GE, Rolls drop push to build F-35 engines

The F-35 Lightning II, also known as the Joint Strike Fighter (JSF), planes arrive at Edwards Air Force Base in California in this May 2010 file photo.

(Reuters) - General Electric Co and Rolls Royce dropped their drive to build an alternate engine for Lockheed Martin Corp's F-35 joint strike fighter, giving up on what they had said could be a $100 billion market.

The decision to end their in-house bankrolling of the project beyond 2011, announced on Friday, is a boost for United Technologies Corp's Pratt & Whitney unit, maker of the engine used in the F-35's early production models.

The Defense Department earlier this year canceled funding for the GE-Rolls engine, capping repeated efforts to persuade Congress to kill it as a belt-tightening measure.

That led the partners to say they would foot the bill themselves for the rest of this year and fiscal 2012 in the hope that lawmakers would step back in with federal funding as they had done for years in rebuffing the Pentagon.

"The decision, reached jointly by GE and Rolls-Royce leadership, recognizes the continued uncertainty in the development and production schedules for the JSF program," the companies said.

The Joint Strike Fighter project is the Pentagon's costliest purchase ever at a projected $382.5 billion for more than 2,400 aircraft in three models over the next two decades.

Navy Vice Admiral David Venlet, who runs the program for the Pentagon, called in an interview published Thursday for slowing the plane's production because of what he described as a surprising number of potential airframe faults turned up in testing.

House Armed Services Committee Chairman Howard McKeon, a key second engine backer, voiced disappointment that "the uncertainty regarding the future of our military budget, and the Joint Strike Fighter program in particular," had ended what he considered a model for government-industry partnership to contain costs.

"But decisions that could cripple our national security and our economy are being made today that will be difficult, if not impossible, to undo tomorrow," the California Republican added in a statement.

He was referring to deep spending cuts mandated by a congressional "super committee" failure to strike a $1.2 trillion deficit reduction deal last month.

Pratt in a statement on Friday said it remains focused on lowering engine costs and making sure the flight-test program is successful. "We are grateful for the continued confidence and support of our DoD customer" for the F-35 engine, the company said.

GE and Rolls had argued that a choice of engines would save money over time, putting the potential market at $100 billion or more. GE said the companies had spent tens of millions of dollars of their own on the project in 2011. Since 1997, the government has spent about $3 billion on it, GE said.

The company said it was working very closely with the Defense Department to speed the development of jet propulsion for U.S. warplanes' next generation beyond the F-35.

Even without the alternate engine program, GE's research and development investments for military and commercial aviation are at "historic levels," said Richard Kennedy, a company spokesman.

George Little, the Pentagon press secretary, said GE and Rolls-Royce were very important industrial partners "and we look forward to continuing to work with them."

(Additional reporting by Phillip Stewart in Washington and Karen Jacobs in Atlanta, editing by Dave Zimmerman, Gary Hill)