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GE-Rolls End Self-Funding Engine Amid Fighter ‘Uncertainty’

General Electric Co. (GE) and Rolls-Royce Holdings Plc stopped self-funding their alternative Joint Strike Fighter engine, halting 15 years of development and efforts to keep it alive against the wishes of two U.S. presidents.

The companies announced their decision today after years of successful lobbying for funding ended in April. Last month, GE officials met newly named U.S. Deputy Defense Secretary Ashton Carter and said they would keep pressing Congress to authorize the program’s completion.

GE, based in Fairfield, Connecticut, and Rolls-Royce dropped their effort after the government raised the possibility the Joint Strike Fighter itself might be canceled. Defense Secretary Leon Panetta said three weeks ago that cuts of as much as $1 trillion in the budget may lead to termination of major programs such as the Lockheed Martin Corp. (LMT) F-35 jet.

“The tipping point was the uncertainty of the development and the production schedule,” Rick Kennedy, a GE spokesman, said in a telephone interview. “If you’re trying to self-fund the program, you need to know when things need to be ready and it would be very difficult to figure out the schedule. It was a moving target.”

Congress authorized $2.5 billion through 2009 in spending on the alternative engine to the F135 made by United Technologies Corp. (UTX)’s Pratt & Whitney unit, according to an April 20 report prepared by the Congressional Research Service.

80 Percent Complete

The Pentagon told GE and 40 percent venture partner Rolls- Royce in April that it was ending the secondary F136 engine, which both companies said was almost 80 percent complete. They then offered to self-fund the project through fiscal year 2012.

Since then, the U.S. House has included provisions in its version of the annual defense authorization bill to revive the project. The Obama administration, like the Bush administration before it, has opposed funding the project.

GE and London-based Rolls-Royce first received seed money to develop the engine in 1996. In lobbying for the project, GE and Rolls-Royce had said the competition of two engines would keep costs down in a market they estimated at $100 billion over the lifetime of the aircraft.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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