Shame on Indiana

I am a Hoosier. (Hear me roar!)

I live in Indiana, pay taxes in Indiana. When Indiana prospers, I prosper. In this, I suppose, I'm not much different from the nine Hoosier congressmen -- six Republicans and three Democrats -- who yesterday voted to salvage the alternate engine for Lockheed Martin's (NYSE: LMT  ) F-35 fighter jet. Although they ended up on the losing side of the issue, I can't let their vote go unnoted.

Here's the thing: According to both the president and the pentagon, we don't need a second F-35 engine. (The engine that United Technologies (NYSE: UTX  ) has built works just fine.) According to Secretary of Defense Robert Gates, building the secondary engine will cost $2.9 billion.

Even General Electric (NYSE: GE  ) , which would build the engine in partnership with Rolls-Royce, admits the costs to finish developing the thing will be high. The bill put forward before Congress asked for $450 million in spending this year. The House eventually voted to remove that funding, 233-198.

So why were Indiana's House representatives voting in favor of spending on the engine? Jobs. According to the Indianapolis Star, building GE's alternate engine would support 4,000 Hoosier jobs; 4,000 potential voters for the nine U.S. congressmen who yesterday put one state's interests ahead of the interests of the nation.

Shame on us
Now don't get me wrong -- I feel for the Hoosiers who might lose their jobs if GE's engine doesn't get built. In the spirit of Fool disclosure, I should mention that my wife was recently offered a job with Rolls-Royce, helping to build this engine (she turned 'em down). So just like the congressmen, I could have benefitted personally, if the engine got built.

Here's the other thing. I'm a Hoosier, but I'm also an American. A citizen of a nation that last year spent $1.3 trillion it didn't have. That's $14.1 trillion in debt today, and the country is preparing to raise the debt ceiling tomorrow. That being the case, I firmly oppose the spending of billions of dollars that we do not have on a fighter jet engine that we do not need.

Foolish takeaway
Fools, there's a time for "enlightened self interest," but that time is not now. Now is the time for rational thinking, hard choices, and shared sacrifice. It's time to kill the F-35 alternate engine. Will GE's F-35 engine die for good in the Senate? If it does, what would that mean for your job (and your portfolio)? Scroll down and sound off in the comments box and don't forget to add General Electric to your Fool Watchlist.

Fool contributor Rich Smith does not own shares of any company named above. The Fool owns shares of Lockheed Martin. The Motley Fool has a disclosure policy.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


Read/Post Comments (21) | Recommend This Article (15)

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  • Report this Comment On February 17, 2011, at 7:48 PM, baldheadeddork wrote:

    Rich, if you're ever in Bloomington and wouldn't mind a beer with someone whose insulted you too many times to count, send me a note.

    And about this piece, the scary part is that the ethics grade of our congressional delegation has probably risen since Bayh stopped shilling for Wellpoint while his wife pulled in millions as a member of their board.

    Baldheaded(hoosier)dork

  • Report this Comment On February 17, 2011, at 7:50 PM, JayBob100 wrote:

    Great sentiment! Please be sure and communicate this to your legislative representatives. They need our support.

    JasonT

  • Report this Comment On February 17, 2011, at 7:55 PM, dixonba wrote:

    You sir are uninformed. Let me inform you.

    1.) 2.9billion to finish? WRONG. The estimate is 1.8billion.

    2.) pratt's engine is 2 billion over budget. GE hasn't asked for an overrun and has been funded at 85% since 2006.

    3.) Having the second engine will keep both manufacturers honest and will drive costs down.

    4.) Research the great engine war. There was a 20% cost savings in using a competing engine program on the f16.

    5.) giving pratt a sole contract (a 100billion dollar contract) for the future of our fighter fleet for the next 30 years is foolish in my book. If pratt's engine fails then 95% of our fleet would be grounded. Think about chinas new fighter they showed off a few weeks ago and then think again about this issue.

    Shame on indiana? I think shame on you for spouting opinions without research. Take a breath, do some research and then form a new opinion. Possibly a "smart" opinion and not a "motley foolish" opinion...

    Yes, I know Gates said we don't need this engine but is it possible that politicians can be swayed by money and kooshy consulting jobs when they retire? He is motivated by his goal of saving money in the short term before he retires. He cares nothing about the future.

  • Report this Comment On February 17, 2011, at 8:24 PM, seethechief wrote:

    I have to agree with Dixonba about doing solid research. Besides the F16 engine he mentions ...take a look at the USCG HH65 Helicopter fleet. It flew with an inferior underpowered engine for almost 15 years until the Coast Guard was forced to ground the entire fleet and re-engine with the Rolls Royce TurboMeca Arriel 2C2-CG turboshaft engine. Surely competition will drive costs down and increase safety on the F35 program and allow the a better weapons system.

    http://www.helis.com/news/2006/hh65c.htm

    platform.http://www.pacchips.com/15/avionics%20and%20reengine.pdf

  • Report this Comment On February 18, 2011, at 1:35 AM, skque wrote:

    Let me inform you some more...

    Myth: The F-35 engine business is a $100 billion monopoly to P&W.

    Fact: According to GAO, the accurate number is $60 billion, with half for sustainment (to be done mostly at government depots). That leaves P&W’s “monopoly” at around $40 billion. Of this, about $20 billion (for installs and initial spares) would be available for competition.

    Myth: GAO says that F-35 engine competition will save $20 billion.

    Fact: GAO says nothing of the kind. The closest GAO comes to a savings estimate is that “it may be reasonable to expect savings of” 10%-12%. Applied to the $20 billion available for competition, the maximum savings would be $2.4 billion over a full 25 years of production. In reality, there will be no savings. The extra cost of fielding two engines, with an average 50/50 split buy every year, will outweigh any potential savings.

    Myth: The F-16 engine competition, 25 years ago, saved 21%.

    Fact: No study or analysis has concluded that any savings were produced in this dual source procurement. The Air Force officials who created the dual source buy predicted savings of 21% in overall life cycle costs compared to their baseline estimate. Their prediction did not materialize.

    Myth: Having two engines could prevent a fleet grounding due to a design flaw in the primary engine.

    Fact: No tactical aircraft fleet has been grounded for engine design issues in the last 30 years. The 2,000 F/A-18s and 5,000 H-60s, all with GE sole-source engines, are a good example

    Decide for yourself..

  • Report this Comment On February 18, 2011, at 6:54 AM, dixonba wrote:

    Research does not consist of copying and pasting text from pratt's website. I've read the GAO reports and clearly understand that the GAO can only calculate with the facts it has.

    The recent offerings by GE for fixed price contracts and pratts rebuttal with the same only proves that competition will drive costs down.

    GE's engine has more thrust, cooler temperatures and has been cheaper. GE started from scratch...pratt started with the F119 engine and went from there. It's obvious that GE is the better choice.

    Its really sad. Pratt's clamoring to have GE's engine shut down just shows how much they are scared. If they were confident in their engine, they would ride it out and claim victory. They've realized that this isn't going to happen for them about 5 years ago and started lobbying HARD to deal a cheap shot to GE. They know that GE will be out of the fighter engine game if they dont have their engine in the mix. If an alternate engine was such a big problem why did the pentagon fund it for 10 years before complaining about it. The answer is clear, pratt is lining pockets with money and jumping up and down like a little girl.

    If pratt gets the sole contract, I'm going to laugh when the engine blows up and the fleet is grounded. Pentagon brass will be wondering who the idiots where that cancelled the alternate engine.

    This airplane only has one engine. There aint no limping home on one engine...just crash and burn...

  • Report this Comment On February 18, 2011, at 8:33 AM, skque wrote:

    I agree with you that competition will drive costs down.But GE wants 2-3 billion now to maybe save 2-3 after.There was competition in 2001 and both Boeing and Lockheed Martin selected PW engine.

    We had competition and GE lost.GE is lobbying much more then PW.They spend more then 30 millions on it.

    It's true that PW started with the F119 engine and went from there.Maybe we should ask pilots do they want to fly with proven technology which is offered by PW or with something totally new.We can’t compare those two engines because PW engine had first flight test 2006 and logged more than 16,000 flying hours while GE engine is still testing on the ground.I believe GE will develop great engine but we don't need it. If they are so confident in their engine why they ask government for money.They make huge profits so they can spend couple of billions and develop it.

    I agree with you that--- " This airplane only has one engine. There aint no limping home on one engine...just crash and burn..." but do you really think that engine started from scratch is safer then engine which is derivative of the proven F119-PW-100 engine which surpassed 110,000 flight hours. I don't think so.

  • Report this Comment On February 18, 2011, at 8:41 AM, TMFDitty wrote:

    @dixonba: Ad hominem attacks on Secretary Gates are as reprehensible as they are baseless. The man's a boy scout (literally). A career CIA officer, and an academic -- not a politician. As far as accusing him of mercenary motives goes, he sold every stock he owned to take the SecDef job.

    TMFDitty

  • Report this Comment On February 18, 2011, at 8:55 AM, TMFDitty wrote:

    @dixonba and seethechief: As far as the real arguments in favor of a second engine go ...

    1. Would a flaw in engine design ground the F-35?

    Sure it would. So would a flaw in wing design. Or one in avionics. The fact that GE-backers focus on the criticality of the engine to the plane's flying, I suspect, hinges more on the fact that that's the part GE wants to build.

    2. Will competing engines save money? Not necessarily. Consider the recent case of the LCS. Inviting Lockheed and General Dynamics to submit competing versions of the Navy's new coast-hugging warship did not prevent massive cost overruns by both contractors.

    http://www.fool.com/investing/value/2008/04/04/washington-po...

    What did get costs under control? Buying in bulk:

    http://www.fool.com/investing/general/2010/11/08/everybodys-...

    3. More generally, will building an alternate engine save money in the long run? The President doesn't think so. The Pentagon doesn't think so. A majority of U.S. Congressmen don't think so. The folks who *do* think so -- unanimously -- are the Congressmen from Indiana whose state has a vested financial interest in building the second engine.

    Like Deep Throat said: "Follow the money."

    TMFDitty

  • Report this Comment On February 18, 2011, at 10:49 AM, jpanspac wrote:

    Well said. We need to call out and hold these pork-barrel politicians responsible for their irresponsible votes.

  • Report this Comment On February 18, 2011, at 12:52 PM, AgainstPork wrote:

    I agree with canceling the alt. engine.

    I take exception to the "theory" that a newly designed engine is superior to an engine sharing architeture with the proven F119 (Raptor) platform. Would you rather (as a taxpayer) buy a newly-designed engine that has had several notable test stand failures or an engine with thousands of mature hours in operation and in testing? I know first hand the commitment to excellence, cost reduction, and value the Pratt team is striving for with the F135.

    For full disclosure I am an employee of Pratt & Whitney.

  • Report this Comment On February 18, 2011, at 1:30 PM, dixonba wrote:

    I'm sure GE would fund the engine themselves if they were allowed. Remember the .gov owns the engines so no .gov funding, then no workey.

    You agree that competition will drive costs down. Great. Glad we are on the same page on that.

    There was no competition like you state. The pentagon has explicitly stated this fact. Contractors were directed to use the pratt engine. Like I said. The .gov funded the F136 for ten years without complaining. GE worked for TEN YEARS and invested time and money into this project to be told "thanks but no thanks...your 18 months off from production but take a hike anyway".

    There has been effects from competition already noticed with GE submitting fixed price contracts.

    Maybe I was too hard on Gates. Sorry. I'll back off and say that he only cares about the here and now. He wants to be able to say he cut 1.8billion from the defense budget. No worries about what could've been. I will say that pratts motives are downright shady. The plan from the beginning was to have these engines compete. They didn't have an issue back in 1996...why do they have an issue now?

    I guess most of us can agree that competition is good and that money can be saved. Its up in the air as of how much.

  • Report this Comment On February 18, 2011, at 3:14 PM, mrjama wrote:

    Let's correct some more....

    1) 4000 jobs? More like 1500. GE states that only 1500 would be lost. The others would be reassigned. Oh, and Pratt would hire more people, at least 150.

    2) And that $1.8 billion? That's GE's estimate. The Pentagon estimate is $3 billion.

    3) So let's see. $3B divided by 1500 is $2 million per person for the so-called "jobs" you want saved. So these GE employees are going to make $2 million over 3 years? Wow, that's some jobs bill. I sure wish I worked at GE. Why not just pay those workers $100K a year for the next three years. We still save a bundle. What a joke.

  • Report this Comment On February 18, 2011, at 3:17 PM, mrjama wrote:

    And by the way:

    1) The Bush administration does not want this extra engine

    2) Neither does the Obama administration

    3) Neither does the Pentagon

    4) Neither does the Secretary of Defense

    5) Neither does the Air Force

    6) Neither does the Navy

    In fact, the Navy has said having 2 engines is a disaster because it creates two supply chains, two spare parts depots, two training requirements, and so forth.

    Only Congress had wanted this thing, and then only those lawmakers whose districts benefited. It's the biggest earmark in history.

  • Report this Comment On February 18, 2011, at 3:23 PM, mrjama wrote:

    And regarding competition, there ABSOLUTELY was a competition. First, there was a competition for the F-22, which Pratt won. Second, the JSF office asked the prime contractors (Boeing and Lockheed) to select the primary engine. GE had every chance to win that competition, but they lost BOTH. That's right, BOTH Lockheed and Boeing chose Pratt. There was a competition for the engine, just not government mandated. That said, both Lockheed and Boeing then chose Pratt, primarily due to the success (and continued operational success) of the F-22. The Pratt engine is based on the F-22, another reason why the alternate engine is a waste (the Pratt engine is not "new", it's been flying for years and is VERY reliable).

  • Report this Comment On February 18, 2011, at 3:37 PM, dixonba wrote:

    Bush listened to Gates.

    Obama listened to Gates.

    Gates is the Pentagon.

    Gates is the secretary of defense.

    Please cite your statements about the air force and navy not wanting a dual engine.

    The GAO even questioned the pentagons 3billion number. I am more likely to trust GE on this since they are not over budget and a running a spectacular program.

    Mr. Sullivan: I do. I think that you may be correct. I don’t think that there was a competition on the Joint Strike Fighter for the engine. I think the competition was at the prime contractor level and GE happened to be a part of that team but they never competed the engine.

    Mr. Roth: That’s true. I won’t dispute that. I meant the program in general. Yeah, absolutely. Yeah I agree with it.

    "Mr. Sullivan: I do. I think that you may be correct. I don’t think that there was a competition on the Joint Strike Fighter for the engine. I think the competition was at the prime contractor level and GE happened to be a part of that team but they never competed the engine.

    Mr. Roth: That’s true. I won’t dispute that. I meant the program in general. Yeah, absolutely. Yeah I agree with it."

    — Mr. Mike Sullivan, Director, Acquisition and Sourcing Management, United States Government Accountability Office and Mr. John Roth, Deputy Comptroller for Program/Budget, Office of the Under Secretary of Defense (Comptroller)

  • Report this Comment On February 18, 2011, at 8:37 PM, vidar712 wrote:

    I think everyone is getting bogged down in the details and is missing the point.

    I believe it is a matter of how efficiently is the government spending your money. Money spent on defense means that the money isn't going to other programs (funding the Lewis and Clark water system) or to buy back government debt.

    If a company was buying a company because it would make one of its subsidiaries slightly more efficient rather than paying down a crushing debt load, would you still buy the stock?

    Would you rather have a second supply chain for the engine of the F-35 or would you rather receive Social Security checks when you retire?

  • Report this Comment On February 21, 2011, at 12:50 PM, nevetsg11 wrote:

    @mrjama Also it puts a serious constraint on the space on these carriers(some not all because of the similarity in nature of tooling).

    @dixonba Read this: http://www.aviationweek.com/aw/generic/story_channel.jsp?cha...

  • Report this Comment On February 24, 2011, at 9:54 AM, ian02 wrote:

    I stumbled on this article by an accident. And was shocked, I mean SHOCKED by the tone of the discourse here in the comments section. Why, an intelligent argument supported by facts and references as opposed to insults and name-calling? And correct spelling, to boot? What's wrong with you guys?!

  • Report this Comment On March 02, 2011, at 1:38 PM, RUKIDME wrote:

    TO: sethechief

    Your websites are flawed; 1st doesn't say anything about flawed engines, simply that the engine is 15 years old and being upgraded; the 2nd states the engine was flawed from delivery. Why was the contractor / manufacturer not forced to repair / replace the lemons. Why waste money on this 2nd engine? I do not trust GE to make any decision that they do not profit from. And I question anybodies motivation that support paying extra tax dollars for a 2nd engine? Me thinketh U and others will profit from the 2nd engine.

    RUKIDENME

  • Report this Comment On December 10, 2012, at 1:42 AM, bizworldusa wrote:

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    Excelent post! I was looking for some information about Blogs and I found this post.

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    bizworldusa

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