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GE Engine Was ‘Miscast’ as Earmark, Immelt Tells Employees

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Feb. 23 (Bloomberg) -- General Electric Co. said it will seek to restore funding for its alternate Joint Strike Fighter engine, which was labeled a waste of money when the U.S. House of Representatives voted to kill the program.

Having a competitor to the primary engine made by United Technologies Corp.’s Pratt & Whitney unit would save $20 billion over time, Chief Executive Officer Jeffrey Immelt said today in a memo to employees, repeating an estimate from the Government Accountability Office.

The vote to eliminate $450 million in engine funds for the fiscal year through Sept. 30 occurred in “the midst of an important fiscal debate,” Immelt wrote. “The JSF funding decision received significant scrutiny and was miscast as an ‘earmark’ on wasteful spending.”

President Barack Obama’s administration has sought to cancel the engine for the F-35, the stealth fighter made by Lockheed Martin Corp. Last week’s vote was the first by the House in more than four years against the engine, which is being developed by GE and Rolls-Royce Group Plc.

The F-35 is the Defense Department’s most-expensive program, with a cost surging to about $382 billion from an estimated $250 billion for development and other expenses a decade ago.

Pratt’s Response

A spokeswoman for Pratt & Whitney, Stephanie Duvall, disputed figures in Immelt’s letter, including the $20 billion. The unit of Hartford, Connecticut-based United Technologies has sided with the Pentagon in deeming the GE-Rolls engine a waste.

The Pratt & Whitney engine “is performing flawlessly and we are keeping costs down,” Duvall said. “This is why the Department of Defense has said they only need one engine for the F-35 program.”

Immelt that while he is “completely respectful” of the budget debate and deficit-reduction efforts, the Pentagon’s acquisition process hasn’t received the scrutiny it deserves in the current round of spending cuts.

“The budget debate has completely skipped a critical policy element -- Pentagon acquisition reform,” Immelt said. The JSF program “is the largest procurement in U.S. military history and has been one of the toughest to execute.”

GE, based in Fairfield, Connecticut, has developed 80 percent of the engine over the past 15 years and will “press our case in the U.S. Senate and elsewhere” to restore funding, Immelt wrote.

The F-35 is about four years behind most of its initial schedule. The estimated cost of an individual jet has increased about 84 percent, to $92 million in 2002 dollars. GE has said that killing the alternate engine cedes a market of as much as $100 billion over the life of the program to Pratt & Whitney.

GE fell 45 cents, or 2.2 percent, to $20.37 at 4:15 p.m. in New York Stock Exchange composite trading, while United Technologies fell 77 cents to $82.79.

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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