U.S. Defense Department to Stop Work on GE/Rolls-Royce Fighter Jet Engine

The U.S. Defense Department is expected to issue an order today for General Electric Co. (GE) and Rolls-Royce Group Plc (RR/) to halt work on a second engine for the F-35 Joint Strike Fighter.

The Pentagon’s acquisition chief, Ashton Carter, will issue a stop-work order on the F136 jet engine, made by a GE/Rolls- Royce team, according to industry and defense officials who were not authorized to discuss the announcement in advance.

President Barack Obama and Defense Secretary Robert Gates have opposed the engine as unneeded and a waste of money at a time of tight budgets. Pratt & Whitney, a division of United Technologies Corp. (UTX), is the main supplier of engines for the Joint Strike Fighter, which is manufactured by Bethesda, Maryland-based Lockheed Martin Corp. (LMT) With a projected cost of $382 billion, the F-35 -- the U.S. military’s next-generation fighter -- is the Pentagon’s most expensive weapons program.

The stop-work order may mean the end of the alternative engine.

About 2,500 jobs, the majority in Ohio, Massachusetts and Indiana, are tied to the its development. If GE and Rolls-Royce reach their projected peak production, that figure would increase to as many as 4,300 jobs, according to Rick Kennedy, a spokesman for GE Aviation.

Because Congress has not yet passed all of the appropriations bills for fiscal year 2011, the Pentagon and other government agencies are being funded at fiscal year 2010 levels through stopgap measures, known as continuing resolutions. The development of the second engine has been uninterrupted under a series of continuing resolutions, the most recent of which expires April 8.

‘Exceeding’ Expectations

“The F136 engine development program continues, and the engine is meeting or exceeding performance expectations,” Kennedy said in an e-mail. “We are gratified that several House and Senate leaders, who will convene in early April to complete the FY2011 budget process, are determined supporters of competing JSF engines for a myriad of financial and security reasons.”

Gates has said that completing development of the alternative engine would cost taxpayers $3 billion. GE disputes that figure, saying the development cost would be about $1 billion, with an additional $800 million to start production.

The House voted last month to strip $450 million for the second engine from the fiscal 2011 Pentagon spending bill, which Congress has not yet passed.

No Funding Included

For two years in a row, the Senate Armed Services Committee and the Senate Appropriations Committee haven’t included money for the additional engine in their versions of the defense authorization and appropriations bills.

The chairmen of those panels, Democratic Senators Carl Levin of Michigan and Daniel Inouye of Hawaii, both back the second engine. They have said that they didn’t include funding because the Senate has enough votes to remove it from the defense bills.

Inouye also did not include money for the GE/Rolls-Royce engine in the 2011 defense appropriations measure he proposed as part of the larger government spending package awaiting congressional approval.

Representative Howard “Buck” McKeon, the California Republican who is chairman of the House Armed Services Committee, said last week said he would restore funding in the 2012 defense budget for the alternative engine.

Action by McKeon’s committee to authorize the program would be the first step in the process. The GE/Rolls-Royce engine program would also need funding in the 2012 defense appropriations bill to continue.

Representative C.W. Bill Young, a Florida Republican who leads the House defense appropriations panel, said he continues to support funding for the second engine. He did not say whether he would include it in the Pentagon’s spending bill for the 2012 fiscal year.

“Competition is good,” Young said in an interview last week. “For 2012, it remains to be seen. We’ll see what develops.”

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net