By Jim Wolf
WASHINGTON (Reuters) - A $160 billion drive led by Boeing Co. (BA.N: Quote, Profile, Research, Stock Buzz) to modernize the U.S. army is likely to be slashed by one-third and drawn out nearly a decade to 2025, a subcontractor to the program said on Friday.
Frank Lanza, chairman and chief executive of L-3 Communications Holdings Inc. (LLL.N: Quote, Profile, Research, Stock Buzz), which supplies sensors, displays and high-tech communications gear also predicted that there will be big cuts in ballistic missile defense.
Missile defense, now costing about $9 billion a year, down from more than $10 billion in recent years, is the Pentagon's single priciest arms program. Lanza predicted it would get no more than $8 billion a year for the foreseeable future.
The so-called Future Combat System -- centerpiece of the army's bid to become lighter, more nimble and more networked -- is going to be "stretched dramatically and reduced" by $50 billion to $60 billion, Lanza told the Reuters Aerospace and Defense Summit in Washington.
Together with other leading U.S. military contractors, Lanza attended a milestone dinner on Monday with Gordon England, the acting Deputy Secretary of Defense and its point man on a sweeping defense review under way that is required by Congress once every four years.
Lanza said his conclusions on budget cuts were based on his own analysis, not on England's remarks at the dinner, the first of its kind with defense contractors since 1993.
President George W.Bush is due to send a spending plan for fiscal 2007, which starts October 1, to Congress in February. Pentagon policy is to decline to comment on the budget until it is made public.
The Army plans to equip all its units slated to use the new systems by the end of 2016, said spokeswoman Maj. Desiree Wineland. But Lanza predicted it would take another decade.
A spokesman for Chicago-based Boeing, Dan Beck, declined to comment on Lanza's predictions. Boeing is the chief contractor for the multibillion-dollar, ground-based component of missile defense.
Jim Albaugh, who heads Boeing's St. Louis-based Integrated Defense Systems business unit, told a conference in New York on Thursday that he had been flagging a coming "flattening" in U.S. defense spending.
"And I think we all know that's coming to pass," Albaugh said at the Credit Suisse First Boston and Aviation Week conference, according to a transcript made available by Boeing.
L-3, headquartered in New York, is a leading supplier of intelligence, surveillance and reconnaissance systems. It is hedged against cuts to big programs because it also builds the high-tech gear used to modernize existing ships, warplanes and ground vehicles, Lanza said.
Others with a big role in missile defense include Northrop Grumman Corp. (NOC.N: Quote, Profile, Research, Stock Buzz), which builds the battle command, control and communications system; Raytheon Co. (RTN.N: Quote, Profile, Research, Stock Buzz), which builds the so-called Exo-atmospheric Kill Vehicle and Lockheed Martin (LMT.N: Quote, Profile, Research, Stock Buzz), which builds booster rockets and the Aegis combat system at the heart of ship-based missile defense.
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