Lockheed’s Anti-Missile System Targeted for Cuts in U.S. Senate

U.S. senators are aiming to eliminate funding for a missile defense program being developed by Lockheed Martin Corp. (LMT) in collaboration with Italy and Germany.

Senator Mark Begich, Democrat of Alaska, and at least six other Democratic and Republican members of the U.S. Senate Armed Services Committee, will try to strike the Pentagon’s funding request for the Medium Extended Air Defense System, or Meads.

“We proposed to eliminate Meads funding,” as part of the internal panel negotiations for the 2012 defense authorization bill, which sets military policy and spending targets for the fiscal year that starts Oct. 1, Begich said in a short interview. The full Senate Armed Services Committee will consider his provision during deliberations this week, he said.

The committee chairman, Michigan Democrat Carl Levin, said that the panel’s subcommittee’s will “scrub and review” all Pentagon programs to find savings. Cuts will be “case-by-case” rather than trimming the entire defense budget by a certain percentage, Levin told reporters yesterday.

Levin also said that he asked the Obama administration to detail how much of its proposed $400 billion in national security cuts over 12 years would come out of the Pentagon and how much must be trimmed for 2012. The administration has not yet made recommendations, according to Levin.

The Senate Armed Services panel on readiness led by Missouri Democrat Claire McCaskill, the only subcommittee to deliberate in open forum, has proposed about $3.5 billion in savings by freezing Defense Department spending on service contracts at 2010 levels, eliminating military construction projects, and reducing operations and maintenance funding for the Air Force.

Multinational Defense

The Pentagon in February said it would terminate Meads when the current contract ends in 2013. The Pentagon requested $406.6 million for Meads in 2012.

The $4.2 billion development program is managed from Orlando, Florida, by Meads International LLC, a joint venture of Lockheed, Lfk-Lenkflugkorpersysteme Gmbh of Germany and MBDA of Italy. MBDA, the world’s second-largest missile maker, is jointly owned by BAE Systems Plc (BA/), European Aeronautic, Defence and Space Co. and Finmeccanica SpA. (FNC)

The House Appropriations Committee yesterday approved a 2012 defense-spending bill that cuts $149.5 million from the Pentagon’s proposed budget for Meads. The House in May approved a 2012 defense authorization bill with the same cuts.

Continuing with the program would have required as much as $1.16 billion additionally for the five-year period ending 2017, according to a Pentagon fact sheet.

Growing Costs

The Meads system has grown in cost by about $1 billion and its overall schedule has been delayed an additional 18 months, according to the Senate Armed Services Committee in its version of the fiscal 2011 defense authorization bill.

The U.S. contributes 58 percent of the funding for the seven-year-old Meads program, in partnership with Germany and Italy. It’s an anti-missile system designed to work within NATO’s command structure that uses the latest version of the Patriot missile developed by Lockheed Martin and Raytheon Co. (RTN)

“This is an extremely needed capability,” Marty Coyne, director of business development for Meads International said in a telephone interview. “It is essential for Congress to fund the request” to finish the development of the system and conduct three flight tests, Coyne said.

Congress also should ask the GAO to conduct a study to compare the costs of operating and maintaining Meads to the costs of the older Patriot missile system developed by Raytheon Co., he said.

Waltham, Massachusetts-based Raytheon’s missile programs vice president, Tim Glaeser, says Patriot is “an affordable, low risk and effective cornerstone to air and missile defense for the foreseeable future.”

-- Editors: Steven Komarow, Terry Atlas

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net.

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

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