Proposed Navy Budget For 2011 And Out Makes Some Cuts

(MoneyWatch)  Like the Air Force at the beginning of the month of September somehow the Navy's planning documents for the 2011 and Future Years Defense Program (FYDP) made it out into the public. This service plans about a 4.5 percent cut overall which reduces each year quite a bit and has made the Service cut back on a great deal of procurements.

Unlike the Air Force's plans to cut some major programs the Navy nibbles at most of their procurement plans as well as retiring some ships early. The biggest change already announced affects General Dynamics and Northrop Grumman with the restructuring of the Littoral Combat Ship (LCS) program. The new program envisions only half of the original planned buy of these ships by 2015 but that was almost ordained with the new acquisition strategy of going to a single source.

Other then getting rid of the Joint Tactical Radio System (JTRS) program which is also being ended by the Air Force the Navy has preferred to just reduce buy quantities across the board for its new missile systems, the V-22 Osprey tiltrotor transport, and support ships. The Navy will delay development of its new reconnaissance aircraft the EP-X beyond the FYDP to save a great deal of RDT&E funding.

The plan also will rely on retiring some ships early to save money meaning that the Navy will not grow as fast as planned. There is also a commitment to maintain some older amphibious ships as six new large ones were canceled or postponed. These would have been able to operate V-22 and the V/TOL version of the F-35 as it replaces the AV-8B Harrier.

The Air Force and Navy's leaks make clear that the Obama Administration intends to hold the line on defense spending. The 2010 budget saw a big effect on Boeing and with these proposals the big contractors will see cuts to their existing procurement programs and delays to new ones. This will significantly effect their revenues and earnings for the next five years. Some new programs will start and this may help one or two of Boeing, Raytheon, General Dynamics or Northrop Grumman but the growth of the last nine years seems to be over.

The Army's proposed budget has yet to leak but the trend is pretty clear and that may see the end of some development programs and delays and reductions in existing procurements to get the budget to the new levels of funding. These leaks of course could be an attempt to get Congress aware of what is coming with the hope that they might start doing some protective work, but it will be another six months before that is possible. If these plans hold up there will be quite a shake up in the U.S. defense industry.