combat Vehicle program, and focus instead on next-generation technology. That is a mixed bag for companies like General Dynamics and BAE Systems that have invested heavily in the current program. The new program would likely involve smaller funding amounts in coming years.

(Reporting by Andrea Shalal, David Alexander and Phil Stewart; editing by G Crosse)

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