Boeing vehicle program's demise may aid competitors

U.S. Defense Secretary Robert Gates's plan to kill an $87 billion portion of a Boeing Co.-led program may benefit armored-transport makers such as General Dynamics Corp. and BAE Systems Plc, analysts said.

Gates told reporters yesterday a new Army vehicle program is still "essential." That opens the possibility that General Dynamics and BAE may be in position to win work for the next generation of combat vehicles, said Daniel Goure, vice president of the Lexington Institute, a public policy research group.

Gates on April 6 announced plans to alter the Future Combat Systems, which would have used faster vehicles with better communication gear to compensate for less armor. Such vehicles won't work well in conflicts like those in Iraq and Afghanistan, Gates said. Sales of existing vehicles such as General Dynamics' Stryker may gain until a new program begins, Goure said.

"This is good for both General Dynamics and BAE, who are going to be at the core of whatever program follows on," said Goure of the Arlington, Virginia-based Lexington Institute. "This gets them back in the direct contracting business with the Army."

Gates said yesterday that an Army vehicle modernization program is "essential" and "high priority."

Funding 'Obligation'

"I have an obligation to make sure the money is there for the Army" in fiscal years 2010, 2011 and 2012 "to get on with a new program," Gates said.

Robert Doolittle, a spokesman for Falls Church, Virginia- based General Dynamics, said details of Gates's plans still aren't clear and it would be premature to comment. BAE, based in London, will "look forward to working with our customer to accomplish what is in the best interest of our nation as a whole," said Jessica Pantages, a company spokeswoman.

General Dynamics gained 19 cents to $43.74 at 1:38 p.m. in New York Stock Exchange composite trading, while Chicago-based Boeing gained 38 cents to $37.02. BAE fell 3.5 pence, or 1 percent, to 344 pence in London trading.