New U.S. strategy sees funding for some weapons, cuts others

WASHINGTON Fri Jan 6, 2012 5:23am IST

U.S. President Barack Obama delivers remarks on the Defense Strategic Review at the Pentagon near Washington, January 5, 2012. With Obama are (front row, L-R) Deputy Secretary of Defense Ashton Carter and Secretary of Defense Leon Panetta. REUTERS/Jason Reed

U.S. President Barack Obama delivers remarks on the Defense Strategic Review at the Pentagon near Washington, January 5, 2012. With Obama are (front row, L-R) Deputy Secretary of Defense Ashton Carter and Secretary of Defense Leon Panetta.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - U.S. officials pledged on Thursday to keep investing in certain weapons and cyber warfare under a new leaner military strategy, but refused to spell out which programs will live or die as the Pentagon planned to cut spending by nearly half a billion dollars.

Defense Secretary Leon Panetta underscored the importance of the defense industrial base and said the Defense Department would in some cases even increase spending for special operations forces, innovative surveillance technologies, unmanned vehicles, space and cyberspace.

The strategy document also singled out the need to sustain undersea capabilities, develop a new stealth bomber, improve missile defenses and continue improving the resilience and effectiveness of U.S. satellites.

But other suppliers of equipment used by ground forces and other programs clearly face significant cutbacks as the U.S. military shifts its focus to Asia and away from the large-scale stability operations that dominated the past decade.

Panetta and other military officials declined, even under repeated questioning, to identify which weapons programs faced cuts or termination as result of Pentagon efforts to cut spending by $487 billion over the next five years. Details would be released later this month, they said.

Panetta said the cuts were difficult but manageable. However, he warned the military would face disastrous consequences if Congress did not reverse an additional $600 billion in across-the-board cuts due to take effect in January 2013 under a program known as "sequestration."

Lockheed Martin Corp (LMT.N), Boeing Co (BA.N), Northrop Grumman Corp (NOC.N) and other top Pentagon suppliers had hoped to gain more clarity from Thursday's announcement. Defense shares dropped about one percent on the New York Stock Exchange as uncertainty about specific weapons programs continued.

Thursday's briefing "raised more questions than it answered," said budget analyst Todd Harrison at the Center for Strategic and Budgetary Assessments think tank.

He said the lack of detailed information was surprising given that officials had already finalized the fiscal 2013 defense budget that will be sent to Congress in February.

Deputy Defense Secretary Ashton Carter dodged the question when asked to what extent officials had axed major weapons programs to achieve nearly half a trillion dollars in cuts.

EVERYTHING WAS ON THE TABLE

"We have had to make major changes in every category of the budget in order to meet this $487 billion target. That includes modernization," Carter told reporters, noting that $263 billion of the cuts would come in the first five years.

Carter said Panetta had insisted that every budget item be scrutinized.

"We're looking at things that we haven't had to look at in this department for a decade. He's made us put everything on the table," he said.

Carter said more details about the 2013 budget would be released in two-and-a-half weeks. When lawmakers saw those cuts, he said, they would understand how difficult it would be if sequestration cuts were not reversed.

Pentagon officials said cutbacks to staff and programs had been made carefully, with an eye to reversing them if the current planning proved to be wrong.

"We want to make sure that 10 years, 15 years from now, we still have an industrial base that supports our key weapons systems, even if we're not able to buy in those in areas at the rates or in the volume that we had planned before we were handed this $487 billion cut," Carter said.

He said the department remained committed to the $382 billion Lockheed F-35 Joint Strike Fighter program, adding: "We want it. We want it to succeed. That's why we're working so intensively on it managerially."

He said the new strategy pointed to the need for greater investment in some areas, such as cyber, while other areas would "have to take more than their share of the cuts."

Reuters reported on Wednesday that the Pentagon was preparing to postpone production of more than 120 additional F-35 jets over the next five years to save money and allow time to resolve issues that arose during development.

Defense consultant Loren Thompson of the Virginia-based Lexington Institute said Thursday's news contained few surprises, but confirmed that makers of warships, missile defense equipment and long-range aircraft could see new orders, along with companies working on cyber capabilities.

But makers of ground vehicles and related equipment, as well as smaller helicopters, should brace for cutbacks given the end of the wars in Iraq and Afghanistan, he said.

Harrison noted that officials repeatedly mentioned military space, which could signal the start of a new satellite program, possibly for protected communications, after the cancellation of a similar program several years ago.

He forecast that several Army ground vehicle programs could be cut or eliminated, as well as a complex joint radio program known as the Joint Tactical Radio Systems.

Defense consultant Jim McAleese said Army programs would clearly bear the brunt of the cuts, while Navy and Air Force programs could see continued investment and possibly growth.

(Reporting By Andrea Shalal-Esa; editing by Andre Grenon)

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