The White House's record $438 billion dollar defense budget proposes a makeover for the nation's military equipment structure a shift that could greatly benefit Los Angeles' defense businesses.

The budget set to go before Congress shows a continuing shift in priorities away from a Cold War model that required large standing armies, big bomber wings and defensive missiles, and toward a surgical strike model geared to fight terrorism.

"The new budget proposals and the new philosophy seem to play to our strengths here," said Jack Kyser, the chief economist at the Los Angeles Economic Development Corp. "Though there are some great potential gains, there are some worrisome losses as well."

Those potential losses include a possible shuttering of Boeing Co.'s C-17 cargo jet plant in Long Beach and the aging U-2 spy plane and F-117 stealth fighter plants in Palmdale operated by Lockheed Martin Corp. The new budget includes no new future funding for the C-17; production on the initial order of 180 planes is expected to be completed in 2008.

However, Defense Secretary Donald Rumsfeld's strategy could benefit the region's defense industry, especially Northrop Grumman Corp.'s Integrated Systems branch in El Segundo.

Northrop declined comment, but the Los Angeles-based contractor stands to gain significantly from full funding of advanced-fighter aircraft, specifically, the F-35 Joint Strike Fighter that is under development and will be shared by the Air Force, Navy and European allies. Also targeted for funding: the Navy's F-18 Hornet, which is being upgraded, and the Air Force's super advanced F-22 Raptor.

Local operations
All three platforms have facilities in El Segundo. The budget projects spending nearly $10 billion through 2007 on the development and manufacture of the F-35, whose fuselage and electronic systems are manufactured locally. The budget earmarks $6 billion to bring 68 new Hornets into operation, while the Air Force's F-22 Raptor should be flush with funds with $7 billion in proposed funding for 25 jets through 2007.

Also, Northrop's B-2 Stealth Bomber facility in Palmdale will see a jolt of $700 million proposed thru 2007 for procurement of spare parts and radar modifications.

"It's easy to see where the Air Force's priorities are: fighters, fighters and more fighters," Dan Goure, the vice president of the Virginia-based defense brain trust The Lexington Institute, said. "Fighters are much sexier than tankers and transport planes."

Unmanned aerial vehicles are also new favorites of the Defense Department and are aimed at eventually replacing the 51-year old U-2 spy plane and possibly some light bombers. The development and production of UAVs will benefit Lockheed, Boeing and Northrop, which has developed five of the vehicles, including the Global Hawk, now operating in Iraq.


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