Defense spending realignments coming, Marines' F-35 on probation

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Defense contractors got some bad news today, as Defense Secretary Robert Gates announced that the Pentagon would have to radically reshape its budget. On the one hand, the Department of Defense will have to find about $100 billion in savings, which it will invest it back into other programs and weapons systems. An additional $78 billion will be cut from the budget and effectively eliminated.

Meanwhile the U.S. Marine Corps' version of the Lockheed Martin ( LMT ) F-35 Lightning fighter jet will go into a two-year probationary program.

The program will give Lockheed Martin a longer span of time to demonstrate the reliability and effectiveness of the next-generation airframe, which has been plagued by mechanical issues and cost overruns that have doubled the unit price tag from $50 million to $100 million.

Gates will also axe the Marines' Expeditionary Fighting Vehicle, an amphibious armored personnel character capable of transporting a full Marine rifle squad, which was in development at General Dynamics ( GD ).

The growing political concern over the U.S. fiscal deficit has put pressure on both Democrats and Republicans to find savings in a wide range of programs. Gates has long been regarded as hawkish on waste and duplication of efforts in the military - for instance, he's long been a critic of the F136 alternate engine for the F-35 fighter, which is being built by General Electric ( GE ) and Rolls-Royce (RR).

That particular project has taken on political importance for members of the House of Representatives, who value the jobs it could bring to home districts.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Economy , Technology , US Markets

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