General Electric and Britain’s Rolls-Royce are stepping up their fight on Capitol Hill to save a multibillion-dollar engine program President Bush scrapped from his 2007 budget request.
Several members of Congress are poised to grill the Pentagon on the decision to jettison the program.
For Rolls-Royce and General Electric, the stakes are high in the battle to save the alternate-engine program for the multinational Joint Strike Fighter (JSF): Even though they will not suffer significant short-term financial losses, the two companies could be effectively shut out of the largest fighter-jet market for the next 40 years, several defense industry sources said.
Critics of the Pentagon’s decision also argue that the stakes could be high for the Air Force, the Navy and the Marine Corps, which have joined together on the program, because having a single engine producer for the entire fleet could be too risky and make them less reliable. JSF planners originally projected that producing two engine programs would create competition, lower prices and provide a backup if one of the engines broke down.
The United States, the United Kingdom and seven other international partners are developing the $256 billion JSF, which is the Pentagon’s priciest airplane to date, to replace a wide range of U.S. and foreign fighter jets. The Pentagon was planning to offer funding for a choice of engines for the first fighters, built by Lockheed Martin.
Pratt & Whitney, a unit of United Technology Corp., has a contract to build the engine for the first JSF. The GE–Rolls-Royce team won a $2.4 billion contract last summer to develop the second engine. Full production of the fighter jet is expected to start in 2014. Until then, the program is in its so-called developmental stage.
Even though rumors of the alternate-engine program’s cancellation started churning late last fall, the news of the lack of funds for the alternate engine came as an unpleasant surprise, a Rolls-Royce official said.
“We are disappointed that the Department of Defense has decided that, after years of support, the engine is no longer required,” said Mike Ryan, Rolls-Royce’s executive vice president for government affairs. “The merits [of the program] are overwhelming, and we are hopeful that Congress in providing its oversight role [will] recognize those merits and restore the whole program.”
Lobbyists for Rolls-Royce and GE are targeting key offices in the House and Senate this week and will be doing so in the coming weeks as well until the Armed Services and Appropriations committees mark up the 2007 bills, industry sources said. Rolls-Royce also has help from the Livingston Group, Robinson International and Dellums & Associates.
This move comes after British Prime Minister Tony Blair failed to reverse President Bush’s 2007 budget decision after several appeals. Also, there has been talk in Britain, which is the biggest partner for the JSF, about pulling out of the program. Rolls-Royce North America, which is headquartered in Indianapolis, and Rolls-Royce in Bristol, England, have been each building parts of the engine. GE is assembling the engines in Cincinnati.
Ohio GOP Sens. Mike DeWine and George Voinovich last week wrote to the Armed Services Committee about their concern for the termination decision. “If the contract is canceled, all of the money that American taxpayers have invested thus far will be lost, as well as potential savings over the years to come,” they wrote.
Indiana Sens. Richard Lugar (R) and Evan Bayh (D) are also speaking out on the issue. Bayh has submitted a series of questions to the Pentagon regarding its decision.
The powerful chairman of the Senate Armed Services Committee, Sen. John Warner (R-Va.), said last week that the committee would give the Pentagon’s decision a careful consideration. He also expressed concern about the decision to scrap the engine, particularly because of the international nature of the program.
After several fiascos with the F-15 and F-16 fighter jets, which relied on one engine, Congress more than a decade ago started an alternative fighter-engine program. “It became a competition, and so you started having the engine wars,” a congressional source said. The result of those battles is that one company receives a certain percentage of the engine contract and another the rest.
“We had to learn over and over that competition is a good thing,” the source said.
Since 1996, Congress has provided funding to GE and Rolls-Royce for the alternate-engine program. A total of $1.28 billion was spent through the end of fiscal year 2005.
“Congress in various forms felt that it was worth having competition in the program,” the congressional source said, and now the Pentagon will have to provide a thorough analysis for its decision.
“There has to be some kind of issue going on within the program after the Congress supported the program every year,” the source said.
The source added that cost increases and pressures could have caused the decision, but the military did not elaborate on its decision. The Armed Services committees are going to look at previous alternate-engine programs to determine what the savings were in those instances and whether the same criteria would apply to the JSF.