Gates set to announce 'fundamental' changes in Pentagon spending

By Bryan Bender, Globe Staff

WASHINGTON -- Secretary of Defense Robert M. Gates will announce "a fundamental shift" in the military's weapons budget on Monday, unveiling a series of cuts to big-ticket programs that he deems ill-suited to meeting current national security threats, the Pentagon said today.

"These are not changes to the margins. This is a fundamental shift," Pentagon press secretary Geoff Morrell told reporters.

Indeed, some press reports suggest the pruning of the Pentagon's $180 billion-a-year weapons acquisition plan will be more extensive than anticipated and potentially impact dozens of programs, including warships, aircraft, and combat vehicles, as well as missile defense systems and a new fleet of presidential helicopters.

New England-based defense firms such as Raytheon and United Technologies have been expected to take a hit from cuts in several high-profile programs -- potentially forcing layoffs of thousands -- but the full package of terminations and delays could be even more extensive than expected.

For example, defense trade publications are reporting that several warships as well as submarine construction could be affected -- cutbacks or delays that would harm the business of General Dynamics' two major shipbuilding facilities in New England: Bath Iron Works in Maine and Electric Boat in Connecticut.

As news of the decisions began leaking out late this week, Wall Street analysts were warning investors to expect a "bold" plan that would likely prompt a sell-off of major defense stocks.

"We believe [Gates'] proposal regarding these 40-plus programs will likely include proposed cancellations and bold, substantial cuts," Morgan Stanley's research division told investors in a note late Thursday. "Programs almost certain to be covered," the analysts predicted, citing "sources and trade press" reports, include all three major fighter aircraft programs, the F-22, F-35, and F/A-18, as well as the Littoral Combat Ship, a small warship designed to operate close to shores and is under contract to Bath.

The plan will have to go before Congress, which is under heavy pressure from lobbyists and constituents concerned about job losses to reverse some of the decisions.

Morgan Stanley predicted that announcing the cuts ahead of President Obama's full federal budget in May could take some of the heat off the new president and make Gates, who served as George W. Bush' defense secretary, the plan's chief salesman.

Gates, a former CIA director and deputy national security adviser who has served eight presidents, is highly respected by both parties and considered a particularly convincing advocate for why the cuts are in the best interest of the country. He has insisted that some conventional weapons programs must be cancelled or delayed in order to afford the tools needed to address terrorism and guerilla insurgencies, which he believes will pose far greater danger to the United States in the foreseeable future than opposing armies, navies or air forces.