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Funds for Lockheed-Led Missile Defense Urged by Panetta

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June 27 (Bloomberg) -- U.S. Defense Secretary Leon Panetta urged a Senate committee chairman to support $400 million for a Lockheed Martin Corp.-led international mobile missile defense program that three other defense panels have rejected.

Failure to provide one more year of funding for the Medium Extended Air Defense System, or Meads, would “be viewed by our allies as reneging on our promises,” Panetta said in his letter yesterday to Senator Daniel Inouye, the Hawaii Democrat who is chairman of the Senate Appropriations committee and its defense panel.

Congressional critics say the system, designed to intercept medium-range ballistic missiles, cruise missiles and drones, has been plagued by cost overruns and performance failures. The House and Senate Armed Services committees and the House Appropriations Committee proposed canceling the final $400 million in their versions of the fiscal 2013 defense bill. “We have received the letter and are reviewing it,” Rob Blumenthal, a spokesman for Inouye, said today in a telephone interview.

Inouye’s panel represents the final opportunity to preserve the funding, as it did last year when the program was singled out for termination by its House counterpart.

The Pentagon “must fulfill its contractual obligations” and the Army may harvest some technology from the project, the Senate panel said in its fiscal 2012 report.

Still, Inouye’s panel said it was concerned about “the historical management of the program and that it has taken the Department three years to conclude the program was simply unaffordable.”

Joint Funding

The Pentagon has jointly funded the missile defense system with Italy and Germany. The Pentagon’s fiscal 2013 request for $400.9 million was to be the last year of U.S. funding for the development effort. The U.S. contributes 58 percent to the program that has been in development since the 1990s.

The Pentagon said last year it would quit the Meads program after the “proof of concept” phase ends in 2013, citing “a number of technical and management challenges” over 20 years “which significantly delayed contract performance and increased expected costs.”

Finishing the phase would let the Army reap the benefits of a 360-degree long-range surveillance radar that would improve missile defense systems, Army Chief of Staff General Ray Odierno said in June 11 letters to lawmakers, including Inouye.

Orlando Management

Meads development is managed from Orlando, Florida, by Meads International Inc., a joint venture of Lockheed Martin, Lfk-Lenkflugkoerpersysteme GmbH based in Schrobenhausen, Germany, and MBDA. MBDA is jointly owned by BAE Systems Plc, European Aeronautic Defence and Space Co. and Finmeccanica SpA.

Asked what the Lockheed Martin Meads unit is doing to influence the Senate panel, spokeswoman Cheryl Amerine said in an e-mail, “We are focusing on the things within our control and that is to execute on the Meads contract, which we have done flawlessly since 2007.”

Panetta recounted in his letter an agreement at last month’s NATO summit in Chicago on the need for alliance missile defense programs co-funded by each country.

“A decision by Congress to prohibit any additional funding for Meads at this late date would diminish the consensus reached in Chicago,” Panetta said.

“Failure to meet our funding obligations could negatively affect allied willingness to join future cooperative endeavors” and “would likely lead to a dispute withe Germany and Italy,” Panetta said.

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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