U.S. military looks to protect big arms programs

By Jim Wolf - Analysis

WASHINGTON (Reuters) - The U.S. armed services are maneuvering to defend big-ticket weapon programs as the nation's economic woes mount and the government spends billions of dollars shoring up the financial system.

Experts say the services have a good chance of succeeding -- to the benefit of contractors such as Lockheed Martin Corp

(LMT.N), Boeing Co (BA.N), Northrop Grumman (NOC.N), General Dynamics Corp (GD.N) and Raytheon Co (RTN.N).

To the extent there is budget pressure on the biggest programs, they are likely to be stretched out or scaled back slightly rather than scrapped, several experts said.

"It's very rare for programs to be actually canceled," said Steven Kosiak, vice president for budget studies at the Center for Strategic and Budgetary Assessments.

Even such controversial efforts as missile defense, which has been receiving about $10 billion annually in recent years, was pruned less than three percent this year by lawmakers -- a measure of bipartisan support.

The Air Force is seeking the abrupt retirement of 314 F-15 and F-16 fighter aircraft and nine A-10 close air support planes to save $3.4 billion in fiscal 2010, which begins next October 1.

Its goal: to use the money to keep on track Lockheed's next-generation F-35 Joint Strike Fighter, modernize bombers and buy unmanned surveillance planes.

In addition, Air Force officials have made clear they hope to extend production of Lockheed's radar-evading F-22 air superiority fighter -- a decision for a new president who will take office in January after the November 4 election.

And less than 24 hours after canceling a projected $6.2 billion deal with Textron Inc's (TXT.N) Bell Helicopter unit due to cost overruns and delays, the Army said it would stage a new competition as soon as possible.

The Army said a new fleet of 512 reconnaissance and attack helicopters remained a "critical requirement".

POLITICAL SUPPORT

"Big weapons programs generate so many jobs that they spawn potent political constituencies," said Loren Thompson, a defense industry consultant. "Weapons programs will be fiercely defended."

The Army is also seeking to protect its $160 billion Future Combat Systems program, the centerpiece of its modernization efforts. The program is co-managed by Boeing and SAIC (SAI.N).

"We're 100 percent behind it, and we'll make it a priority in all of our budgeting going forward," Army Secretary Pete Geren told reporters earlier this month, days after a $700 billion financial rescue package was signed into law.