Pentagon to U.S. Navy: Buy fewer LCS Ships, More Planes

Defense Secretary Ash Carter ordered the U.S. Navy in a sharply worded memo this week to buy 12 fewer small littoral combat ships (LCS) and more fighter jets, electronic warfare equipment and other weapons in the upcoming budget year instead.

If approved by Congress, the changes would have a huge impact on many big weapons makers, including Lockheed Martin Corp and Australia's Austal Ltd, which would have to compete to build eight remaining LCS ships in fiscal 2019.

Carter told Navy Secretary Ray Mabus in the memo dated Tuesday the Navy's proposed budget plan for fiscal 2017 was "unbalanced."

The Navy had been buying ships in recent years "at the expense of critically-needed investments in areas where our adversaries are not standing still, such as strike, ship survivability, electronic warfare and other capabilities," Carter said.

A copy of the memo, first reported by Defense News, was seen by Reuters. It revealed deep tensions between the Navy and the Defense Department over the 2017 budget, which faces an uncertain fate in Congress during an election year

Carter ordered the Navy to buy only 40 LCS ships or frigates, instead of the 52 ships currently planned. He said that would free up funds for more SM-6 missiles built by Raytheon Co and other weapons, development of new torpedoes, and the purchase of additional Lockheed F-35 fighter jets and Boeing Co F/A-18E/F fighters.

The Navy had hoped to buy more F/A-18 jets in fiscal 2017, but Carter's memo would delay those orders until 2018 - a move that could cause problems for Boeing, which needs orders next year to avert a shutdown in its St. Louis production line.

The department would give the Navy $1.7 billion in additional funding in fiscal 2017 to pay for a range of items, including 10 additional submarine upgrades, modernization of two more DDG-51 destroyers, and additional upgrades to the Navy's Boeing P-8A maritime surveillance planes, Carter said.

He also approved the Navy's plan to buy 10 DDG-51 destroyers over the next five years, instead of cutting two ships as initially proposed by Pentagon officials, according to a source familiar with the matter.

The memo did not mention $2 billion which one defense source said had been approved by the White House Office of Management and Budget to fund replacement of the aging fleet of Ohio-class nuclear-armed submarines. The extra funding should alleviate some pressure on Navy shipbuilding accounts in coming years.

One source with knowledge of the situation said curtailing orders for the LCS ships could have a serious impact on the companies involved and their suppliers. Costs would likely rise if the Navy dropped to buying just one ship a year instead of three, as planned, said the source.

Representative Randy Forbes, the Republican chairman of the House Armed Services Seapower and Projection Forces Subcommittee, said the Navy needed both more capability and more ships. "Unless we provide more resources for our Navy, it is not going to be able to keep meeting the demands that our nation and our national security strategy place upon it."

 

Reporting by Andrea Shalal