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Program cuts at Defense Department could affect contractors in Arizona

Raytheon Co., Honeywell International Inc. and other defense contractors doing business in Arizona could lose millions of dollars under proposed program cuts that the Defense Department announced Monday.

Defense Secretary Robert Gates outlined his recommendations for the agency’s fiscal 2010 budget during a news briefing at the Pentagon, saying the proposals “will profoundly reform how this department does business.”

Gates said he is urging Congress to cut spending for some aircraft, weapons and vehicle programs that have incurred cost overruns, rely on technology that is not yet mature or are not as crucial to U.S. security and combat needs given current and future threats facing the country.

Representatives for Raytheon Co., Honeywell International Inc., General Dynamics Corp. and other firms with local operations said Monday that it was premature to speculate on how the proposals might affect them because Congress has yet to approve the budget.

Defense analysts have predicted the Obama administration would cut spending for such programs as it devises plans to pull troops from Iraq and crack down on over-budget defense contracts.

Critics of the Defense Department’s handling of military programs have cited cost overruns in several weapons and vehicles programs, including a contract to build a new fleet of presidential helicopters, as reasons to revamp the procurement system.

Obama’s proposed $533.7 billion Defense budget for fiscal 2010 is about 4 percent higher than what Congress appropriated for fiscal 2009, excluding funding for military operations in Iraq and Afghanistan.

However, Gates has proposed to shift funds from traditional military weapons and technology to programs for increased pay and benefits for military personnel.

Arizona’s two Republican senators were split over Gates’ proposals. Sen. John McCain, co-sponsoring a bill that calls for more oversight of contract procurement, called the announcement “a major step in the right direction.”

Sen. Jon Kyl was one of six senators who wrote Monday to President Obama saying some of Gates’ proposals could “undermine” the country’s ability to protect against the “growing threat” of enemy missiles.

The department is proposing terminating the “multiple kill vehicle” program as part of an overall plan to reduce the Missile Defense Agency’s budget by $1.4 billion.

Raytheon Missile Systems in Tucson was awarded a defense contract worth $442 million in November to develop MKVs, which would launch satellites into space to crash enemy missiles. The program poses “significant technical challenges,” Gates said.

Representatives of Raytheon, which employs about 11,000 workers in Tucson, wouldn’t comment on the proposed cuts or how many workers are tied to that program.

The department’s recommendation to cease production of F-22 Raptors at 187 units could affect Phoenix-based Honeywell Aerospace, which supplies electronics and engine parts for the fighter jet.

Honeywell Aerospace, which employs about 10,000 workers in the Valley, said in a statement that it does not expect the recommendation to immediately affect its operations.

Gates also is recommending that the department purchase 30 F-35 Joint Strike Fighter jets in fiscal 2010 compared with 14 during the current fiscal year. Honeywell also makes components for that aircraft.

Another move that was widely expected was Gates’ recommendation to terminate a contract with Lockheed Martin to produce 23 new presidential helicopters.

Originally valued at about $6.5 billion in 2005, the contract has ballooned to more than $13 billion because of add-ons by the defense department.

Defense-products maker BAE Systems makes seats for the helicopters at its Phoenix facilities.

Gates also is proposing eliminating the vehicle component of Future Combat Systems, the Army’s $160 billion program to modernize vehicles, weapons and communications technology.

General Dynamics C4 Systems in Scottsdale has subcontracts to provide several computer software and hardware components for communication tools that are part of the program. The company declined to comment.


Defense cuts

U.S. Defense Secretary Robert Gates outlined his proposals for the department’s fiscal 2010 budget, which could include funding cuts to programs key to Arizona contractors.

• Multiple Kill Vehicle: Raytheon Missile Systems in Tucson won a $442 million contract in November to develop a system that would launch satellites into oncoming enemy missiles.

• F-22 Raptor: Lockheed Martin is the prime contractor for this fighter jet. Honeywell Aerospace in Phoenix supplies many of the avionic components.

• VH-71: Gates recommends terminating this contract with Lockheed Martin to build a fleet of 23 presidential helicopters because of cost-overruns. BAE Systems in Phoenix has supplied seats for some of the test models. Honeywell Aerospace supplies some components.

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