12 May 05. Defense Secretary Donald Rumsfeld has restored Lockheed Martin Corp.’s venerable C-130 cargo plane to the defense budget, a tacit acknowledgment that the Pentagon may have cobbled together sweeping budget cuts too hastily. Mr. Rumsfeld’s about-face, communicated in a letter to Capitol Hill Tuesday, was as abrupt as the Pentagon’s proposal late last year to cancel the program in the fiscal 2006 budget. That cut was designed to save $5 billion, but it quickly ignited political opposition led by lawmakers from Georgia, where Lockheed builds the transport plane. In his letter, Mr. Rumsfeld said that while the decision to scrap the C-130J, the latest version of the plane, was “based on the information available at the time, new information has become available regarding the contract termination costs.” The letter didn’t specify, but defense officials said that in addition to the $400 million in direct termination costs, the Pentagon could be liable for a further $1.1 billion in payments to Lockheed to compensate for other aspects of the multiple-year contract. The officials couldn’t comment on why these additional costs weren’t known in late December when the Pentagon decided to cancel the C-130 as part of a broader effort to cut $30 billion in defense spending. The C-130 is slated to be a main transport plane for an array of vehicles in the Army’s Future Combat System program. It also is unclear why Mr. Rumsfeld reversed his view on the program before a major Pentagon study of troop and cargo airlift needs is completed this year. The decision to keep the C-130J is a boost to Lockheed, potentially the biggest loser in Mr. Rumsfeld’s proposed budget cuts. The Bethesda, Md., company faces an uphill task to rally congressional support for its costly F/A-22 stealth fighter plane. Though it has survived for now, the C-130J has been widely criticized by congressional investigators and others over cost and performance issues. (Source: WSJ)
Comment: Given the reliance of the U.S. military on the C-130J, it was a rash move on Rumsfeld to cancel the plane in which UK Ltd has a strong stake. It may be the growing penetration of the A-400M into international markets particularly South Africa and Malaysia that ahs prompted this move. Lockheed is believed to have coveted a stake in Airbus Military but in the light of the Boeing-Airbus spat over Government support, this is seen as unlikely.
10 May 05. As it pursues a U.S. partner for Air Force aerial-refueling planes, European Aeronautic Defence & Space Co. announced that it is teaming up with Raytheon Co. to bid on a separate Pentagon contract for Army transport aircraft. The venture with Raytheon marks another step by the European aerospace company to expand in the world’s biggest military market, and it uses a model that EADS will need to compete for the Pentagon’s future tanker-aircraft program: A U.S. company acting as prime contractor for a plane developed and largely built abroad. In the case of the Army contract, valued at $1bn initially to replace existing small transport planes, both competing aircraft are European. EADS, the majority owner of aircraft maker Airbus, will offer a propeller-driven model made by its Spanish unit, Constucciones Aeronáuticas SA, or CASA. The rival plane was developed by Alenia Aeronautica SpA, a unit of Italy’s Finmeccanica SpA, and Lockheed Martin Corp. of Bethesda, Md. Alenia’s Army bid is being led by L-3 Communications Holdings Inc. of New York.
05 May 05. NATO Maintenance and Supply Agency (NAMSA): Business Report
Publication was announced of the 2005 NAMSA Business Report, which includes the General Manager’s review of 2004 and his assessment of future prospects. NAMSA is said to be preparing a Strategic Development Plan, identifying “two major development thrusts”: expansion of logistics support for NATO Operations and improvement of performance and efficiency. Comment: NAMSA is NATO’s premier logistics