Pentagon Said to Propose Ending $6.8 Billion Missile, Satellite

The Pentagon will propose canceling a potential $6.8 billion Army missile program that pits Lockheed Martin Corp. (LMT) against Raytheon Co. (RTN), a Northrop Grumman Corp. (NOC) weather satellite, and an Air Force light-attack aircraft, according to a government official.

The Joint Air-to-Ground Missile, the Defense Weather Satellite System, and the plane are included on a list of weapons programs that would be terminated under the fiscal 2013 defense budget to be sent to Congress next month, according to the official, who spoke yesterday on condition of anonymity before Defense Secretary Leon Panetta releases some budget details on Jan. 26.

The three programs would be ended along with a 10-year-old initiative costing about $4 billion under which Boeing Co. (BA) is upgrading C-130 Hercules transports with modern cockpit electronics.

The satellite for environmental monitoring is in the initial stages so there’s no specific dollar value for savings from calling it off. The Air Force planned to buy two satellites. Northrop Grumman said in May it received authorization and funding to proceed with development for a projected initial launch in 2018. The Pentagon requested $445 million in fiscal 2012.

The Senate’s defense appropriations panel in its fiscal 2012 bill called for terminating the program, citing “a difficult and confusing set of management issues.” The final House-Senate negotiated version spared the satellite while cutting funds.

Northrop Grumman spokesman Randy Belote said the Falls Church, Virginia-based company had no comment “until the Air Force publicly issues a statement on the status of the program.”

Raytheon Versus Lockheed

The new joint missile that would be canceled is a potential $6.8 billion project pitting Raytheon of Waltham, Massachusetts, the world’s largest missile maker, against Lockheed Martin of Bethesda, Maryland, the world’s largest defense company, which arms many of the U.S. military’s helicopters and drones with its Hellfire missiles.

The contest winner was to build about 33,853 of the missiles for helicopters, drones and fighter jets flown by the Navy, Army and Marines. Each missile is expected to cost $202,000, according to the Government Accountability Office.

The Joint Air-to-Ground Missile, or JAGM, is designed to equip the Army’s Apache AH-64D made by Boeing, the MQ-1 C Gray Eagle drones made by General Atomics, and the OH-58 Kiowa Warrior helicopters made by Bell Helicopter, a unit of Textron Inc. (TXT) of Providence, Rhode Island.

Navy, Marine Plans

The Navy and Marine Corps plan to install it on the F/A-18 E/F Super Hornet fighter jets made by Boeing, the Seahawk MH-60R helicopter made by Sikorsky Aircraft, a unit of United Technologies Corp. (UTX), and the AH-1Z Super Cobra helicopters made by Bell.

“Lockheed Martin has not been notified of any change to the JAGM program,” Melissa Hilliard, a spokeswoman, said in an e-mail. Raytheon spokesman Michael Nachshen declined to comment on the program’s status.

Also to be canceled is the Air Force’s new Light Attack and Armed Reconnaissance aircraft program for irregular warfare.

The program is in the early stages with no approved acquisition strategy and was under review, Air Force Major General Jay Lindell told a House Armed Services Committee panel in November.

“The acquisition strategy has not been fully approved,” Lindell said. “It is on hold.”

Lockheed Martin and Hawker Beechcraft Corp. formed a team in 2009 to vie for the program. Boeing also was prepared to compete.

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

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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