Source : Boomberg
Feb. 23 (Bloomberg) -- The U.S. Army plans to cancel the Boeing
Co.-United Technologies Corp. Comanche helicopter program,
according to people familiar with the plan.
The program has been overhauled six times in its 18-year history as
the cost per helicopter grew. The U.S. Army was ordered in 2002 to
reduce the number of Comanche helicopters it planned to buy to 650
from 1,207. Initially, it planned to buy 2,000.
United Technologies' Sikorsky Aircraft unit and Boeing split
revenue for the development of the Comanche under a cost-
reimbursement contract awarded by the Army in 2000. Cancellation is
likely to help sales of Boeing's Apache helicopters, which cost
about $25 million each and were used successfully in Afghanistan
and Iraq, said Richard Aboulafia, vice president of Teal Group, an
aerospace consultancy based in Fairfax, Virginia.
``The most directly competing programs in the Army are Apache and
Comanche,'' Aboulafia said. ``Which would you rather have - 100
percent of a proven machine with good profit, or 50 percent of a
risky venture?''
Shares of Hartford, Connecticut-based United Technologies fell
$3.72 or 3.9 percent in New York Stock Exchange composite trading
at 12:20 p.m. Shares of Chicago-based Boeing fell $1.11 or 2.5
percent.
Sikorsky spokesman Matt Broder said the company hasn't heard from
the Army and still considers the program intact until the company
is notified. A Boeing spokesman also declined to comment.
Soviet Threat
The Comanche is designed to receive and process intelligence from
drones and surveillance aircraft and pass it to ground units. The
Army was directed in 2002 to focus its research on producing a
reconnaissance helicopter rather than one that can attack as well
as scout. The helicopter was intended to counter Soviet
weapons.
``The Comanche program was overtaken by new threats and new
technologies,'' said Loren Thompson, a defense analyst for the
Washington-based Lexington Institute. ``After 20 years of
development, it had yet to produce an operational
helicopter.''
The value of the contract was raised to $6.6 billion from $3.2
billion under a revised development contract awarded in November
2002. That contract calls for the venture to deliver nine Comanche
helicopters in 2005 and 2006 for test and evaluation improvements
through 2011, according to United Technologies' annual filing with
the U.S. Securities and Exchange Commission.
Delayed Procurement
While the research contract increased in value, the Army delayed
procurement by several years to pay for it.
The program's total budget for the Comanche is $38.3 billion. The
Army has spent $6.8 billion through Sept. 30. The fiscal 2005
budget asks $1.2 billion for research and development and just $12
million for procurement. The procurement request is $2 billion in
2009.
The Comanche is the third major weapons program to be canceled by
the Bush administration. A Raytheon sea-based missile defense
system was killed in December 2001 and the Crusader self-propelled
artillery system in May 2002.
President George W. Bush has said he will reduce the U.S. budget
deficit by half -- to $237 billion by 2009 from the record $521
billion estimated for this year by the White House. Defense
spending accounts for almost 20 percent of Bush's proposed budget
for fiscal 2005.
The White House on Feb. 10 ordered a review of the Comanche and the
$71 billion Lockheed Martin Corp. F/A-22 fighter.
The procurement budget for the U.S. military is slated to increase
to $114 billion by 2009 from $75 billion in fiscal 2005.
Comanche subcontractors are the Honeywell Inc.-Rolls Royce Plc
Light Helicopter Turbine Engine Co., Indianapolis; Harris Corp.,
Melbourne, Florida; and Northrop Grumman Inc., San Diego.