Pentagon Issues 90-Day Stop-Work Order on GE’s F-35 Engine

The U.S. Defense Department today told General Electric Co. (GE) and Rolls-Royce Group Plc (RR/) to halt work on a second engine for the F-35 Joint Strike Fighter until there is more explicit direction from Congress.

The order applied immediately for 90 days and stopped the expenditure of $1 million a day for an engine the military has said consistently since fiscal 2007 that it doesn’t want, the Pentagon said in a statement.

The order doesn’t terminate the engine program, defense undersecretary for acquisition Ashton Carter said in an interview. “This is a not an irreversible step,” he said.

While halting spending now, it’s “the prerogative of Congress to give further direction on the extra engine. We do not have definitive direction this year,” Carter said.

“We understand the ultimate outcome will be decided by Congress,” he said. “We have shown great forbearance to continue to fund something we don’t believe is needed” as Congress continues to debate defense spending for the current fiscal year and for 2012.

GE plans to use its own funds to continue developing the engine for 90 days while Congress debates, said company spokesman Rick Kennedy.

“We are disappointed that DoD took this unilateral action before Congress has completed its work on the fiscal year 2011 budget,” said Kennedy in a statement.

GE Self-Funding

“We feel so strongly about this issue, as do our Congressional supporters, that we will, consistent with the stop-work directive, self-fund” the program “through this 90- day stop-work period,” Kennedy said.

House Armed Services Committee Chairman Howard ‘Buck’ McKeon, a California Republican, said in a statement that his committee “will explore all legislative options to maintain engine competition in the largest acquisition program in U.S. history.”

The senior Republican on the Senate Armed Services Committee, John McCain of Arizona, applauded the stop-work decision, saying the GE engine was “unnecessary and wasteful.”

The F-35 program is currently estimated to cost at least $382 billion. It is the only U.S. jet fighter currently in development.

None of the military funding legislation pending in Congress for the fiscal year that ends Sept. 30 includes money for the alternate engine. The House voted last month to strip $450 million for the second engine from the fiscal 2011 Pentagon spending bill, which Congress hasn’t yet passed.

Freshmen Oppose

More than half of the new Republicans in the U.S. House of Representatives joined in the 233-198 vote to kill funding for the second engine.

About 2,500 jobs, the majority of them in Ohio, Massachusetts and Indiana, are tied to its development. If GE and Rolls-Royce reach their projected peak production, that figure would increase to as many as 4,300 jobs, according to Kennedy.

President Barack Obama and Defense Secretary Robert Gates have opposed the engine as unneeded and a waste of money at a time of tight budgets. Gates said last month he’d use “all available legal options” to kill the engine.

Pratt & Whitney, a division of United Technologies Corp. (UTX), is the main supplier of engines for the Joint Strike Fighter, which is manufactured by Bethesda, Maryland-based Lockheed Martin Corp. (LMT)

McKeon’s statement said the Pentagon’s stop-work order “is especially troubling when you consider their preferred engine has experienced development delays and a cost-to-complete increase of 445 percent over the last three years.”

Pratt Delays

The F-35 program manager, Admiral David Venlet, said in March 15 testimony that Pratt & Whitney was two to three weeks behind schedule this year with the first six engines. Projections indicate the company will get back on schedule soon, he said.

Carter, the Pentagon acquisition official, sought to minimize the impact of the engine decision to GE.

The company “does lots of work for us and will do lots of work for us -- this is just one program,” he said. “We value having more than one industrial partner in the military jet engine business. There is other business for GE, but we do not need the extra engine.”

GE provides engines for the Navy’s F/A-18E/F fighter. The service is buying more of those planes as a hedge against additional F-35 delays. GE also competes for F-16 and F-15 engine work.

GE last year had $2.9 billion in defense contracts, out of total revenue of $150.2 billion, according to Bloomberg Government derived data. Jet engines represented as much as $2.2 billion of the total, according to the data.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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