WASHINGTON, April 13 (Reuters) – The United States may have to scrap some military missions and trim troop levels if President Barack Obama sticks with his goal of saving $400 billion on security spending over a 10-year period, the Pentagon said on Wednesday.

Arms makers’ shares sold off after Obama made a speech on the budget deficit in which he called, in effect, for holding growth in the Pentagon’s core budget, excluding war costs, below inflation through 2023, starting in fiscal 2013.

The squeeze on the Pentagon’s budget, which has roughly doubled since 2001, is part of a larger drive to cut the U.S. budget deficit by $4 trillion over the 10-year period.

Standard & Poor’s aerospace and defense index declined 0.9 percent on Wednesday, underperforming the S & P 500 index, which closed up .02 percent. Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz), the Pentagon’s No. 1 supplier by sales, dropped 2.6 percent to close at $80.37 on the New York Stock Exchange.

“It’s not just a math exercise which is ‘cut $400 billion’,” said Geoff Morrell, the Pentagon press secretary. “It’s ‘let’s review our roles and our missions and see what we can forgo, or pare down, in this age of fiscal constraint, where we are all collectively trying to work with the deficit problem.’”

Analysts said a selloff of arms makers’ shares was an overreaction.

“We think that a flat defense budget” (excluding overseas contingency operations such as Iraq and Afghanistan) “is what investors and the defense industry already expect,” said Rob Stallard of RBC Capital Markets.

WASHINGTON, April 13 (Reuters) – The top U.S. arms buyer said he was dissatisfied with cost overruns in the United Technologies Corp (UTX.N: Quote, Profile, Research, Stock Buzz) Pratt & Whitney engine powering the multinational F-35 fighter jet.

But Ashton Carter, undersecretary of defense for acquisition, repeated Pentagon opposition to funding an alternate engine being developed by General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) and Britain’s Rolls-Royce Plc (RR.L: Quote, Profile, Research, Stock Buzz).

“I’m not happy, as I am with so many parts of all our programs, with (the P&W engine’s) cost performance so far,” Carter told the House of Representatives Appropriations subcommittee on defense on Wednesday. “We need to drive the costs down.”

At stake is potential engine business that the Government Accountability Office, Congress’s audit arm, puts at $62 billion in 2002 dollars. The Project on Government Oversight reckons that this equals about $75 billion in 2010 dollars.

The Pentagon ordered GE and Rolls-Royce to stop building the alternate engine last month, but the companies said they would spend their own money to keep it alive. The Pentagon has sought for five years to kill the engine as an economy measure.

Carter, in reply to a question from Representative Norm Dicks, a Washington Democrat, said costs were growing too fast for both the engine and the F-35 Joint Strike Fighter aircraft, being built by Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz). The air frame’s cost overruns were proportionately higher than the engine’s, Carter added.

Pratt & Whitney said in response that a U.S. Defense Department “Joint Assessment Team” in 2009 had confirmed that its cost-reduction plan was “executable and we are on plan.”

WASHINGTON (Reuters) – The top U.S. arms buyer said he was dissatisfied with cost overruns in the United Technologies Corp (UTX.N: Quote, Profile, Research, Stock Buzz) Pratt & Whitney engine powering the multinational F-35 fighter jet.

But Ashton Carter, undersecretary of defense for acquisition, voiced confidence in the engine and repeated Pentagon opposition to funding an alternative being developed by General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) and Britain’s Rolls-Royce Plc (RR.L: Quote, Profile, Research, Stock Buzz).

“I’m not happy, as I am with so many parts of all our programs, with (the P&W engine’s) cost performance so far,” Carter told the House of Representatives Appropriations subcommittee on defense on Wednesday. “We need to drive the costs down.”

At stake is potential engine business that the Government Accountability Office, Congress’s audit arm, puts at $62 billion in 2002 dollars. The Project on Government Oversight reckons that this equals about $75 billion in 2010 dollars.

The Pentagon ordered GE and Rolls-Royce to stop building the alternate engine last month, but the companies said they would spend their own money to keep it alive. The Pentagon has sought for five years to kill the engine as an economy measure. A close vote in the House in February seemed to spell an end to the project.

Carter, in reply to a question from Representative Norm Dicks, a Washington Democrat, said costs were growing too fast for both the engine and the F-35 Joint Strike Fighter aircraft, being built by Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz). The air frame’s cost overruns were proportionately higher than the engine’s, Carter added. Pratt & Whitney had no immediate comment.

Representative Jim Moran, a Virginia Democrat, told Carter that the GE-Rolls Royce alternate engine, known as the F136, is “not a dead issue.”

WASHINGTON (Reuters) – Saudi Arabia has asked the United States for prices for surface warships with integrated air and missile defenses, helicopters, patrol craft and shore infrastructure, the U.S. Navy said on Friday.

The Navy is preparing a rough cost estimate that would be delivered possibly as soon as May, Navy spokeswoman Captain Cate Mueller told Reuters.

Saudi Arabia is the biggest U.S. arms buyer and is expected to remain so despite political upheaval in the Middle East.

The request for medium surface combat ships and the rest of the hardware was received by the Navy in July through the Saudi Ministry of Defense and Aviation, Mueller said.

Earlier on Friday, Lockheed Martin Corp executives said the first phase of the so-called Saudi Naval Expansion Program-II could be worth $20 billion, attributing the estimate to U.S. Navy officials. The company would likely vie for any such orders.

Other likely competitors would be Australia’s Austal Ltd and General Dynamics Corp, which teamed up to build a Littoral Combat Ship for the U.S. Navy, as is Lockheed.

Paul Lemmo, a Lockheed vice president for business development, said the company would pitch a multimission version of its fast new coastal combat ship, perhaps fitted with Lockheed’s Aegis weapon system.

WASHINGTON, April 7 (Reuters) – The United States is preparing for its first test of a sea-based defense against longer-range missiles of a type that U.S. officials say could soon threaten Europe from Iran.

Much is riding on the event, including confidence in the Obama administration’s tight timeline for defending European allies and U.S. forces deployed against the perceived Iranian threat.

The last two intercept tests of a separate U.S. ground-based missile defense, aimed at protecting U.S. soil, have failed.

The planned sea-based test this month will pit Lockheed Martin Co’s (LMT.N: Quote, Profile, Research, Stock Buzz) Aegis shipboard combat system and a Raytheon Co (RTN.N: Quote, Profile, Research, Stock Buzz) missile interceptor against their first intermediate-range ballistic missile target, said Richard Lehner, a spokesman for the Pentagon’s Missile Defense Agency.

Previous such sea-based drills have been against shorter-range targets. Intermediate range is defined as 3,000 to 5,500 kilometers (2,000-3,500 miles) — a distance that would put London, Paris and Berlin within range of Iran’s westernmost soil.

The coming test is “to demonstrate a capability against a class of ballistic missiles, and is not country-specific,” Lehner said in an emailed reply to queries from Reuters.

The layered, multibillion-dollar U.S. anti-missile effort also focuses on North Korea’s growing arsenal of missiles that, like Iran’s, could perhaps be tipped with chemical, biological or nuclear warheads.

WASHINGTON, Feb 14 (Reuters) – The Pentagon’s Missile Defense Agency is pressing Tokyo to clear the sale of advanced missile interceptors, codeveloped with Japan, to third countries and to agree to joint production.

The United States plans to deploy the Standard Missile-3 Block IIA upgrade by 2018, U.S. Army Lieutenant General Patrick O’Reilly said in a Jan. 3 letter to Nobushige Takamizawa, director general of policy at the Japanese defense ministry.

The system is a centerpiece of President Barack Obama’s plan to thwart any Iranian long-range ballistic missiles that could be tipped with chemical, biological or nuclear warheads. It took on greater significance after Obama scrapped George W. Bush-era plans to deploy a long-range missile defense system in Poland and the Czech Republic. The missile is due to start intercept tests in 2014.

The cooperative development program is rapidly heading for “key milestones at which production planning decisions will need to be made,” O’Reilly wrote.

Absent a coproduction deal, the United States will assume it will produce the missiles at a Raytheon Co (RTN.N: Quote, Profile, Research, Stock Buzz) facility in the United States, he said.

The letter was first reported by Aviation Week. A copy was obtained by Reuters. Rear Admiral Randall Hendrickson, the MDA’s deputy director, discussed the contents Monday with reporters during a briefing on the agency’s 2012 budget request.

The United States is interested in a coproduction deal with Japan, the top U.S. ally on missile defense, “but we’re going to make the decisions that we need to make obviously,” he said in a teleconference.

WASHINGTON (Reuters) – The U.S. Defense Department said on Monday it hopes in the next month or so to award a contract, worth roughly $35 billion, for 179 Air Force tanker aircraft, capping a saga that began almost a decade ago.

Chicago-based Boeing Co is vying for the deal against Europe’s EADS, parent of Toulouse, France-based Airbus.

Last February, a senior U.S. military officer, outlining a rematch between the bidders at a Pentagon background briefing, cited a range of $25 billion to $50 billion for the deal’s potential value.

“The contract is valued at approximately $35 billion,” said a summary of the Defense Department’s proposed 2012 budget as President Barack Obama sent his spending plan to Congress.

The department is seeking $900 million for new tankers in fiscal 2012, which starts October 1, and hopes “to make an award within a month or so,” Robert Hale, the Pentagon’s chief financial officer, told a briefing.

Hale said he did not expect any impact from a stopgap measure, known as a continuing resolution, that limits the government generally to previously approved spending levels. The current measure expires March 4.

He cited what he described as a previous budget’s funding for the planes and said the Air Force, if the stopgap funding were to be extended, could “reprioritize” to pay for a contract.

WASHINGTON (Reuters) – The White House proposed on Monday to spend $671 billion on the military next year, handing the Pentagon a short-term boost even as it prepares for tighter budgets in coming years.

The Obama administration budget proposal for fiscal 2012 includes $118 billion for the wars in Afghanistan, Iraq and Pakistan, on top of the base budget of $553 billion.

That base budget figure is $22 billion above the level enacted for 2010, setting a new record even as the government faces an overall freeze in federal spending.

The budget would include $113 billion for procurement of weapons and services, down from about $120 billion projected a year ago, plus nearly $77 billion for research and development, roughly on par with the previous plan.

U.S. defense contractors including Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp have been bracing for slower growth in defense spending after a decade of double-digit increases that have nearly doubled the Pentagon’s core budget since September 11, 2001.

The proposed defense budget unveiled on Monday is largely in line with plans announced last month by Defense Secretary Robert Gates, who pledged to cut $78 billion from the Pentagon’s core spending over the next five years.

Total spending on national defense in the proposed budget would be $702 billion, a figure that includes spending on nuclear weapons and health care and retirement, down from $721.3 billion in fiscal 2010, according to budget documents.

WASHINGTON (Reuters) – Boeing Co submitted a final proposal in its politically sensitive rematch against Europe’s EADS to build a potential $50 billion fleet of U.S. Air Force refueling aircraft.

Even as final bids rolled in, questions arose about whether a contract could be awarded under the temporary measure being used to fund the U.S. government through March 4 or a possible follow-on of a similar stop-gap budget bill.

Boeing, based in Chicago, declined to discuss any changes in its offer, which is based on a 767 jetliner, compared with the 8,000-page proposal it sent the Air Force on July 9, 2010.

The North American arm of EADS said it was submitting a final proposal Thursday, ahead of an 8 a.m. EST Friday deadline. It also withheld details.

The tankers are used to extend U.S. military power by refueling other planes in flight.

EADS, then partnered with Northrop Grumman Corp, won a 179-plane deal in February 2008, only to have it canceled after a successful protest by Boeing.

EADS’ tanker is based on an A330-200 wide-body jet built by its Toulouse, France-based Airbus subsidiary.

WASHINGTON (Reuters) – A group of prominent business executives and national security figures will visit China next month as part of their drive to reduce U.S. dependence on oil.

Members of the private Energy Security Leadership Council will discuss possible U.S.-Chinese cooperation on oil security-related issues, said retired Navy Admiral Dennis Blair, a former U.S. director of national intelligence.

“Can’t we work on them (oil security issues) together?” Blair said his fellow travelers would ask at meetings with Chinese government officials and business leaders. He cited what he called parallel U.S. and Chinese oil-market interests, including securing supplies at “a reasonable price.”

Blair was the top U.S. intelligence official from January 2009 until his resignation was requested by President Barack Obama in May after an alleged al-Qaeda airliner bombing attempt and an attempted car bombing of New York’s Times Square.

He disclosed the China trip in an interview with Reuters after joining fellow council members to release sweeping recommendations designed to create a less oil-dependent U.S. transportation system.

“Reliance on petroleum has created unsustainable risks to American economic and national security,” said the council’s report, titled Transportation Policies for America’s Future.

The trip in mid-March will bring council members to a seminar with the Energy Research Institute of China’s National Development and Reform Commission. Discussions will include “new energy development and China-U.S. cooperation,” said Justin Kitsch, a spokesman for Securing America’s Future Energy, the council’s parent group. He did not spell out which other council members would join Blair on the trip.