UPDATE 1-House punts on F-35 fighter engine controversy

* Compromise seeks bill’s passage during lame-duck session

* Bill authorizes $725 billion for Pentagon in fiscal 2011

* Fate of GE-Rolls Royce engine is uncertain

* Takes no position on U.S. Navy ships request
(Adds Navy request for 20 coastal warships, 5th paragraph)

By Jim Wolf

WASHINGTON, Dec 17 (BestGrowthStock) – The U.S. House of
Representatives approved a $725 billion defense authorization
bill that ducks a decision on a General Electric Co (GE.N: )-
Rolls Royce Group Plc (RR.L: ) alternate engine for the F-35
fighter jet, an engine that President Barack Obama has said he
would use his veto to kill if necessary.

The bill, which the House passed 341 to 48, would provide
$1 billion less than Obama’s request to fund the Defense
Department, Iraq and Afghanistan operations, and related
spending for the fiscal 2011 year that began Oct. 1.

The legislation reflects compromises designed to speed it
through the House and Senate during the lame-duck session of
Congress now under way. It was not immediately clear when the
Senate might vote on its version.

The legislation leaves a decision on whether to fund the
interchangeable engine to the appropriations committees.

It also takes no position on a revamped U.S. Navy request
to buy 20 coastal combat ships, half from Lockheed Martin Corp
(LMT.N: ) and half from Australia’s Austal Ltd (ASB.AX: ), instead
of buying 10 ships from just one bidder.

It neither authorizes nor restricts funding for the
GE-Rolls Royce engine. Likewise, it does not specifically spell
out the number of Lockheed F-35 aircraft to be bought.

United Technologies Corp’s (UTX.N: ) Pratt & Whitney unit
builds the engine being used in early F-35 production. Without
the alternate engine, it would have a decades-long monopoly on
the projected $100 billion market for the more than 3,000 F-35s
due to be bought by the United States and partner countries.

The radar-evading, single-engine F-35 is the Pentagon’s
priciest arms purchase yet, at up to $382 billion over the next
two decades. Eight co-development partners have helped fund the
program — Britain, Italy, the Netherlands, Turkey, Canada,
Australia, Denmark and Norway. Israel in October ordered a
squadron, and South Korea, Japan and Singapore have shown
interest.

The House in May adopted another version of the fiscal
2011 defense spending bill that included $485 million to keep
the alternate engine alive, defying Obama’s veto threat. The
Defense Department has sought to end the second engine program
each year for the past five years as a belt-tightening
measure.

Obama, in a written statement after the House voted May 28,
said of the alternate engine and of any funding for more Boeing
Co (BA.N: ) C-17 cargo planes, “Our military does not want or
need these programs being pushed by the Congress, and should
Congress ignore this fact, I will veto any such legislation so
that it can be returned to me without those provisions.”

The outgoing chairmen of the House and Senate Armed
Services committees each questioned whether Obama would use his
veto over the matter.

Rep. Howard McKeon, a California Republican due to take
over as House Armed Services Committee chairman after the new
Congress is sworn in Jan. 5, said Wednesday he backs the
competitive engine on the assumption it would bring down prices
over the long term and make any F-35 fleet-wide grounding less
likely.

Amid concerns over delays and cost overruns in the F-35
program, the House bill requires the Defense Department to
establish a plan tying specified F-35 production to milestones,
including in design, manufacturing, testing and fielding.

The Pentagon released a per-aircraft breakdown Thursday of
its fourth low-rate production deal showing progress toward
driving down the costs of the three F-35 models being built for
the Air Force, Navy and Marine Corps.

Jennifer Whitlow, a Lockheed spokeswoman, said it was
critical to maintain the jet’s projected buy rates to keep it
affordable.
(Reporting by Jim Wolf; Editing by Robert MacMillan and Tim
Dobbyn)

UPDATE 1-House punts on F-35 fighter engine controversy