U.S. Army and suppliers brainstorm ways to do more with less

HUNTSVILLE, Alabama Wed Feb 19, 2014 8:30pm EST

HUNTSVILLE, Alabama Feb 19 (Reuters) - The U.S. Army faces big funding challenges for another five to seven years, but senior officials sought to reassure U.S. arms makers on Wednesday that they would keep investing in cutting edge technologies to maintain U.S. military superiority.

Lockheed Martin Co, Boeing Co and other arms makers are awaiting details about the Pentagon's fiscal 2015 budget, which Defense Secretary Chuck Hagel is due to preview on Monday. The full budget will be sent to Congress on March 4.

U.S. weapons companies have cut jobs, closed facilities and tried to make their operations leaner in recent years as they braced for a downturn in military spending after the end of the war in Iraq and the reduction of U.S. forces in Afghanistan.

Some top industry executives told analysts last month they thought U.S. military spending would nose up again after 2014 and 2015, but General Dennis Via, the four-star general who runs Army Materiel Command, said the end of the downturn was not yet in sight.

Via said the Army faced further reductions in coming years since mandatory cuts known as sequestration remained in effect after fiscal 2015, and that meant the Army and its suppliers needed to continue looking for ways to do more with less.

"We're in that transitional period that happens at the end of every war," Via told reporters after addressing a conference hosted by the Association of the U.S. Army, a booster group.

"I don't have a crystal ball  but in five to seven years, I think we'll see at some point of time where we'll bottom out, and then we'll see a sustained, predictable level of funding."

Via and Army acquisition chief Heidi Shyu underscored their commitment to continued investment in research and development of new weapons, highlighting three-dimensional printing, new lighter materials for troop clothing, next-generation vertical lift aircraft, and unmanned systems as promising areas.

Shyu told the conference the Army had had to make difficult decisions about its priorities, given the need to cut its budget, which could lead to reductions in aviation, mission systems and ground systems and cutting production quantities.

But she said Army leaders understood the need to invest in new technologies during the downturn. The Black Hawk helicopter built by Sikorsky Aircraft, a unit of United Technologies Corp , the Bradley fighter vehicle built by BAE Systems and Raytheon Co's Patriot missile defense system all got their start during the downturn in defense spending after the end of the Vietnam war, she said.

ANXIOUS TIMES FOR INDUSTRY

Industry executives welcomed the Army's commitment to funding work on next-generation weapons but said they remained worried that funding cuts jeopardized the defense industrial base.

Mark Signorelli, vice president of industrial operations for BAE's combat vehicle systems business, told Reuters that his company needed to secure initial funding this year for additional U.S. or foreign orders to keep its plant in York, Pennsylvania open past 2015.

"I continue to be anxious, " Signorelli said, noting that his company was also hoping to secure orders to remanufacture and repair worn out equipment returning from Afghanistan.

He said he hoped Army officials found a way to balance doing that kind of work at its own facilities with allowing companies to bid for the work.

BAE may have to cut its workforce by hundreds of engineers this year unless it gets orders for new design programs, he said.

Leanne Caret, who heads Boeing's military rotorcraft business, said her company was continuing to invest in new technologies, encouraging innovation across divisions and looking for new ways of doing things.

"We have a different head set than we did years ago," Caret told Reuters, citing Boeing's cooperative work with Sikorsky on an Army contract to build a next-generation helicopter. She said the effort was aiming to "break the cost curve" by factoring in the cost of operating the planes into its design.

"We are anticipating that sequestration goes on through the decade, so we are continuing to stay very aggressive on affordability," she said, "We are taking a hard look at how we do business."

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