Bloomberg News

Boeing-Textron V-22 Said to Be Cut $1.75 Billion by Pentagon

February 07, 2012

Feb. 1 (Bloomberg) -- The Pentagon will eliminate 24 V-22 Osprey aircraft built by Boeing Co. and Textron Inc. from its five-year budget plan, saving $1.75 billion through 2017, according to two U.S. officials.

The planned reduction to 98 planes from 122 will be reflected in a final, multi-year contract that’s under negotiation between the Navy and companies, according to one of the officials, who spoke on condition of anonymity because the decision hasn’t been announced.

The V-22 is a fixed-wing plane with rotors that tilt so it can take off and land like a helicopter. Boeing, the world’s largest aerospace company, and Textron’s Bell Helicopter unit are in the last year of a four-year, $10.9 billion contract for 174 aircraft. The Bell Helicopter-Boeing team submitted a proposal in August for all 122 aircraft that were previously planned.

The Pentagon’s decision to curtail V-22 purchases is part of an effort to find $259 billion in planned savings through 2017. The cutbacks also include delays in acquiring 179 F-35 fighters, two Littoral Combat ships, one Virginia-class submarine and postponing by two years construction of the next generation of ballistic-missile submarines.

The Army is canceling upgrades of its Humvee all-terrain vehicles, and the Navy isn’t buying eight Joint High Speed Vessels.

Procurement Request

The cumulative effect in fiscal 2013 of program terminations and cutbacks will result in a procurement request of $98.8 billion and $69.4 billion for research and development, according to an official familiar with the Pentagon’s spending plans who spoke on condition of anonymity before President Barack Obama sends his budget to Congress on Feb. 13.

That’s $18.8 billion less than announced in February 2012 for procurement in fiscal 2013 and $6.3 billion less for research, according to Pentagon budget data.

The Pentagon now intends to buy 21 V-22 aircraft in each of the next two budget years, down from 27 planned previously for fiscal 2013 and 26 for fiscal 2014.

The military would buy 19 aircraft a year in 2015 and 2016 instead of the planned 23 each year, and 18 in 2017. No number had been set previously for that year.

The reduced aircraft include seven of the Air Force’s CV-22 models for special operations forces.

March 1

The Navy and contractors for the next round of V-22s must develop reliable data allowing the service to certify to Pentagon officials that buying them in a five-year block can save at least 10 percent over annual batch purchases. The certification is due to Congress on March 1, and the Navy plans to sign the contract later this year, Navy spokeswoman Stephanie Vendrasco said in an e-mail.

“We cannot speculate or comment on V-22 quantities in the budget for 2013 until it is released,” she said.

Bell-Boeing spokesman Andrew Lee didn’t respond to an inquiry about whether the companies have been informed of the reduction.

“Bell-Boeing is pleased that the Department of Defense has made a second V-22 multi-year contract a priority, and our team is actively engaged in support of the Navy’s evaluation of our proposal,” Lee said in an e-mail. “The Bell-Boeing V-22 program is presently on time and under budget in successfully executing its first multi-year procurement contract.”

The V-22 is being manufactured by Bell Helicopter in Fort Worth with final assembly in Amarillo, Texas. Boeing Helicopter in Philadelphia, a unit of Chicago-based Boeing, assembles the fuselage.

Rolls-Royce

The engines are produced in Indianapolis by Allison Engine Company, a unit of London-based Rolls-Royce Holdings Plc.

V-22 deliveries contributed to an increase in Bell’s fourth-quarter revenue of $35 million and profit of $29 million over the year-ago quarter, according to a Jan. 25 statement by Providence, Rhode Island-based Textron.

Scott Donnelly, Textron’s chairman and chief executive officer, said on a conference call that day with analysts that V-22 profit margins “have been good” and the company was optimistic the next multi-year contract would be signed this year.

Congress approved spending $35 billion on the $53.2 billion V-22 program through December 2010.

The program was approved for full production in September 2005 after four years of additional development to overcome deficiencies in its design, safety and reliability that were uncovered after two crashes in 2000 killed 23 Marines.

The aircraft’s overall performance “has laid to rest all doubts” about its combat effectiveness, the House Appropriations Committee said in a June 13 report.

Bin Laden

The Osprey has been deployed in Iraq and Afghanistan. One plane ferried Osama bin Laden’s body to the U.S. Navy aircraft carrier USS Carl Vinson after he was killed in a U.S. raid May 2 in Pakistan.

The V-22 Osprey’s performance has improved in the past year, according to the Pentagon’s test office.

New aircraft software evaluated in tests from August through early November “performed largely as expected,” the test office found. The improvement gives Osprey pilots greater capability to track, monitor and communicate from their cockpit with U.S. ground forces and to avoid bad weather.

“Software enhancements were modest but provided new piloting options and power margins” during flying operations, “increasing safety and reducing pilot workload,” Michael Gilmore, the Pentagon’s director of operational test and evaluation said in a report released Jan. 13.

--Editors: Larry Liebert, Cesca Antonelli

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

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net -0- Feb/01/2012 14:01 GMT


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