Panetta Says Budget Cuts May Kill Lockheed’s F-35 Jet

U.S. Defense Secretary Leon Panetta told Senators John McCain and Lindsey Graham that defense budget cuts of as much as $1 trillion may lead to the termination of Lockheed Martin Corp. (LMT)’s F-35 jet.

In a letter today to the two Republican lawmakers, Panetta said reductions beyond the $450 billion, 10-year defense budget cuts already planned would reduce the “size of the military sharply.”

If a special committee of lawmakers fails to reach agreement on U.S. deficit reduction, that would trigger a so- called sequestration. That would involve at least another $500 billion in defense cuts over a decade and reduce Pentagon programs in 2013 by 23 percent if the president exercises his authority to exempt military personnel, Panetta said.

Panetta said such funding reductions might lead to termination of major programs such as Lockheed’s F-35 Joint Strike Fighter, major space initiatives, silo-based U.S. nuclear missiles and ground combat vehicle modernization.

Such cuts also would damage shipbuilding and construction projects, and cause termination of the Littoral Combat Ship, Panetta wrote.

“You cannot buy three quarters of a ship or a building,” he wrote the lawmakers urging them to ensure that Congress finds deficit reduction through other means.

Nov. 23 Deadline

A congressional supercommittee, seeking at least $1.2 trillion in deficit reductions, has until Nov. 23 to get an agreement. If Congress fails to approve the panel’s plan, federal spending would be cut automatically, including about $500 billion from the Defense Department, not including interest.

The sequestration would call for the reduction of as much as $100 billion a year from the Pentagon’s “topline” projections, starting in 2013, Panetta said.

The Pentagon as recently as February anticipated spending $571 billion in 2013, or 1 percent real growth over the fiscal $553 billion basic request. The projections grow to $611 billion in 2016.

Pentagon budget planners now anticipate the Office of Management and Budget may allow only about $522.5 billion annually in 2014-2017, according to Defense Department data. The estimates are calculated in fiscal 2011 dollars and don’t assume sequestration.

The projections assume war funding of $50 billion in 2014, $30 billion in 2016 and $20 billion in 2017. That’s down from $117 billion proposed this fiscal year.

The Congressional Budget Office has projected that the Pentagon’s budget may be cut by $882 billion through 2021, starting with $83 billion in 2013, increasing to $91 billion in 2016 and $110 billion in 2021.

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; 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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