(For other news from Reuters Aerospace and Defense Summit,
click on www.reuters.com/summit/Aero13)
(Adds Navy, Pentagon statements, byline)
By Andrea Shalal-Esa
WASHINGTON, Sept 3 Lockheed Martin Corp
is bracing for cuts and delays next year in major weapons
programs, including a new coastal warship it builds for the U.S.
Navy, unless Congress acts to reverse mandatory reductions in
U.S. military spending, a top company official said Tuesday.
Dale Bennett, executive vice president of Lockheed's Mission
Systems and Training division, said the company was already
seeing a slowdown in programs and declines in contract awards as
result of spending cuts required under a process known as
"sequestration," and the situation could worsen next year.
Bennett told the Reuters Aerospace and Defense Summit the
Pentagon had largely achieved the cuts required in fiscal 2013
through furloughs of non-military employees and by reducing
operations and maintenance spending, but weapons programs would
likely take a bigger hit going forward.
It will also be difficult for the Pentagon to start any new
"The impact of sequestration will be felt more acutely next
year," Bennett said, noting the Pentagon could not cut personnel
costs quickly enough to achieve the required cuts, which was
forcing them to make difficult choices about programs.
Lockheed and other arms makers have been laying off workers
and consolidating facilities to brace for a downturn after the
end of the Iraq war, and the drawdown in Afghanistan. But the
budget cuts now planned - about $1 trillion over the next decade
- are more far-reaching than many companies or defense officials
In an interview published Monday, Pentagon acquisition chief
Frank Kendall told the Washington Post that officials were
looking at delaying and canceling programs in coming weeks as
result of the automatic cuts. He did not name specific programs.
Kendall is due to speak at the Reuters summit on Wednesday.
Bennett said Lockheed was focused on keeping its programs
within budget and on schedule, and making sure it delivered the
technical capabilities it promised.
"All the programs are on the table to be discussed," Bennett
said. "The programs that are performing will have a higher
probability of proceeding forward."
Bennett said Navy and Pentagon officials had not notified
Lockheed about possible cuts to the Littoral Combat Ship (LCS)
program despite reports that officials could halt the program at
24 ships, instead of the 52 units now in the Navy's plan.
Lockheed and Australia's Austal Ltd are building
two different models of the new smaller warships for the Navy.
Defense officials said the Navy is working through several
scenarios to achieve another 10 percent cut in military
spending, including options that could reduce the total number
of LCS ships that it would buy, but no decisions had been made.
The Navy Times newspaper reported on Monday that top
Pentagon leaders support the idea of limiting the total LCS buy
to 24 ships to achieve the needed budget reductions, while Navy
officials were arguing for no less than 32 ships.
Pentagon spokeswoman Maureen Schumann said no decisions had
been made. She said Defense Secretary Chuck Hagel had told
reporters at the end of July that more analysis was required
before he made any force structure or program decisions. "That
remains our current position," she said.
Navy spokeswoman Lieutenant Caroline Hutcheson said the Navy
was continuing to evaluate future demand for forces and the
right way to balance fiscal and operational risk, and no
decisions had been made on reducing the planned LCS purchase.
"We remain committed to a 52-ship LCS program," she said.
"This number accurately and appropriately captures the
requirement for capacity and capabilities."
Bennett said Lockheed remained convinced the LCS class of
ships, which are smaller and require less personnel, offered the
Navy the best way to increase the size of its fleet, which is
now at historic lows.
He said a decision to more than halve the expected purchases
could have consequences for the companies building the ships and
their suppliers. Current contracts will keep production of the
Lockheed LCS ship running through 2018, he said.
"It's always problematic when you're at the front end of a
program and you're making those investments ... and you later
find out that the budget doesn't support those kind of
quantities," he said.
He said Lockheed remained in discussions with Saudi Arabia
and the United Arab Emirates about possible sales of the new
ships, and was looking at licensing the design for production in
An initial sale could emerge for the program in coming
years, he said.
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(Editing by Tim Dobbyn)